Subcontractor hits out at “rip off” management fee

The head of a subcontractor has called the high management fees used by some FE colleges a “rip off”.

“The colleges get away with it because they can,” the source, who wished to remain anonymous told FE Week.

“Subcontractors simply don’t have the clout to turn around to their local college and say up yours, I’m not going to pay that, I’m going to go somewhere else.”

City of Bristol College is charging subcontractors a 30 per cent management fee for the delivery of adult apprenticeships at level two and three.

“I downloaded all the documents and after some digging around (found) the management fee was 30 per cent – then I just put the document away because it’s not worth it,” the source said.

City of Bristol College told FE Week the 30 per cent management fee reflected “the high quality support” which they offer to subcontractors.

these outfits that take big management fees won’t allow the subcontractors sufficient funding to be able to deliver a quality service”

“City of Bristol College provides a member of the executive team as the key point of contact to all our subcontractors, in addition we provide a specialist support team headed by  a senior manager who has day to day responsibility for assisting the subcontractor in all matters that relate to  our students,” a spokesperson for the college said.

“Business services, curriculum development and support is provided by this dedicated partnership team along with quality assurance systems.

“Partners have access to common frameworks for online data tools developed and supported by the college and subcontractors who work with the College have access to our specialist team to maximise joint bidding opportunities.”

However, the subcontractor told FE Week that taking on the contract would have affected the quality of the training they delivery.

“Prime contractors want us to deliver a high quality service, which we pride ourselves on doing, but these outfits that take big management fees won’t allow the subcontractors sufficient funding to be able to deliver a quality service.”

The Skills Funding Agency (SFA) told FE Week they are working with prime contractors “to understand the reasons” why they take higher management fees.

A spokesperson for the SFA said: “The amount of funding retained by a prime contractor for programmes and provision delivered in whole, or part, by a subcontractor must represent good value for money and reflect the actual costs incurred by each party in the delivery of that provision.

“Where it is identified that the percentage of Agency funds from the lead provider’s allocation passed to the subcontractors is significantly low, the Agency works with the prime contractor to understand the reasons for this.”

The SFA spokesperson said the amount retained by FE colleges is often “not a management fee at all” and instead used to retain responsibility in areas such as assessor support, collection and procession of data, quality assurance and registration.

“We are working with our External Advisory Group and Stakeholders, including AELP and AoC, to develop criteria around this area so we are confident that the fee charged is representative of the service provided,” the SFA spokesperson told FE Week.

However, the subcontractor said the increase in management fees would only cause the SFA to further reduce funding in the sector.

“If they’re aware it’s widespread practice for the prime contractors to ‘top slice’ 30 per cent or more, then all that will happen is they will just reduce the funding that’s available,” the source said.

“If the SFA say ‘look, our guideline is a 15 per cent management charge but there are a lot of primes subcontracting at 30 per cent or higher, maybe we’ve got our sums wrong’.

“They’ll say ‘maybe we don’t need to be giving them so much money to be delivering these qualifications, so actually let’s knock 10 per cent off the top’.

“That’s what will happen, and then everybody will suffer.”