Funding figures expose boom in colleges’ apprenticeship deals.

The amount that colleges spend on apprenticeship subcontractors has more than trebled in a year to £66.7m, FE Week can reveal.

Figures from the Skills Funding Agency also show a boom in the number of deals. In the 2010/11 academic year they averaged 2.4 for each college, compared with 4.2 in the first nine months of last year.

The growth comes despite an agency warning, in its annual reports and accounts document for 2011/12, that subcontracting was “exposing the agency to higher levels of operational and financial risk”.

It added: “Recent changes to policy, for example implementing a minimum contract level, have increased the need for subcontracting throughout the sector.

As a result of changes directed from the centre, colleges have necessarily had to undertake extra subcontracting”

“However, the prime driver has been the requirement to maintain the proportion of the adult skills budget earmarked for apprenticeships.”

Association of Colleges policy manager Teresa Frith defended the use of subcontractors. She said it made “sound financial and educational sense to ask focused niche experts to provide a service for the college rather than to establish departments from scratch”.

She added: “As a result of changes directed from the centre, colleges have necessarily had to undertake extra subcontracting.

“This does not mean they have had to increase the workload, or divested responsibility — it simply means the delivery arrangements for certain courses have changed.”

Just under £22m of agency cash filtered through 85 colleges to subcontractors last year, according to figures released under the Freedom of Information Act.

But this year, more than £66m went to subcontractors from 146 colleges. And the number of deals has grown from 208 last year to 607 – an increase of 192 per cent.

The figures come amid an ongoing Serious Fraud Office (SFO) investigation into subcontractor Luis Michael Training (LMT). Three men, aged 29, 51 and 52, were arrested, questioned and bailed earlier this year. They remain on bail.

Subcontracting for eight FE colleges, LMT did apprenticeships at football clubs including Leeds, Millwall and Nottingham Forest.

Allegations against the now-defunct firm, which was based in Newport and run by former Welsh international footballer Mark Aizlewood, related to work between 2009 and 2011.

An SFO spokesperson said at the time of the arrests: “It is believed LMT fraudulently overstated the number of students and apprenticeships that they had placed. The suspected offences include fraudulent trading, false accounting and forgery.”

But the threat of similar accusations against other subcontractors has not stopped colleges using their services.

West Nottinghamshire College, for example, last year made eight deals at £524,700. That grew to 27 subcontractors and £3.2m this year.

However, vice principal Graham Howe said safeguards were in place.

“Partnerships are a strategic theme of our college and have been part of our long-standing approach to employer-responsive provision,” he said.

“We recognise the major contribution independent training providers make within FE and, as a college, we play an important role as a conduit of funding and in providing the critical support that allows these providers to function, develop and grow.”

He insisted that heavy investment in supply chain management meant the college was exposed to “less risk, not more”.

He added: “We constantly develop our systems and processes to manage risk within a disbursed delivery model. This ensures that our provision, wherever it is delivered, is of the highest quality.”

At Hull College, three apprenticeship subcontractors last year cost £376,000. Now there are 24 — at a cost of £2.77m.

Principal Dr Elaine McMahon said: “We have worked with a range of partners as part of our contribution to delivering government policy and to secure apprenticeship growth.

“Alongside our own direct delivery we select partners who bring complementary capabilities in regeneration, upskilling, reskilling and supporting employment.”

Editor’s comment : Subcontracting explosion

Thanks to our freedom of information request we know that in the first nine months of 2011/12 subcontracting more than tripled.

This is not surprising, as numerous policies introduced by the current government made this inevitable. I predicted this outcome in The Guardian last year.

However, subcontracting is recognised as high risk and what is unexpected and concerning is that it is being taken on mainly, not by training providers, but by FE colleges.

Why are large colleges taking these unnecessary risks, which in the not too distant past led to the closure of Bilston College?

The reason is typically a belief that using partners presents the only way to quickly respond to changing government priorities.

This is a lazy and short-term attitude which is already damanging the reputation of the sector (see the case of Luis Michael Training).

Behind closed doors, the government recognises this is a problem, and the Skills Funding Agency has introduced new policies to measure the genie, but it may be too late to put it back in the bottle.

If I were a college principal or governor, I would quickly take back ownership, as previous subcontracting explosions have ended in tears.