The Department for Education has hired seven law firms to provide legal advice on insolvency, audit and fraud cases – at a cost of up to £3.3 million.
Tender documents show the companies will be put on a rota over the next two years to advise on legal matters. Cases will likely involve “financially distressed” colleges, academy trusts, independent and higher education providers for the DfE’s provider market oversight (PMO) division.
The DfE anticipates there will be around 40 of these “projects” each year, although there is “no guarantee of work and no retainers”.
A spokesperson for the department said the tender had caps on what the winners can charge to “ensure greater value for money” to the taxpayer.
Hourly and day rates for each of the seven firms have been redacted in the tender documents.
But they do show the contracts commenced on September 3 for an initial one-year period – valued around £2,067,000, with an option to extend for a further 12-months – which would cost an additional £1,275,000.
Julian Gravatt, deputy chief executive of the Association of Colleges, said the DfE has spent “quite a lot” in recent years on lawyers and accountants to provide advice on restructuring and on funding rules.
Part of the problem, he told FE Week, is “under-funding, over-regulation and an environment in which mistakes result in lengthy investigations”.
The DfE launched its PMO team, currently led by director Matthew Atkinson, in late 2017.
The move came partly in response to the considerable number of untried and untested training providers that have hit the market in recent years, for example, through the register of apprenticeship training providers.
FE Week reported last month that a training provider called ABIS Resources Limited is suing the education secretary in the High Court after the firm’s FE loans and apprenticeship contracts were terminated. This is believed to be the first time a training provider has taken the DfE all the way to court over terminated skills funding contracts.
There have also been a number of high-profile cases of alleged fraud in recent years, while many other FE providers have fallen foul of complex data rules, which has led to contested clawback challenges following audits.
A college insolvency regime was also introduced in 2019. Hadlow College became the first to fall under the education administration process in May of that year, followed closely by its sister college, West Kent and Ashford College. Investigations into financial irregularities at the colleges are ongoing.
Multiple FE Commissioner reports have since warned that other colleges have been close to going insolvent.
According to the tender documents, the lawyers will provide legal services and advice for “restructuring and insolvency, such as in the run-up to and during an education administration” or independent business reviews.
Advice will also be required for “counter fraud and investigations”, including in the event of “legal challenge, assessment of relevant potential contractual action and strategic options depending on individual case factors”.
Elsewhere, the lawyers could be called on for “ongoing audits and provision of advice on funding error recovery action”, which will include a legal assessment on likelihood of legal challenge and possible “debt recovery”.
“This could include advice on freedom of information and GDPR provision,” the tender documents add.
[This article has been updated from its original version as the correct total for the legal advice could reach £3.3 million, rather than the £23.4 million originally reported.]