Rise in SFA contracts for small providers

Rise in SFA contracts for small providers

Plans to cut the number of recipients of Skills Funding Agency cash have been shelved in an attempt to increase the provider base for degree and higher-level apprenticeships, and advanced learner loans.

A total of 1,023 providers received direct SFA funding this academic year, up from 984 at the start of 2015/16.
The SFA first attempted to introduce a minimum contract threshold of £500,000 five years ago, designed to cut the number of providers it funded directly.

FE Week understands that more than 200 providers lost their agency business when this policy was introduced, because they were unable or unwilling to increase their contracts to the half-million mark.

The SFA previously told FE Week that this minimum contract policy had “allowed efficiencies to be realised within the sector through a reduced agency role, economies of scale, and more opportunities for shared services between training organisations”.
But advanced learner loan contracts were introduced in August 2013, and they were this year expanded to include 19-23 year olds.

This year’s data shows a clear jump in the number of contracts – surprisingly a quarter (255) of these were providers with total allocations of under £500,000.

FE Week analysis also shows that 87 contracts (nine per cent) were for under £100,000, while a further 63 (16 per cent) fell below £250,000.

When asked to explain this, an SFA spokesperson told FE Week that “the number of contracts has risen” because it was “expanding the provider base for delivering degree and higher level apprenticeships”.

The agency had “completed a series of expression-of-interest exercises to expand the provider base” ahead of 2016/17, she added.
And this year’s contracting process had been “more efficient for providers and the SFA”, because all contracts for the year were issued through the digital skills funding service.

Paul Warner, policy director at the Association of Employment and Learning Providers, was sceptical about this apparent change in approach by the SFA, and claimed that the department is facing “capacity challenges”.

“The number of providers under the £500,000 contract value threshold has gone up quite significantly, which supports our view that the changes made in August 2011 were misguided and not properly thought through,” he said.

“Given the government’s views on subcontracting, and the capacity challenges facing the SFA, it will be interesting to see how the final proposals for the new register for apprenticeship training providers will impact on the numbers.”

This is not the first time the SFA’s minimum contract-level policy has been called into question.

In May 2013, FE Week reported that 50 providers had been given total allocations of less than £500,000 – the smallest of which was for just £11,274.

The total amount allocated to the 50 providers was over £7 million, raising concerns that the SFA had abandoned the policy.

But, despite the number of allocations coming in below the minimum, the SFA said at the time that it would “continue to apply the principles of minimum contract values”, and that “the level at which these are set for individual procurement exercises is driven by the ability of providers to meet the needs of their communities and the provision procured.”