Apprenticeship subcontracts halved since 2017 levy launch

Apprenticeship subcontracting has more than halved since the introduction of the levy in April 2017, new FE Week analysis has revealed.

The Department for Education released a new list of declared subcontractors for 2019/20 this week – updating the records for the first time in more than a year.

It follows the launch of an Education and Skills Funding Agency consultation on proposed changes to subcontracting rules at the start of the month – as officials bid to cap deals and “eliminate” poor arrangements.

FE Week analysis shows the amount of subcontracting funding for apprenticeships dropped from £310,659,000 in 2016/2017 – the last time the full figures were provided – to £145,270,000 in 2019/20.

In addition, the number of declared subcontractors decreased by three quarters during this period, from 1,557 to 386.

The number of contracts also dropped by 70 per cent over the three academic years, from 3,417 to 1,012.

However, there was a slight increase in the amount of main providers, which rose from 322 in 2016/17 to 347 in 2019/20.

There are two most likely causes for the dramatic reduction in funding being passed on to subcontractors.

Firstly, a new funding rule forced main providers to deliver apprenticeship starts to all the employers also serviced by the subcontractor, or end the arrangement.

Secondly, many subcontractors gained direct access to funding with the introduction of the Register of Apprenticeship Training Providers, so no longer needed to work with a main provider.

In the most recent figures, out of all main providers, the British Army awarded the highest value of subcontracts, £22,922,296 – more than the rest of the top five combined. The employer provider gave out just four subcontracts – with Babcock Training Limited receiving the largest sum of £8,068,043.

The independent learning provider advertises that it is the largest provider of engineering apprenticeships to the British Army, and also delivers more than 758,000 training days annually for the force.

East Sussex College Group distributed the second highest amount of subcontracting funding as a prime provider for apprentices this year, £6,881,266, to 13 providers.

In third, independent learning provider BCTG Limited handed over £5,238,444 to 20 subcontractors.

Rounding off the top five was employer provider Bae Systems PLC, which gave out £4,812,196 to 13 providers, and the CITB (Construction Industry Training Board) which offered £4,654,650 to 70 subcontractors.

The next four general FE colleges on the list after East Sussex College Group were Bradford College, Dudley College of Technology, Eastleigh College and Heart of Worcestershire College.

One of the key proposals in the ESFA’s subcontracting consultation is to strengthen controls on the volume and value of provision that can be subcontracted by a prime provider.

A percentage cap is proposed on subcontracted provision of 25 per cent of ESFA post-16 income in 2021/22, and further reducing that percentage to 17.5 per cent in 2022/23 and to 10 per cent in 2023/24.

The ESFA also wants to “exercise greater oversight of the volume and value of provision that can be delivered by a single subcontractor”.

Its consultation said that where the aggregate value of a subcontractor’s delivery exceeds more than £3 million of ESFA funded provision, the agency proposes to make a referral to Ofsted for the subcontractor to be subject to a direct inspection.

The ESFA also outlined that as a “broad rule of thumb”, it believes subcontracting partners should be no more than one hour away from the prime contractor by car.

And from 2021/22 the government agency proposes to introduce stricter controls on the circumstances in which the whole of a learner’s programme can be subcontracted.