Colleges in uproar as CITB tries to protect management fees with ‘reverse subcontracting’ deal

The Construction Industry Training Board is trying to force colleges to enter “reverse subcontracting” arrangements where it charges “unfair” top-slices of at least 28 per cent even though it won’t be the prime.

The bizarre deal, which the Association of Colleges believes would break government funding rules, has been thought up by the CITB after it failed to win a non-levy apprenticeships contract.

Whereas before the levy it would use its apprenticeships contract as a prime and subcontract the training out to colleges, the CITB now wants colleges to agree to a “reversal of our contracts”.

Colleges would be the prime but have to pay a huge management fee believed to range from 28 to 36 per cent, like a subcontractor, for which the CITB will give access to construction employers and provide other services such as inductions and health and safety training, according to a contract seen by FE Week.

CITB ‘reverse subcontract’ proposal

It means that for apprenticeships on the carpentry and joinery level two standard, for example, the training provider would receive £12,000 government funding but have to give £3,360 of it to the CITB.

One college which did not want to be named told FE Week the deal was “unfair”.

“We would question the regulatory compliance of the current reverse contract proposal and it does appear to be ill-conceived and almost unworkable,” it said.

“It is unfair and not in the best interests of the sector, students and employers.”

The Association of Colleges, who the CITB deceptively said had endorsed the deal along with the ESFA, is “deeply concerned” about the proposed arrangement.

It is suggesting colleges do not enter into such deals without consulting the association first.

“We remain deeply concerned that the current deal is not compliant with the current funding rules and does not represent a fair and transparent deal,” said AoC boss David Hughes in an email sent to his members today.

“To try to work through this, we have a meeting with CITB next week to which we are inviting ESFA, because an urgent way forward is needed.

“It would be helpful to hear from every college involved in this so that we can communicate directly with you.”

Teresa Frith, senior policy manager at the AoC, added: “We need to ensure that the way of working is fully compliant with ESFA funding rules and that it is fair to all involved.

“It is unfortunate that miscommunication at CITB has led to their staff telling colleges incorrectly that AoC and ESFA support the current proposal, but at least this has led us to the opportunity to jointly consider a way forward.”

Part of the reason why this “reverse subcontract” will be deemed as uncompliant by the ESFA is that a number of activities the CITB contract proposes they will do are listed in the rules as ineligible for funding, such as recruitment.

A Department for Education spokesperson said: “The ESFA funding rules make clear that we expect a direct relationship between apprenticeship training providers and the employers and apprentices they are working with.

“We would not support or endorse any funding arrangements that are inconsistent with these rules.”

She added that the DfE will “take action” with training providers found to be operating outside of the funding rules.

Steve Hearty, CITB’s director of apprenticeships and standards, told FE Week that all arrangements “will be in accordance with the ESFA’s subcontracting guidelines” when agreed.

“Like a number of providers, CITB was not awarded a contract to provide apprenticeship support to non-apprenticeship levy employers from April 2018 to March 2019,” he explained.

“In response to this, we have agreed a reversal of our contracts with our partner colleges. This means CITB will be a subcontractor to colleges providing training for non-apprenticeship levy construction employers where they wish to do so, although colleges may choose to deliver services without CITB as a subcontractor.”