ESFA delays European Social Fund contracts due to alleged breach of tender rules

The Education and Skills Funding Agency has delayed issuing European Social Fund contracts after multiple providers who lost out in a recent procurement alleged that the government broke tender rules.

Winning bidders from the exercise, which was worth £282 million in total, were supposed to be awarded their contracts on Tuesday following a 10-day standstill period, but this has now been extended to 8 February.

The providers complained that the ESFA’s tender was botched mainly because the agency failed to score the “track record” section of bids, even though they were expecting to get marked for this.

We will take legal action if necessary

Their anger was amplified when they were told they lost out to Serco, which won at least £37 million of European Social Fund cash in the tender.

The training provider made losses of £29.5 million in 2017, according to its latest accounts, and is rated “requires improvement” by Ofsted – although this is just for its apprenticeships provision.

The aggrieved providers were also shocked to find out that Learndirect’s new owner secured more than £20 million worth of ESF contracts, in conjunction with his other company Dimensions Training Solutions, in the tender.

This was despite Learndirect being hit with a grade four Ofsted rating in 2017 and the ESFA terminating all of its skills contracts in July last year.

“We will take legal action if necessary as these contracts could only have been won through the successful organisation misrepresenting components of their business vehicle to the ESFA,” said one chief executive of a provider that lost out to Serco and asked to remain anonymous in fear of repercussions from the agency.

A Department for Education spokesperson confirmed that the ESFA has received “a number of queries from tenders regarding the procurement process” but “no more details can be made public at this time for legal reasons”.

She claimed that all European Social Fund contracts were “awarded in line with the ESFA procurement process”, but also confirmed that the results of the track record section were not included in the final selection.

The spokesperson said this was made clear to all bidders but refused to say when this communication was.

The aggrieved providers said the DfE “didn’t make it clear at all”.

“Everyone I know is totally shocked that it was omitted,” said the anonymous provider.

“The DfE has fundamentally and substantively changed the process between publishing tender documents and the marking stage, which renders the whole procurement process illegitimate.”

A chief executive of another provider that lost out to Serco and also wished to remain anonymous added: “After re-reading the guidance and the published question and answer’s we are unable to find any communication that states that track record is not scored.  

“All of our challenges are based on clear breaches in the process and not on decisions.

“For example, financial standing, Ofsted Grade, misrepresentation of business structure, showing that the ESFA have not carried out clear due diligence on information contained in the winning bidders tenders.”

Everyone I know is totally shocked that it was omitted

The ESF is funding that the UK received, as a member state of the EU, to increase job opportunities and help people to improve their skill levels, particularly those who find it difficult to get work.

The current funding round is worth about €3 billion (£2.3 billion) across England over the period from 2014 to 2020.

England’s fund is administered through the Education and Skills Funding Agency, the Department for Work and Pensions, and the Big Lottery Fund, which each provide match funding.

Documents about the ESF winners, seen by FE Week, shows that Serco won contracts in at least six different regions.

A DfE communication to one of the aggrieved providers stated: “I’m sure you appreciate that yours is not the only organisation to have submitted queries. Please be assured that we will not be issuing contracts in the lots where you have raised queries until we have responded to your queries.”

Serco, which won 15 European Social Fund contracts valued at £31.6 million in 2017, said it could not reveal the total contracts it has won through this recent tender because the standstill period is ongoing.

But Rob Matts, Serco’s head of skills training, defended the provider’s track record.

“Serco has a strong track record of delivering high-quality ESF training and over the last two years we have successfully trained more than 18,000 people from over 5,500 different businesses and organisations,” he said.