Mayors reboot Kickstart scheme for employment score

Mayors are rebooting a paid work experience programme trialled by the government during the pandemic in a bid to help more people into jobs.

Kickstart was a £1.1 billion government scheme that offered about 163,000 subsidised work placements for young people on universal credit from 2020 to 2022.

The scheme was initially criticised for being “chaotic” and questionable value for money, but experts agree that such subsidised work experience schemes “add value” to government employment strategies.

West Yorkshire Combined Authority (WYCA) is now planning to launch a local version using “inactivity trailblazer” funding.

The government is releasing this funding to eight areas in England and Wales to stimulate a more joined-up “place-based” approach to employment, health, and skills support.

WYCA estimates that £4 million would fund minimum wages and “wraparound support” for about 400 placements each year.

Its new work, health, and skills plan said other actions to tackle inactivity would include “strengthened health and employment leadership,” addressing “SME barriers to recruiting,” and “continued backing of the voluntary, community, and social enterprise (VCSE) sector.”

Rising NEET problem

The proposals come weeks after the Office for National Statistics released estimates showing 987,000 young people aged 16 to 24 (13.4 per cent of the age group) were classed as NEET (not in education, employment, or training).

WYCA’s plan is funded by £125 million for eight areas in England, announced last year in the government’s Get Britain Working white paper.

This is alongside £45 million in funding for eight “youth guarantee trailblazer” areas.

Experts have welcomed work experience funding, although most are cautious about how much should be invested.

The Institute for Employment Studies (IES), which analysed several past youth employment subsidy schemes in the UK and Europe, said they have a “low positive impact and high cost.”

However, the IES also stated that “the costs were outweighed by the benefits.”

Becci Newton, the director of public policy research at the institute, said: “Subsidies can add value at times when a particular group is at risk, but are generally seen as a short-term solution.”

“We know employers are interested to see a reprise of a Kickstart-type intervention, but we also need to find lower-cost and longer-term solutions to support young people into jobs that are supportive of health and wellbeing.”

West Midlands Combined Authority told FE Week its £5 million share of youth trailblazer funding would fund a new “subsidised work experience programme.”

A spokesperson said: “These programmes have demonstrated success in the past at progressing residents into the labour market.”

“We are building on successful components of these to develop a new model targeted at young people.”

Steve Rotheram, the mayor of Liverpool City Region, appears to be the first to set up a regional subsidised work scheme.

In January last year, he approved a three-year scheme offering up to 240 “wage incentives” of £3,000 for employers who recruited 18-to-24-year-olds.

Kickstart’s impact?

In 2022, MPs on the influential Public Accounts Committee described the Kickstart scheme’s rollout as “chaotic.”

The committee cited its rushed implementation and a failure to collect “basic management information” to track young people’s progress.

However, an internal Department for Work and Pensions evaluation, published last year, suggested that for every 100 people who participated, an additional 11 were in employment after two years compared with a similar group who did not participate.

A cost benefit analysis estimated the scheme made a loss of 73p on every pound spent by the taxpayer after two years, with an average cost of £6,850 per participant.

This improved to a gain of 18p when “wider societal impacts” were considered.

Spend it carefully

Stephen Evans, the chief executive of Learning and Work (L&W), said a Kickstart-style scheme “could” be an effective part of “broad-based” government action to boost employment.

“But it would need to be very carefully targeted on those who need the most help, such as those with no work experience and who’ve been out of work for a longer time, given its higher cost.”

“It also needs to be part of a broader plan for joined-up work, health, and skills services.”

Although the £125 million in inactivity trailblazer funding is available from April, West Yorkshire is the only one of the eight regions to confirm what kind of initiatives it would fund.

The “economic inactivity trailblazer” areas are North East, West Yorkshire, South Yorkshire, Greater Manchester, York and North Yorkshire, two areas under the Greater London Authority, and one in Wales.

The youth trailblazer areas are Liverpool City Region, West Midlands, Tees Valley, East Midlands, West of England, Cambridgeshire & Peterborough, and two under the Greater London Authority.

Former Middlesbrough College principal and deputy FE commissioner remembered

A former college principal and deputy FE commissioner has been described as “one of a kind” by colleagues following his recent death.

John Hogg, 71, who led Middlesbrough College for a decade, left an “enduring mark” thanks to his wisdom and warmth, according to current principal and chief executive Zoe Lewis.

Lewis said: “Once met, never forgotten, he could light up any room with his Northern Irish wit and irresistible charm. Our college owes him so much.”

“John not only believed in me but also guided and encouraged me, helping me see the possibility of a future life as a principal, as I am sure he did for many others.

In a video released online, Middlesbrough College said Hogg was a “much loved, admired and respected principal” whose “legacy lives on”.

Hogg’s career in further education started in the late 70s and spanned more than four decades, first as a law lecturer in Coventry and Birmingham before moving to Middlesbrough College in the 1990s.

He became principal and chief executive from 2000 to 2010, during which he oversaw the unification of four former campuses into one £68 million building in Middlehaven, a historic dockland area of the city.

Lewis said the move was a strategic transformation that “still shapes our college today”.

In the early 2010s he stepped in to lead the 5,700 student City of Wolverhampton College as interim principal following an ‘inadequate’ Ofsted grade in 2012, helping its grade increase to ‘requires improvement’ the following year.

He moved on to lead City College Coventry for a year following an ‘inadequate’ Ofsted grade in 2013, before becoming a deputy Further Education commissioner in 2014.

Following a four-year stint as a deputy FE commissioner, during a rocky period of financial instability for many colleges, Hogg publicly urged principals to take a team-oriented approach rather than attempting to be “charismatic” and master every aspect of college management.

He also advised his colleagues to ensure their pay reflects the financial wellbeing of their college.

In 2020, the former principal was drafted in as interim chair of Gateshead College after a £6 million deficit was discovered and its chair and principal, the highest paid in the country at the time, stepped down in quick succession.

Mark White, former chair of Education Training Collective, said: “As principal and chief executive of Middlesbrough College at a critically important time, as deputy FE commissioner, as a university governor and as a leader at numerous other organisations, he was transformative and inspirational.

“John was a magnificent leader and a wonderful person.”

Middlesbrough College governor Morgan McClintock said: “When I first arrived at Teesside Polytechnic as the coordinator of BTEC courses, it was suggested that I should meet John Hogg, a young lecturer at Kirby College who was dealing with similar challenges.

“John and I connected well at this first meeting, partly because we had both experienced our formative years in Northern Ireland, but also because we seemed to have shared values, including a similar outlook on education.

“John always seemed in his element leading a conversation, adapting his style to suit strangers or friends; but I suspect that few of these events gave him as much pleasure as his regular solo trips back to Ireland, walking along coast and countryside, and enjoying the music in a local bar.

“Middlesbrough College is fortunate to have had the benefit of his leadership, and I was privileged to have been one of his colleagues.”

Friends and family will gather for a funeral service this afternoon.

Middlesbrough College will host an event to celebrate Hogg’s life at its Waterside Brasserie on April 28. The college has asked that anyone interested in attending email marketing@mbro.ac.uk.

Coventry College recovers after three consecutive ‘requires improvements’

Coventry College has improved to ‘good’ after eight years and three consecutive ‘requires improvement’ judgments. 

The West Midlands college ended its Ofsted grade 3 streak with a report published today following a full inspection last month. 

Inspectors found the near-5,000 learner college to be ‘good’ in each sub-judgment, noting “leaders have substantially improved the education learners receive.”

This is a marked improvement for the college from its November 2022 inspection, which saw it graded ‘requires improvement’ for the third time in a row and an ‘inadequate’ grade for its apprenticeships put an end to that provision. 

A standout improvement for the college has been the proportion of learners that achieve and progress. T Levels were highlighted among “several courses” that still need to improve. However, leaders “have clear actions and support in place”.

Since the last inspection, a “Coventry College quality mark” has been introduced to raise teaching standards and improve the quality of lessons. Alongside, the college has “significantly invested” in teacher training through dedicated coaches that work with curriculum teams. 

Carol Thomas, who has been principal of Coventry College since 2020, said the inspection outcome was a “huge step forward.”

“In just four years, our staff have driven remarkable change, and you can feel the difference the moment you walk into the college.”

Thomas told FE Week the college “will be reviewing its position regarding apprenticeships with both the ESFA and the board of governors.”

Quality of education, personal development, leadership and management, programmes for young people, adult learning and provision for high needs learners were all uprated to ‘good’ from ‘requires improvement’.

Inspectors also uprated the college’s score for contributing to local skills needs from ‘limited’ to ‘reasonable’.

High needs learners achieve “at least as well as their peers” at the college with increasing access to work experience opportunities and supported internships. 

The report notes governors’ understanding of the college’s strengths and weaknesses and leaders’ oversight of subcontracted teaching. 

To improve further, Ofsted advised the college to provide consistent feedback to all learners, provide enrichment activities for more learners, improve the kitchen learning facilities for life skills learners and increase achievement in the “small” number of courses where it’s “not yet high enough.”

Thomas added: “This success is a collective achievement, and I want to thank everyone who made it possible. Moving forward, we will continue to improve and provide high-quality education.”

MOVERS AND SHAKERS: EDITION 490

Freya Thomas Monk

Managing Director, Pearson Qualifications, Pearson

Start date: March 2025

Previous Job: Managing Director – Vocational Qualifications & Training, Pearson

Interesting fact: Freya cycles around London every single day come rain or shine.

Diana Martin

Chief Executive and Principal, Dudley College of Technology

Start date: March 2025

Previous Job: Vice Principal, Dudley College of Technology

Interesting fact: Diana is a secret avid fan of Buffy the Vampire Slayer, owning every one of the 144 episodes on DVD, admiring the complex and relatable storylines and taking inspiration from the strong female lead (and on occasion going full Buffy for a fancy dress party).

Anthony Painter

Director of Strategic Engagement, Ufi VocTech Trust

Start date: March 2025

Previous Job: Director of Policy and External Affairs, Chartered Management Institute

Interesting fact: Anthony has had some interesting jobs, including a fairground ride operator – ghost train and Mexican hat – on Santa Cruz boardwalk, and been a salaryman in Tokyo for an international logistics company.

Colleges want to bring apprentice assessment in-house to ease delays

Colleges are calling for the power to carry out assessments of their own apprentices instead of relying on external bodies after new research suggests assessor capacity is causing lengthy delays. 

Forty-three per cent of colleges claim to have waited three months or longer for apprentices to receive their end-point assessment (EPA) once they have reached gateway and 82 per cent have experienced delays of more than a month.  

Nearly all (94 per cent) said the availability of an assessor contributed to the delays, according to data obtained through an Association of Colleges (AoC) survey shared exclusively with FE Week.  

But the body representing end-point assessment organisations (EPAOs) warned the findings were “at variance with broader-based research” conducted by Ofqual, while another expert said allowing colleges to mark their own homework would reduce trust and confidence in the apprenticeship system.

Capacity concern 

Apprentices have had to pass an EPA to fully achieve their apprenticeship since 2017.  

The assessments are carried out by independent and regulated EPAOs, chosen by the apprentice’s employer or training provider.  

FE Week understands the government is concerned that the cost, complexity and limited capacity of EPAOs is hampering apprenticeship completion and achievement rates.  

In a drive to cut red tape, ministers announced last month that colleges and training providers will soon be allowed to sign off on parts of their own apprentices’ assessments.  

College bosses want the government to go a step further and bring EPA fully in-house.  

Natalie Wilson, vice-principal for curriculum and skills at Luminate Education Group, said: “The current system places impractical pressures on colleges, particularly within the current funding environment. Empowering colleges to be more closely involved in the delivery of EPA could improve the experience for apprentices while also reducing the financial and administrative pressures on colleges.”  

Report author Clare Barker, a senior policy manager for skills and industry at the AoC, said: “The delays identified … make a compelling case for colleges to take charge of their own EPAs, to break down barriers to apprentices’ career progression ensuring they can complete in a timely, straightforward manner.” 

Source: AoC

 But experts warn that allowing colleges to conduct every aspect of EPA is risky.  

Simon Ashworth, the deputy chief executive of the Association of Employment and Learning Providers, agreed there were issues around capacity, leading to delays “especially around the peak demand periods between April and July”. Providers and employers “should be able to contribute towards EPA”.  

However, allowing institutions to mark their own homework would decrease “trust and confidence”, he said. 

Accuracy doubts 

Rob Nitsch, the chief executive of the Federation of Awarding Bodies, which represents many EPAOs, cast doubt on the accuracy of the AoC’s findings. 

He pointed to Ofqual research, presented at this week’s Apprenticeships and Training Conference, which showed 78 per cent of an unspecified number of EPAOs did not consider that the “availability of assessors impacts on the timely delivery of assessment”.   

“The implication that there would be betterment if colleges delivered assessments is not substantiated by the evidence contained in the [AoC] report; for example, there is no analysis of how college-delivered EPA would address the shortcomings,” Nitsch said.

He added that the “evidence on the ground” is that AoC’s recommendation “does not represent the views of all apprenticeship providers, including colleges, nor does it properly consider the preference employers have for independent assessment”.  

Colleges were responsible for just over 58,000 (17 per cent) of the 340,000 apprenticeships starts in England in 2023-24. AoC’s data on EPA delays was based on responses from 83 colleges.  

‘A challenge we would be happy to address’ 

Chris Todd, the chief executive of Derwentside College, said that bringing EPA in-house “would be challenging to deliver in the short term” , but was a “challenge we would be happy to address”. 

“The key to successful implementation here is to agree a manageable transition and timetable for the change, allowing colleges to develop their capacity prior to implementation.”  

The AoC also used Individual Learner Record (ILR) data, submitted by 170 colleges, to find the cost of EPA to colleges has been consistent at 13 per cent of their apprenticeship income for the past three academic years.   

In 2023-24 apprenticeship payments to colleges totalled £261.3 million and EPA cost was £34.2 million.  

However, the AoC said the true cost was likely to be a higher percentage because of the cost of resits and the additional physical resources required that were not taken into account by the ILR data.  

Latest Ofqual data shows that 90 per cent of all apprentices pass their EPA at the first attempt.  

AoC’s survey found 34 per cent of colleges worked with 11 to 20 EPAO and 11 per cent worked with 21 or more, which “creates additional administration burden”.  

Todd argued that EPA should be scrapped altogether as it was “not necessarily needed or wanted by many employers”.  

“It’s very expensive to operate, you only have to look at some of the awarding bodies to see that their profit margins have risen (and continue to rise) as a result of the growing volume of EPA activity. This is all money that is going outside of the sector and away from learners.  

“If EPA was removed, we could move back to an assessment regime more akin with what we do in other provision types, at a fraction of the cost, and with little impact on quality.”  

A DfE spokesperson refused to say whether the department would consider allowing colleges to conduct their own EPA. 

  

  

Employers losing patience on apprenticeship levy reform

Employers say their “confidence is waning” as the government drags its feet on widening the apprenticeship levy.

Skills minister Jacqui Smith told FE Week’s annual Apprenticeships and Training Conference that the Department for Education was trying to introduce levy spending flexibility “within a constrained resource”. Ninety-nine per cent of the last year’s budget was spent.  

She repeated the government’s view that that apprenticeship spending needed to be “rebalanced” towards young people, highlighting a significant fall in apprenticeship starts of almost 40 per cent since 2015-16 for those aged under 25.  

“We have to prioritise,” she told delegates.  

Initiatives such as foundation apprenticeships aimed to give young people “a foot in the door”, but the minister was clear that fiscal constraints meant “tough decisions” about “what we fund in the future”.  

Reforming the apprenticeship levy into a “growth and skills levy” and allowing employers to spend their contributions on other training routes was a key pledge in Labour’s election manifesto.  

The minister told The Financial Times last month that the government’s ability to allow money from the apprenticeships budget to be used for non-apprenticeship training would depend on how much funding the DfE received at the spending review in June.  

The department’s apprenticeships budget increased to £2.7 billion in 2024-25. Ministers now plan to remove level 7 apprenticeships from the levy funding, which could free up about £240 million – although a final decision on how many will be chopped is yet to be announced.  

Smith said: “Without additional amounts, we will need to make decisions about how we can deliver that [election manifesto] flexibility within a constrained resource.” 

Scrapping level 7 won’t yield savings for years

Rob West, the Confederation of British Industry’s head of education and skills, told FE Week that the “inflexibility” of the apprenticeship levy was “making it increasingly difficult for firms to find, hire, and upskill talent within their organisations”.  

“Confidence is waning as the government continues to treat the levy as a tax, preventing firms from fully investing in upskilling their own workforce.”  

Jane Gratton, the deputy director of public policy at the British Chambers of Commerce (BCC), said a “lack of clarity” about the future of the growth and skills levy was creating “fresh uncertainty among businesses”.  

She said that some employers told the BCC they had put training plans on hold until they heard what alternatives would be funded in future. 

She called on the government to set out a clear timeline for reform, although threats of cuts to the levy before it has been established “are worrying and destabilising”.  

Sector leaders argue that the Treasury is shortchanging businesses because it keeps more than £800 million of employer levy contributions in its own coffers instead of distributing it to spend on apprenticeships.  

Smith previously said she had “made this point to the Treasury”.  

Simon Ashworth, the deputy chief executive and director of policy at the Association of Employment and Learning Providers, said the government was in a “straitjacket” on apprenticeship funding unless the Treasury freed up more of the unallocated levy top slice.  

“With 99 per cent of last year’s budget spent, there’s little room for manoeuvre—scrapping level 7 apprenticeships won’t yield savings for years.  

“Any short-term flexibilities won’t kick in until August, while broader reforms remain a slow, phased rollout. Until the programme budget more closely matches the levy take, it’s imperative funding priorities are aimed at maintaining the sustainability of apprenticeship standards, rather than introducing further non-apprenticeship flexibilities.”  

‘To govern is to choose’ 

Gareth John, the chief executive of First Intuition Cambridge, told Smith at at the conference that he knew of “many employers” who had filled apprenticeships starting this September and October based on level 7 funding being in the levy.  

Smith said that she heard his “point” about ensuring sufficient notice, but said when the announcement on the programme’s future was made, only those who had already started a level 7 would be supported until its completion. 

 “The decisions around level 7 are, I’m afraid, an example of the choices that you need to make when you have limited resource. 

“To govern is to choose and we have to prioritise. We’ll announce as soon as possible the final decisions with respect to level 7 apprenticeships.” 

Minister clams up on level 6 funding as front benches clash in heated debate

An education minister today refused to rule out removing level 6 apprenticeships from the scope of levy funding.

Education front benches clashed in a fiery committee stage debate on the Institute for Apprenticeships and Technical Education abolition bill. 

There has been ongoing uncertainty over future funding of level 7 apprenticeships since prime minister Keir Starmer announced in September that some would no longer be funded through the apprenticeship levy.

Since then, employers and training providers have demanded clarity on when and how much funding will be removed for level 7 apprenticeships, and how new programmes, such as foundation and short apprenticeships, will be funded. 

Scrapping all level 7 apprenticeships would save about £240 million a year from the maxed-out apprenticeships budget, which ministers want to reallocate towards “other priorities”. 

Skills minister Jacqui Smith told the Apprenticeships and Training Conference earlier this week that an announcement on the reforms was “imminent”. 

Janet Daby, who speaks for the government on skills in the Commons, this afternoon declined to answer a direct question on the future of levy funding for level 6 apprenticeships. 

She was challenged by shadow education minister Neil O’Brien, who suggested ministers could place level 6 in the firing line next because “that’s the first place the money will go”. 

“We keep asking, but without ever getting an answer. I invite the minister today to rule out axing level 6 apprenticeships in the way they are doing with level 7,” O’Brien said. 

Daby said level 6 apprenticeships were “a core part of our offer”, adding “decisions on training and funding through the levy in the future will be guided by Skills England”.

O’Brien hit back: “I think that was a very clear not ruling out of doing exactly what they’re doing to level 7 apprenticeships to level 6. 

“Ministers are clearly looking to keep their options open, not just on level 7, but on level 6 as well, which is very, very concerning … a real backward step and a real wrecking ball to a lot of the progress made on apprenticeships over the last decade.”

Jaws on the floor

That wasn’t the only part of Thursday’s debate that left O’Brien riled.

He was visibly frustrated when trying to get an answer from Daby on whether or not it was government policy to allow up to 50 per cent of Labour’s reformed growth and skills levy funding to be spent on non-apprenticeship training. 

Education secretary Bridget Phillipson said in December: “We remain committed to reforming the failing apprenticeship levy and turning it into a growth and skills levy with up to 50 per cent flexibility for employers.” 

Phillipson’s comments were consistent with Labour party messaging when it announced pre-election it would reform the apprenticeship levy into a more flexible growth and skills levy. 

But the 50 per cent threshold was notably missing from the Labour’s manifesto – and sector experts have said it will be impossible to meet. 

Neil O’Brien

Daby deviated from her boss’s December remarks and today refused to confirm the 50 per cent threshold. 

“I don’t want to put a target or limit on flexibility. This will be led by what employers need, driven by Skills England analysis,” she said.

O’Brien didn’t let up. 

“Employers will be jaw to the floor, agog at what is going on with the DfE here. What is the policy? What an extraordinary situation. What a shameful situation. Unbelievable.”

“The government said that it would allow employers to take up to 50 per cent of the money and spend it on things that were not apprenticeships. Now, that either is the policy still, or it is no longer the policy. Which of those two things is the truth?” 

Daby replied: “I will get back to him, and I’ll make sure there’s a written response.”

O’Brien could then be heard responding: “Absolutely unreal. Unreal.”

The committee will reconvene on Tuesday.

OfS won’t unfreeze register and degree awarding functions until August

The higher education regulator has confirmed it will reopen its register of providers and restart conferring degree-awarding powers in August.

The Office for Students (OfS) suspended a range of regulatory activities in December to allow it to prioritise struggling university finances. 

Alongside closing its register, the office also paused applications for degree-awarding powers and a university title. 

While the regulatory hiatus was always billed as temporary, the August deadline would “remain under review”, according to the OfS’s original announcement. 

However, the watchdog has now confirmed it will not resume these activities before August. 

In a statement on Thursday, it said: “These temporary changes will end in August 2025, and the OfS will reopen for new applications and resume paused assessments on a staggered basis.” 

Registrations were paused for 18 providers, with degree-awarding applications halted for 20. 

Waltham Forest College, which was affected by the registration closure, told FE Week at the time that it forced “carefully planned” courses developed in response to employer demand in limbo.

Affected providers had been contacted, the OfS said.

Colleges directed to enrol SEND students despite inability to meet needs

Two thirds of colleges have been forced by local authorities to enrol SEND students even though they could not meet the young person’s needs, new data suggests.

The Children and Families Act 2014 includes a “duty to admit” young people with an education, health and care (EHC) plan.

Local authorities conduct a consultation process by which places for high needs students are commissioned. But if a college says it cannot meet a particular applicant’s needs, the local authority can still direct the college to admit the applicant under this “duty”.

A new Association of Colleges (AoC) survey, completed by 67 colleges, found that 69 per cent said they had their consultation replies of not being able to meet students’ needs overruled this year.

This happened in 10 or more cases for a quarter (25 per cent) of respondents, while two colleges reported this happened around 30 times. 

One anonymous survey participant said the practice “has been difficult and concerning.

“We have had instances of violence, putting staff and learners at risk because information was not shared.”

Another said: “These have been mainly students from special schools with a track record of significant aggressive behaviour to other students and staff. We have explained that these students may require regular physical intervention. We have advised the local authority that [we cannot safely] address the needs of these students and they simply impose the student on us.”

The data showed that 44 per cent of colleges said the “duty to admit” rule was directed by their local authorities for less than 10 applicants.

David Holloway, AoC’s senior policy manager of SEND, said: “The government has said that the direction of travel of future SEND reforms will be towards greater mainstream inclusion, however our report shows that local authorities’ financial difficulties are being passed on to colleges – creating a disincentive for colleges to embrace those students who need the most support. 

“This is why we have called for increased collaboration and strategic planning between colleges, government and local authorities to ensure that colleges can continue to provide inclusive and effective education for all students.”

Late payments

The Institute for Fiscal Studies calculated the 2024 national high needs budget currently totals nearly £11 billion.

High needs funding is split into three payments, the first of which is the 16 to 19 per student funding formula and the second (element two) is £6,000 of support. Both are paid by the ESFA. The last, element three, is additional top up funding to pay for further support costs, paid by the local authority.

Though colleges estimated an average of £3.2 million per college for high needs budgets, only 38 per cent said their local authorities consistently engaged them in strategic planning.

Almost one quarter (23 per cent) said local authorities consistently took account of the financial viability of provision, but then failed to actually cover college costs.

Once costs have been agreed, 80 per cent of colleges surveyed experienced delays in payment.

Just one-fifth (20 per cent) said that payment schedules were established before the start of the autumn term and adhered to.

Almost one-third of colleges (32 per cent) reported that there were still outstanding payments by the end of the academic year.

One college said it was carrying the high needs costs of elements two and three for up to six months before payments are made because “element two and additional element three payments are made following the end of each term”.