Shock new subcontracting rule to be phased in following sector criticism

A “shock” new rule that will require thousands of subcontracting contracts to be rewritten will have a phased implementation, the Education and Skills Funding Agency has revealed.

It will only apply from 1 December 2019 for new learner and apprentice starts where existing subcontracts need to be revised.

But for new starts where a new subcontract is yet to be agreed and entered into, the rule will apply from 1 August 2019.

The staggered transition follows a strong backlash from the FE sector when a change to the funding rules was revealed last Thursday, just four weeks before the start of the new academic year.

All subcontracting contracts, for both adult education budget and apprenticeship funding, must include for the first time a “list of individually itemised, specific costs for managing the subcontractor”.

In addition to listing the services, the contract must include “how each cost contributes to delivering high-quality training” and “how each specific cost is reasonable and proportionate to delivery of the subcontracted teaching or learning”.

These costs are typically referred to as a management fee or “top-slice” and have proven controversial for many years.

After learning of the rule change last week, Mark Dawe, chief executive of the Association of Employment and Learning Providers, labelled it as an “immensely bureaucratic process” that “appears both out of the blue and shockingly late in the day”.

And a spokesperson for Learning Curve Group, a provider that operates as both a prime and subcontractor, told FE Week: “The administration connected to these updated requirements seems overly onerous and ambiguous from an audit perspective. 

“It is also hugely unhelpful that the publication of the rules is so late.”

According to ESFA figures for 2017-18, there were over 3,292 subcontracting contracts involving 516 main contractors and 1,032 subcontractors.

In an update about the rule change published today, the ESFA said it “recognises that subcontracting has a role to play in delivering high quality learning to apprentices and adult learners”.

“In recent years, we have strengthened our funding rules on subcontracting and we are continuing to do so,” it continued.

“We expect providers to maximise the amount of funding that reaches front line delivery of high quality learning.”

The agency said it will, ready for delivery from 1 August, implement a “risk-based approach for monitoring these rules” and “impose compliance measures when appropriate”.

“These expectations will be reviewed in 18 months.”