Subcontracting and social media

An “urgent review” of sub-contracting has been called for by the Association of Employment and Learning Providers (AELP).

Graham Hoyle, chief executive of the AELP, has written to the skills minister John Hayes recommending a full investigation of current sub-contracting arrangements.

Issue 567 of the AELP Countdown reads: “Recent analysis by the Skills Funding Agency (SFA) of the extent of subcontracting within the FE system has given rise to a series of questions regarding the pros and cons of this delivery mechanism.

AELP has been receiving reports from members of sub-contracting approaches from colleges looking at significant underspends with the final quarter of 2011-12 on the horizon,”

“A more accurate understanding of actual delivery is clearly necessary. “

The call follows instances of undelivered funding from the SFA being advertised openly to sub-contractors through the social networking site LinkedIn.

Neptune Solutions, a brokerage company which helps lead providers team up with sub-contractors, has been offering “immediate” funding to providers on a number of discussion threads on the Apprenticeships England group.

“AELP has been receiving reports from members of sub-contracting approaches from colleges looking at significant underspends with the final quarter of 2011-12 on the horizon,” An AELP spokesperson told FE Week.

“This is one of the reasons why we want the practice reviewed, because it is important that any new sub-contracting arrangements are made with due diligence undertaken.”

Elena Ryabusha, managing director at Qdos Training Ltd, is one of many training providers which have responded to the advertisements on LinkedIn.

Commenting on one of the discussion threads in March, she said: “We are a prime contractor and we have funding spare for March starts.”

The behaviour has raised concerns over much how due diligence is being carried out by prime contractors who enter subcontracting arrangements at short notice.

Scott Upton, vice principal of Sandwell College, told FE Week: “It is a little disappointing that a small minority of members are using the site for ‘blind dating’ for the purposes of setting up sub-contracts with very short lead-ins.

“Offers of funding for starts in the same month leave virtually no time for due diligence between potential partners.”

He added: “This would seem to be flying in the face of the current push for tighter risk management of contracts between providers.

“Hopefully these practices will not proliferate and will be self-policed by the many committed members of the site.”

Mike Cheetham, director of risk management at RSM Tenon, added: “The rise in use of social media to link potential sub-contractors with colleges and other training providers is not unsurprising.

“However, as with any partnership, there is no substitute for a robust due diligence process before entering into the contract, and close monitoring subsequently of the quality of delivery and compliance with the funding rules.

“As auditors, we have seen too many times the financial and reputational damage that can occur from entering into contracts that, with hindsight, really were ‘too good to be true.’”

Geoff Russell, chief executive of the SFA, has defended the behaviour on LinkedIn and said any alternative to an open market system would offer the government less value for money.

“If you look at some of the respondents to the post on LinkedIn, there are quite a few good providers,” Mr Russell told FE Week.

“But clearly, in a market system, there will always be the risk that a small number of participants try to take undue advantage and go for short term profits rather than a reasonable, long term return by delivering quality training.”