ESFA faces legal action following controversial European Social Fund tender

A training provider is launching legal action against the Education and Skills Funding Agency following an allegedly botched European Social Fund tender.

The agency ran its latest ESF procurement, worth around £282 million in total, towards the end of last year and was supposed to award contracts to the winning bidders on January 29.

But after multiple providers claimed the government broke tender rules, namely by excluding the “track record” section when marking bids, it delayed issuing contracts.

We will be submitting a series of final pre-action disclosure requests to the ESFA

The agency then had to delay the contracts again in February for 12 areas in the tender while it reviewed an “error”, as it named Serco Regional Services Ltd as the winner instead of Serco Limited.

On Friday, over a month after the review of the “error” started, the ESFA confirmed the outcome to providers and launched a fresh 10-day standstill period.

“As you’re aware you have received a message relating to investment for Serco Regional Services Ltd were incorrectly identified as the written winning legal entity under a number of lots,” a message to providers, seen by FE Week, said.

“The winning organisation for those lots is Serco Limited. Financial due diligence was applied.”

Providers who lost out are however perplexed at how such a mistake could be made, considering the ESFA’s bidding system, Bravo, only allows a company to bid as the legal entity it is registered as.

One provider that wished to remain anonymous told FE Week the situation is “unprecedented” and questioned how the ESFA could “legally commit to awarding contracts when they have acknowledged that an error has been made, especially when it involves something so critically fundamental as a company’s name”.

Another provider who lost out to Serco and also wished to remain anonymous told FE Week they are preparing to launch a legal challenge.

“We will be submitting a series of final pre-action disclosure requests to the ESFA in order to clarify the discrepancy between the organisation that was assessed at the pre-qualification questionnaires stage of the ESF procurement and the organisation that has received the latest award decision notification,” the chief executive of the company told FE Week.

“We will issue proceedings if there is any inconsistency between the entities (Serco Limited and Serco Regional Services Limited) submitting information throughout the procurement process as this would constitute an illegal direct award.”

The provider continued: “We will be making pre-action disclosure requests from the ESFA to provide evidence that there has been no misrepresentation on the part of the bidding entities and that the same entity has been assessed by the ESFA throughout the entire procurement process.

“Failure on the ESFA’s part to provide substantive evidence and reassurance to these requests leaves us with no alternative but to challenge the award in court.”

Documents about the anticipated ESF winners, seen by FE Week, shows that Serco won at least £37 million of European Social Fund cash in the tender.

Failure on the ESFA’s part leaves us with no alternative but to challenge the award in court

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.

Serco Limited has maintained that it bid as itself, and not Serco Regional Services Limited, and is not sure how the alleged admin error was made.

The ESFA would not comment on the situation when approached by FE Week, as it is still considered a live tender.

The ESF contracts are supposed to come into force from April 1.

One person close to the debacle said the provider challenging the ESFA might have a case following the precedent set by the Eurotunnel saga.

In December, the Department for Transport contracted three suppliers to provide additional freight capacity on ferries for lorries. But Eurotunnel complained the contracts were handed out in a “secretive” way.

It resulted in the government agreeing to pay £33 million to the company to settle a lawsuit over the botched tender.

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.