Is subcontracting just the latest FE bubble?

With more than £850m-worth of subcontracting last academic year, Mick Fletcher looks at whether such delivery is something to be concerned about.

Some parts of FE can be awfully hard to explain to anyone outside the system or even to many of those inside who see their main role as teaching.

Indeed, some aspects are fairly easy to describe in ways that make them sound distinctly dodgy, especially if there is the slightest whiff of scandal.

The danger is that when sooner or later political scrutiny chances upon one of these darker corners, the baby will get thrown out with the bathwater and the reputation of the whole sector gets tarnished.

The world of FE subcontracting is a case in point. Most observers would be genuinely surprised to learn that many colleges routinely get more funding from the Skills Funding Agency (SFA) or the Education Funding Agency (EFA) than can be justified by the student numbers taught by their own staff.

They would be still more surprised to learn that not only do these colleges then effectively ‘buy’ student numbers from third parties to ‘earn’ their funding allocation, but that there is a whole secondary market involved in ‘selling’ students to FE with large and successful organisations set up to do just that. It sounds odd, but is it a problem?

Concerns about subcontracting often focus on the proportion of funding received by the college that is passed on to the organisation that does the real work — teaching students. On average, it seems that colleges hold nearly a quarter of the total back with instances of more than 30 per cent of funding held back from the training organisation.

Clearly the subcontractors would like to receive more with some describing the colleges as just ‘skimming easy money’ off the contract; and at the same time colleges can give an impressive rationale for their proportion quoting the need for quality control and the fact that they provide specialist services in support of the work. But where does the truth lie?

There are clearly problems if the relationship is asymmetrical. When the boot is on the other foot, as when higher education institutions subcontract work to FE colleges, the latter are quick to complain that some universities abuse their stranglehold on the power to award degrees and their close relationship with HEFCE to retain an excessive proportion of funding.

Furthermore colleges are rightly critical of higher education partners that see their subcontracting as a sort of ‘balancing tank’, letting it grow if their ‘own’ numbers fall and cutting back when their mainstream recruitment is healthy.

The bigger question about subcontracting is whether the provision delivered through that route represents value for money

There is certainly evidence that an asymmetric relationship was established in FE when, in order to save its own administrative costs, the SFA sharply raised the minimum size of contracts it was prepared to let, forcing many small providers to seek subcontracts from larger institutions. This not only meant that the new subcontractors were in a weak bargaining position, but it allowed SFA to claim it had cut costs without hurting the ‘front line’ whereas in practice the inescapable costs of administration, now recouped by the subcontracting colleges, directly reduced the funding available for learners.

In general however, it is not obvious that the proportion of funding held back by colleges is excessive. Many teaching teams within colleges would be delighted to get 75 per cent of the funding that their work earns because on average a good half of all FE funding is used to support institutional overheads — not just the buildings and the principalship, but teams of marketing managers and finance departments, quality units and MIS operatives.

In any event, most subcontracting does not take place between monopoly colleges and vulnerable small contractors, but in a fairly open market where each partner needs the other.

The bigger question about subcontracting is whether the provision delivered through that route represents value for money — is it intrinsically worthwhile? In this respect there is an uncanny resemblance between some of the work undertaken and that delivered in previous FE bubbles — the franchising scandal in the mid 1990s for example, or the excesses of Train to Gain or adult apprenticeships. So have we learned from our mistakes?

The problem of course does not lie with the colleges, but with government policy

Although there is a tighter control over qualifications eligible for funding (we no longer train thousands of so-called diving instructors as some colleges did through franchises), the bubbles each have several things in common. The focus is on lower level work, often at level one or two; it is often work-based with the risk that it is substituting for employer investment; it often involves a high proportion of distance learning (now of course described as ‘blended learning’); and, it often has a focus as much on assessment of existing skills as the teaching of new ones. None of these features are necessarily problematic; but in combination and when the work is expanded rapidly, it must give cause for concern.

It is fascinating that a cause celebre in the franchising scandal of the 1990s concerned Tesco shelf stackers while the recent adult apprenticeships bubble was highlighted by Morrisons. As the level of subcontracting grows exponentially, one wonders which supermarket has its finger in the pie this time.

The problem of course does not lie with the colleges, but with government policy that reduces education to a marketplace and measures success through crude quantitative targets. In the 1990s, government wanted growth at all costs to reduce the unit of resource.

More recently, it has wanted apprenticeships — almost at all costs — to appear to tackle unemployment and low skill.

It currently requires colleges to hit ever-increasing quality targets with limited and unstable funding so when a subcontractor offers to sell provision that seems to fit the bill, who can be surprised at its rapid expansion? A closer examination of what we are getting for our money however might reveal some nasty surprises.

Mick Fletcher is an FE Consultant

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  1. Mike Cooper

    A related point regards the impact of FE Loans. On the latest published figures, these seem currently set to fulfill the gloomier predictions.

    If that proves to be the case that Level 3 provision for adults is hit badly and courses close early as a result, then colleges will perhaps be back off to subcontractors, in order to buy some more low-level vocational qualifications (delivered largely at a distance) to help bring the level of provision back up to that of their allocations.

    Just as FE franchising helped close down expensive technical FE, in favour of hundreds of food hygiene certificates and the like, 24+ Loans and the vagaries of sub-contracting together will help de-skill — just FE when most commentators agree we need to up-skill the workforce.

    Another unintended, but not wholly unpredictable consequence?