Subcontractors with a total allocation of more than £1 million are being offered a direct contract by the Skills Funding Agency (SFA).

Businesses were sent a letter by the SFA in mid-January encouraging them to bid for a contract worth at least £500,000 as part of a one-off funding pilot by the agency.

The letter says successful bidders will receive funding for 16 months to deliver full apprenticeship frameworks aimed at learners of all ages, provided they can begin the delivery from April and enroll a quarter of predicted learners by August.

The SFA says the pilot is designed to “test the appetite” of large subcontractors which have the capacity to move to a direct contractual relationship with the agency.

A spokesperson for the SFA told FE Week: “This is intended as a pilot to inform the potential introduction of a structured long term process to introduce new entrants to the education and training market, providing the Agency with access to additional capacity to deliver high quality learning opportunities to communities and businesses across the country.”

The pilot, which the SFA says will help develop the funding requirements for 2012/13, will test how organisations can be funded directly when it is not possible to reallocate provision from under-performing providers.

The Association of Employment and Learning Providers (AELP) say they are supportive of the pilot and agree that large subcontractors should be offered a direct contract by the SFA.

An AELP spokesperson said: “It is right and welcome that that the SFA should look at ways of encouraging new entrants into direct contracts, providing quality remains the watchword for the process.

“In fact, AELP has pressed for a long time for the agency to offer direct contracts to those relatively large sub-contractors who want them, although we feel that it shouldn’t be a mandatory development.”

The letter says subcontractors were invited to take part in the funding pilot only if they featured on the list of organisations which passed the ACTOR pre-qualification questionnaire and expressed an interest in delivering apprenticeships through the Single Adult Skills Budget (SASB) invitation to tender (ITT) last July.

Deep Blue Sound Limited, which delivers courses in sound engineering, music production and music performance, among others, has a subcontracting allocation of £1.2 million with City College Plymouth, but did not receive the letter.

Nigel Burt, director of Deep Blue Sound, told FE Week: “Were I to receive such a letter I would have to think very carefully about how to react.

“We have a good relationship with partners and I would be cautious about doing anything that threatened that without there being a good deal of security in it for us.

“With the almost whimsical way the education landscape seems to be changed at the moment but policy makers, this obviously wouldn’t help to give me that security.”

He added: “There is little opportunity to plan anything long term as one just doesn’t know what ‘funders’ have in store for us year on year.”

The SFA say they are currently reviewing all of the bids submitted for the pilot.

“We are not able to comment on who has applied until the process is complete,” an SFA spokesperson added.