Tough new rules forcing prime contractors to go public with information on their deals with providers are to be introduced by the Skills Funding Agency. See paragraphs 342 to 346 on pages 79 to 81 in the Funding Rules 2013/14.
Regulations that will come into force from August will require primes to publish details of their subcontracting arrangements online.
The details, “as a minimum,” will include the management fee charged by the prime, the services offered for the management fee and, where relevant, the reasons behind any differences in management fees.
An agency spokesperson said: “Since publishing last year’s rules, we have been consulting the sector on how we ensure subcontracting is only undertaken where it is of direct benefit to learners and employers.
“Working closely with representatives from across the sector we have sought to strengthen the freedoms of providers in managing healthy supply chains.
“However, in doing so we have made clear in the new funding rules, the controls and assurances we expect providers to have in place.”
The new rules will be introduced less than a year after an Ofsted probe uncovered primes charging management fees “as a way of generating income for doing little work”.
The Ensuring Quality in Apprenticeships report highlighted how subcontractors felt they were getting “poor value for money” from management fees and revealed many primes were overcharging according to agency guidance.
We support the idea that all providers are required to be open about how they determine what amount of funding they retain”
And in June last year, FE Week told how primes appeared to take an average management fee of 23 per cent. Research from the agency suggested primes charged subcontractors more than £175m, based on allocations worth almost £760m.
But all deals could come under public scrutiny with the new rules dictating their details are published on a prime’s website. The rules will also require primes to outline the reason for subcontracting and explain how the move will benefit the quality of teaching and learning.
The move toward openness was supported by the Association of Colleges (AoC), whose senior skills policy manager, Teresa Frith, said: “We support the idea that all providers are required to be open about how they determine what amount of funding they retain and full disclosure of what they have retained.
“This type of requirement will be of no consequence to most providers, who will probably find that they can continue sub-contracting business as usual.”
She added: “In broader terms it must be remembered that colleges retain funds for a wide range of reasons, not simply managing sub-contractors. There can be other services provided such as sourcing students or delivering programme elements.”
The new rules also “highly recommend” providers refer to the Association of Employment and Learning Providers (AELP) and AoC-developed Common Accord, and the Learning and Skills Improvement Service’s good practice guide on supply chain management.
The accord and the good practice guide aim to tackle inadequate due diligence checks by primes and whether their management fee represents value for money.
Graham Hoyle, AELP chief executive, said: “I am confident the accord and the good practice guide will help providers and colleges minimise the risk within supply chains, ensuring they offer high-quality provision for employers and learners.
“If the good practice exemplified in the guide is embedded in supply chains throughout the post-16 learning and skills sector, then the government and its agencies can be confident they are getting good value from the public purse.”
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Editorial : Deals to go online
Providers want freedoms and flexibilities to subcontract their funding.
They want to be trusted to self-regulate the management of ‘high-risk’ provision.
The SFA has said ‘deal, but only if you publish who, what, where, why and how much’. Now that’s transparency.
If ever there was a carrot and stick approach to FE policy, then this is it.
It’s also very experimental, and some may object to publishing commercially sensitive information.
Importantly however, the AoC and AELP support the new rules, so it’s now up to providers to adhere to them.
Aside from greater transparency over management fees, perhaps the most important thing to be published on websites is ‘why subcontract?’.
How many would say: ‘We subcontract to protect our SFA allocation’?
Answers please on an e-card to FE Week.
Nick Linford, editor
Do we welcome this “demand” from an organisation that seems incapable of protecting sub-contractors from the financial incompetence (or worse) of prime contractors — or is it SFA processes that drive primes to the wall? All this as another prime goes bust — Scientiam — leaving one sub-contractor owed £60,000