Marked change of direction at AELP as new chief criticises growth of subcontracting

Mark Dawe (pictured) may only be weeks into his new job, but he is already breaking the mould.

The former college principal and awarding organisation chief has become the first boss of the Association of Employment and Learning Providers (AELP) to openly criticise the scale of subcontracting.

Mr Dawe spoke out after AELP claimed that 93 per cent (130,850 of 140,010) of the subcontracted starts made in 2014/15 were delivered by independent training providers (ITPs).

The association published the analysis using Skills Funding Agency (SFA) data, obtained through its freedom of information request.

Mr Dawe conceded that subcontracting was a “complex issue” and often takes place “for good reasons”.

But he was keen to highlight that “the sheer growth of it over the last 10 years has also happened for reasons that are harder to justify”.

“We know ministers are concerned and we think they know what needs to be done,” he added.

“The new levy system will still require funding allocations within a finite programme budget, and it is important much more of those allocations go to providers who can directly deliver apprenticeships.”

This is the first time AELP has come out firmly against the volume of subcontracting, and the move will be viewed as a major change in direction under Mr Dawe, who took over from Stewart Segal as chief executive in March.

His remarks follow a string of negative headlines generated recently by the controversial practice.

We reported last month that around 300 non-compliant colleges and training providers had been threatened with subcontracting bans after failing to follow disclosure rules.

The SFA also announced in April that it was reviewing the use of brokers in fixing short-term tactical subcontracting deals – after an FE Week investigation found they were raking in up to five per cent commission fees on seven figure contracts.

We know ministers are concerned and we think they know what needs to be done

The Department for Business Innovation and Skills (BIS) demanded an end to ‘tactical’ subcontracting in their 2015/16 grant letter to the SFA.

And the National Audit Office confirmed in February it was investigating management fees – after it emerged that lead contractors were withholding up to 40 per cent of government funding allocations.

The SFA’s director Keith Smith, who is currently on secondment to the BIS, overseeing levy implementation before it goes live next April, warned delegates to plan for a future without subcontracting at the Association of Colleges conference last November.

This was because levy reforms will mean colleges no longer have a funding allocation for apprenticeships. Instead, employers will be able to approach subcontractors to work directly with them, potentially leaving colleges in the cold.

The AELP’s freedom of information response analysis also indicated that 40 per cent (62,240 of 157,290) of all apprenticeship starts contracted through FE colleges were actually delivered by ITPs as subcontractors.

And 76 per cent (378,170 of 499,900) of all apprenticeship starts in 2014/15 were shown to be delivered by ITPs.


Teresa Frith, senior skills policy manager for the Association of Colleges, was shown the figures but still insisted that “subcontracting has benefits for both colleges and independent training providers because it minimises the amount of bureaucracy created by the funding system”.

FE Week asked the SFA why it was still allowing up to £1bn a year of subcontracting to take place per year, in view of AELP’s findings.

A spokesperson said: “Our funding rules state that lead providers should only use subcontractors who they determine are of a high quality and low risk.”


Editorial: I agree with Mark

The new chief executive at the Association of Employment and Learning Providers (AELP), Mark Dawe, is keen to portray his members as the apprenticeship ‘experts’ that colleges go to for help.

The scale of college subcontracting should come as no surprise to the Skills Minister and readers of FE Week, which has regularly reported on the issue since our first edition
in 2011.

However, what is as welcome as it is surprising, is Mr Dawe’s decision to criticise the continued growth in subcontracting.

Readers of my previous editorials on subcontracting will be familiar with my concern over top-slicing arrangements.

But what’s surprising is that the membership body for so many of the subcontractors has criticised the growth in their use.

Many subcontractors I speak to are happiest out of the spotlight of a direct Skills Funding Agency (SFA) contract.

It’s an important intervention, although with increasingly diminished resources at the SFA it seems unlikely they will rush to issue new direct contracts.

It also leaves the Association of Colleges exposed and alone in failing to face up to the truth.

There continues to be too much subcontracting, and the SFA should step in to reverse the trend.

Will the apprenticeship levy be a subcontracting game-changer alone?

That, like so much of the levy plans, remains unclear, untested and uncertain.

Nick Linford

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  1. All the time that the contract holders lack what’s needed to deliver all of the results, subcontracting will be a necessary evil.

    Without it, the SFA would need to directly manage a much larger provider market, and they simply don’t have the resource to do it. Subcontracting is, for want of a better rationale, the devolution of contract management responsibilities.

    But the SFA need to stick to their word and take action against those contract holders that are making subcontracting a revenue stream, rather than “just” applying the concept of full cost recovery.

  2. Paul Warner

    As Mark said, it’s a complex subject and much of it takes place for good reason. But too much is still being used as a profit point with no added value to the end user. Subcontracting will continue in the new world but it’s shape will change, particularly with a sharp downturn in tactical subcontracts and unnecessarily high management fees, neither of which add value for the end user, the learner. Both should whither away with the availability of what are effectively direct contracts with employers.

  3. Has AELP tried canvassing its members and asked them how many would a) like to have a direct contract with the SFA b) have to invest in the added resource required to meet the requirements of OFSTED and increase head count due to additional IT, Marketing and HR requirement the levy will have and c) considered that all these comments will do is encourage lead providers to come up more ingenious ways for cutting management fees but increase ‘stealth’ consultancy charges d)asked members how many of them struggle to get paid on time by some lead providers and stepped forward with a solution and finally e) actually thought about the impact on smaller PTPs if sub-contracting is eliminated? Watch this space for the next FE/LSECT seminar on Sub Contracting! Obviously the attendance numbers are dwindling and Nick needs to drum up some trade for the IT and Legal companies that he has in attendance/sponsoring these days.

  4. Graham Hoyle

    Sub contracting is a legitimate and widespread business practice effectively utilised throughout business and commerce. To ban it would be wrong and an admission that the bad practices used throughout the FE sector cannot be rectified. It would be better and braver if the regulators moved to eradicate the bad practices and ensure that the approach is properly employed in order to increase the much argued for raising of quality across all delivery. It has always been wrong for quality providers to be unjustifiably refused direct contracts. It has always been wrong for main contractors to use the approach merely as an income generator taking cash away from the front- line delivery. It has also been highly questionable for providers whose prime role has been to serve their local communities, to extend geographical delivery via sub-contractors solely to extract unjustifiable ‘top slices’ from the exercise.
    All of these examples of poor practice could and should have been sorted long ago. They still can. The refusal to offer adequate direct contracts to (mainly) independent providers has been at the root of most of theses problems. It has also hidden the true proportion of apprenticeship delivery by independent providers which has always been substantially understated.

  5. Karen Redhead

    There needs to be a proper strategic debate on subcontracting looking at the pros and cons and the perspectives of primes and subcontractors. I am only personally familiar with excellent subcontracting arrangements where all parties are valued and all parties work effectively together with a common goal of fully serving the needs of learners and employers. I am however aware that not all primes operate like this and I am also aware that some subcontractors need a lot of help, particularly around funding compliance and quality assurance. There are many sides to this story. I am pleased to see the acknowledgement of this in the article and some of the comments.

  6. We’re a small provider, we have high success rates and a genuine passion for what we do. We work incredibly hard to achieve what we do , in an ethical and quality driven fashion. I’d love to contract directly with the SFA, I’d love to welcome Ofsted in – it would improve us, but we are completely unable to contract with the SFA due to our size.

    Continual sweeping generalisations on sub-contractors seriously hampers the work of businesses like mine, despite our efforts I read articles like this and sometimes wonder: “what’s the point?”. I put everything on the line to start a business doing something I love, the repeated messages of “sub-contracting growth is worrying” does nothing for my confidence in the longevity of my business.

    We’ve been brought in to work with two employers recently, where we have also recruited Assessors. Within both employers, I’ve heard some absolute horror stories of providers who do have an SFA contract (one is a GRADE 1 OFSTED PROVIDER!!!), enrolling hundreds of learners and never visiting them – for up to 9 months! As a sub-contractor, if we did that we’d be cut off.

    We’ve also recruited an Assessor who worked for the ‘Grade 1’ Ofsted provider, the practices I’ve heard about are borderline illegal and it makes a nonsense of the system.

    As Graham rightly points out, sub-contracting is a legitimate business practice, work-based learning isn’t the founder of sub-contracting, it works across many industries and there’s no reason why it can’t work in ours. Providers like mine, employ hundreds, possibly thousands of people and as the data suggests, delivery a high quantity of provision.

    If the SFA aren’t going to expand contracting, due to cuts/lack of resources, then perhaps they should accept sub-contracting and put tighter controls on prime providers and their ethics/strategic objectives for sub-contracting. The levy will, inevitably, not solve any problems.

  7. I’m slightly tired of this populist nonsense. Graham Hoyle is right. If there are bad subcontractors the SFA should grow a backbone and fix them. Subcontracting is a legitimate business practice and I promise you, given the nature and size of Levy payers, subcontracting will INCREASE. By their nature, Levy paying companies will have transnational and complex needs that single providers will be unable to meet without a supply chain.

  8. Anita Baldock

    The growth of subcontracting over the last 10 years has been in direct response to the cuts in direct fund allocations by the funding agencies – remembers MCVs anybody?

    Subcontracting should not be hailed as a necessary evil & “dirty practice”, without first checking whether the subcontracting providers are happy, or otherwise, with the level of management fee. They are quite capable of voting with their feet.

    Subcontractors for many colleges provide outstanding training, satisfied customers who would not necessarily have been able to access their training programme and funding, without the bureaucracy and risk a direct contract brings. It allows them to do what they are good at – delivering quality training.

    There will always be those who abuse the system, but rather than deny everybody the opportunity, put in place the robust checks & measures to ensure subcontracting remains a quality & honourable option for may training providers and colleges. Cuts over the years of SFA personnel, moving to local & regional provision and de-focus of quality allows the opportunity to “work around” the rules, with no consequences.

    Over the last 10 years, I have seen a gradual withdrawing of any form of robust quality monitoring, lack of consequences to the large providers who have blatantly broken the rules and “spirit” of subcontracting, whilst always squeezing the small provider who is not interested in the big bucks, just their learners.