DfE to announce solution to AEB tender chaos later today


UPDATE: An hour after publishing this article the ESFA sent out electronic letters confirming the additional AEB funding (click here for details)


The ESFA has begun telling private providers that they will receive a resolution to the adult education budget tendering chaos later this afternoon, FE Week can reveal.

This announcement is unlikely to be made public today, and will instead be shared with relevant parties via the DfE’s sourcing team eTendering portal.

The AEB procurement has been a particularly hot potato ever since providers were informed of its outcome on August 4, when many lost out unexpectedly on huge sums.

Some providers who won contracts have had their funding cut dramatically compared to previous years, but the government appeared to give special treatment to protect various Learndirect Ltd contracts across Whitehall, including the Life in the UK Test it administers for the Home Office.

The nation’s biggest FE provider was awarded a grade four from Ofsted – something that usually prompts the ESFA to apply an “early termination of funding agreement.”

However, as first reported by FE Week and subsequently confirmed by the skills minister Anne Milton, Learndirect Ltd was instead handed funding allocations from August 2017 to July 2018 worth £45 million after it benefited from a tender rule change at the eleventh hour.

Learndirect Ltd had applied for funds during the procurement and prior to the Ofsted inspection, but the DfE confirmed it later withdrew its bid.

The DfE repeatedly declined to comment on when Learndirect Ltd withdrew its tender, along with failing to explain why the tender rules were changed for those that did not bid.

The rule change was to the maximum 2017/18 contract value, which went from £589,148 (see image) to being 75 per cent of the allocation for 2016/17.

The ESFA original tender policy – that has now been scrapped

Good news perhaps for those that did not bid or withdrew, but many providers, such as Somerset Skills & Learning, who did apply were handed dramatic cuts. In this case, located in an area of low priority, SSL’s funding fell from £3.4 million to just over £111,000.

In fact, had it chosen not to bid, it would have been awarded over £2 million, based on 75 per cent of the previous year’s contract.

The Financial Times characterised this as “a topsy-turvy world where losers end up winners, and where ‘winners’ end up on the brink of insolvency”.

FE Week understands that following a challenge from affected providers, the ESFA has been seeking legal advice under the cover of Regulation 72 within the Public Contracts Regulation 2015. This states that under certain conditions “contracts and framework agreements may be modified without a new procurement procedure”.

However, with political pressure from Conservative MPs mounting over the case of Somerset Skills & Learning, a U-turn of some sort is inevitable.

The ESFA could award additional funding through in-year growth bids, but alone this is unlikely to be sufficient as the process will take too long for some providers already on the verge of issuing redundancy notices.

And given the news that more than £200 million of the AEB has been underspent in 2016/17 , the most likely scenario is that additional funding has been found for successful bidders like Somerset Skills & Learning.

FE Week understands that the SSL issue in particular needed resolving ahead of the Conservative Party conference next week, and everyone will benefit to avoid any legal challenges over potential claims of special treatment.

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  1. Right of reply

    learndirect Limited would like to place on record its grave concern at yet more inaccuracies being published in FE Week.
    Two separate articles published this afternoon alleges that learndirect Limited was given special treatment by the government. This is categorically untrue.
    The article ‘DfE to announce solution to AEB tender chaos later today’ states that:
    “Learndirect Ltd was instead handed funding allocations from August 2017 to July 2018 worth £45 million after it benefited from a tender rule change at the eleventh hour”
    It is important to note learndirect Limited will not benefit from the £45m of funding as this level of funding does not even cover our cost base in that part of our business. The decision to fund learndirect Limited to July 2018 was taken as it is the best outcome for learners.
    The reason this decision is best for learners is that our Adult Learning business has good success rates and also did not receive an Ofsted Grade 4; instead it received a Grade 3. Therefore, the board and stakeholders of learndirect Limited feel a very unjust decision has been taken to force a perfectly good operator in the Adult Learning sector to close down.
    Moreover, the company understands that learndirect Limited did not receive a higher proportional funding allocation from ESFA in 2017/18 than other providers who chose to exit the sector.
    As an aside, it is worth noting that a public sector organization that is awarded an Ofsted Grade 4 is allowed to continue trading and make improvements while any private sector provider given a Grade 4 is closed down.
    It is also less than helpful that Mr Linford in an accompanying article refers to the current situation as a “scandal”. This is a time for sober and well researched analysis and there is no place for tabloid style hysteria.
    The continual publication of inaccuracies about learndirect Limited is causing grave concerns for its staff, stakeholders and end users.

  2. Tom Carter

    The above press statement issued by learndirect is some what baffling, to state on record that a £45m allocation won’t cover the companies internal cost base is what I can only explain to be a significant red herring and/or just quite frankly the finance team can’t add up.

    This to one side is a known entity within our sector, funding gets allocated funding gets cut, increased or moved around, any business which lives in this fallacy that their contract levels remain fixed and the same is some what deluded.

    Business’s in general be it publicly funded or via commercial employers/consumers paying should have contingency in place to scale the business in line with demand, this is a simple fact of life that if you don’t live by you go bust.

    This is the same rule that says provide a bad service be it publicly funded or via commercial provision and you lose the business.

    I work in the PE and corporate finance world and this is the No1 rule amongst our portfolio, statements like the ones made above only lead to further statements that the company live in a world of expectancy rather they earned.

    Learndirect take offence at the statement of special treatment however I can imagine some providers would feel that truly is the the case, First 4 Skills was issued a grade 4 in apps and it lost all of its provision, why is the situation any different in the case of Learndirect the sector will ask?

    The sector will quite rightly ask these questions, the rule book is the rule book for a reason and every clause regardless of statement carries the same level of basis in law as another, I don’t necessarily blame Learndirect for the “special treatment” thats face it its issued to them not by them however they should expect that they will have to live with the comments regarding this and making the above statements simply aid the theory.

    The questions of consistence and impartiality will be raised on the ESFA in times like this, lets face It government departments should and are answerable to the public this is the rule of our land and what providers are so widely instructed to promote via British values.

    This to one side and back to the comment above, maybe just maybe Learndirect should adapt their business model from subcontracting the vast majority to meet the contracts they have so fortunately kept and accept that the sector is likely to not be best pleased with the stance taken by the ESFA.

    The statement previously issued that learn direct apprenticeships was formed to move the company apps provision into is just clearly one part of the story.

    No company should be to big to be not accountable and no one rule within the rule book carry’s any more residence than another….constancy is key and legal technicalities carry only a small amount of weight in a sector which places moral credence above that of the spin of law.