Sub-contractors are suffering devastating knock-on effects as the wait for a new Skills Funding Agency (SFA) payment system continues, FE Week can reveal.

One sub-contractor in Liverpool said it could go bust waiting for late payment from its prime who, although having been paid itself, was unable to put an exact value on provision until the new system is up and running.

However, following the intervention of FE Week, the prime contractor has agreed to make payments based on estimated delivery.

Behind the apparently sector-wide issue is the adoption of a new funding system in which key software is yet to be fully functioning.

Prime and sub-contractors with the SFA, and also Education Funding Agency (EFA), will use the new system, which generates the values of provision delivered.

Vauxhall Neighbourhood Council has been among the worst hit by the knock-on effects of the delay.

It has received a letter from prime contractor Intraining, an arm of NCG (formerly Newcastle College Group), warning about “the current payment situation”.

Vauxhall Neighbourhood Council enterprise director Gill Mason told FE Week: “We’re a charity and a social enterprise and we have no cash flow. We support 36 other organisations affiliated to us.

“We will not be able to pay our staff. The impact is massive. We’re a neighbourhood council and we support local tenants’ associations. We have 18 members of staff.

“If we don’t receive our payment we won’t be able to pay our staff salaries next month, so we’ll be gone. This has major implications for us. We don’t know what exactly we’re owed.”

Meanwhile, a director at another Intraining sub-contractor, who did not want to be named, told FE Week it too had experienced problems.

He said: “We’re getting paid, but we seem to be a long, long way behind — constantly chasing.”

Intraining managing director Phil Bonnell told FE Week: “There are often issues across the sector about ensuring contractors get accurate payments for the right number of learners at the start of any new contract until data can be verified.

“And we have already made arrangements with those who work on our SFA contracts to ensure they get an estimated payment for the first quarter which we then rectify with subsequent payments.

“We realise the impact this could have on smaller suppliers so we are also making similar arrangements on our EFA contracts to make initial payments based on an estimate of learners and will correct it with later payments. We will be in touch with all our suppliers shortly to update them.”

The SFA, along with the EFA, has already paid prime contractors based on the value of delivery estimates (termed payment on profile).

However, it has conceded there have been delays in implementing the new funding system (known as the Data Collections and Funding Transformation programme), in which the Learning Aim Reference Service (Lars) replaces Learning Aim Reference Application (Lara), and the Funding Information System (Fis) replaces Learner Information Suite (Lis).

In an early October update, the SFA said the situation would be sorted out “shortly”.

It added: “This is a little later than planned and consequently we will ensure that no decisions are taken in relation to contract performance or future allocations that are not founded on a full and robust data return.”

Stewart Segal, chief executive of the Association of Employment and Learning Providers, welcomed the SFA and EFA’s payments based on estimates, but said: “Providers need the Fis system up and running as soon as possible so that they can review their actual delivery against profile.”

Nobody from the SFA was available for comment as to what was causing the new system delay.