Training providers with back-to-back ‘requires improvement’ Ofsted grades could see their Department for Education funding contracts terminated from August.
New contracts for education and skills services covering independent training providers for the 2025-26 academic year were published yesterday with tough new rules around financial health, reporting and accountability.
Rules giving the department the power to cancel contracts based on Ofsted inspection results have been bolstered for most provider types, but not colleges.
Next year’s contracts also give DfE the power to “engage directly with learners to ascertain the contractor’s performance” and transfer some or all learners to a new contractor if it is concerned about a provider’s financial health.
Until now, training companies receiving an ‘inadequate’ grade in an inspection, either overall or for a sub-judgment, faced contractual penalties. These range from enforceable requirements to improve and suspensions to learner starts through to contract termination.
Contracts for 2025-26, which come into effect this August, extend the Ofsted performance rules to include ‘requires improvement’ grades.
A new group of clauses details how two consecutive ‘requires improvement’ grades for overall effectiveness or “any graded sub-judgment” will now result in penalties at the DfE’s “absolute discretion”.
The same will apply to grant-funded employers, higher education institutions, local authorities and trusts. It also applied to local authorities with accountability agreements.
DfE’s new contracts for services come as Ofsted digests consultation responses on its new inspection regime, due to be implemented in the 2025-26 academic year, which will replace the ‘requires improvement’ and ‘inadequate’ judgments.
Further education and skills providers will also no longer receive overall effectiveness grades from September.
Sub-judgments currently include; leadership and management, behaviour and attitudes, quality of education and apprenticeships.
The number of sub-judgments is set to spiral under the proposed inspection regime with new grades for areas like curriculum, developing teaching and training, achievement and participation and development for each provision type.
Ofsted is yet to confirm its new five-point scale (‘exemplary’ to ‘causing concern’) which it proposed to replace the current four-point scale from ‘outstanding’ to ‘inadequate’.
A DfE spokesperson told FE Week: “We’ll update our post-16 intervention, accountability and oversight policies in line with the new framework once it’s confirmed”.
Simon Ashworth, deputy CEO of the Association of Employment and Learning Providers (AELP) said: “Make no mistake, this is a strengthening of the DfE’s intervention triggers for dealing with providers who are not meeting expectations. They are right to expect high standards and value for money, but interventions should be proportionate and consistent when compared to other types of providers.
“This is also very strange timing, given that single word judgements, including the ‘requires improvement’ terminology, are set to end a month after these contract changes start. A proper consultation process would have highlighted this.”
The 2025 contracts also introduce tough new penalties for providers receiving an ‘insufficient progress’ score in an Ofsted monitoring visit.
Alongside existing sanctions like suspending recruitment of new learners, the 2025 contracts include the suspension of payments for current learners and new DfE powers to force providers to become a subcontractor for another provider.
Elsewhere, training providers must now tell the department if their credit rating, or the credit rating of one of their subcontractors, is downgraded by any rating agency. This new clause also requires “prompt notification” of any suspected or actual fraud, financial irregularity, anything which “could cause” or does cause “an insolvency event of the contractor or subcontractor”.
New actions have been added to the menu of options the department can take “in its absolute discretion” against providers whose financial health or ability to deliver the contracts declines, or “may be declining”.
These include talking directly to learners about their provider’s performance, and unilaterally transferring all or some of a provider’s provision to another provider chosen by the DfE.
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