The NHS has defended controversial new plans to charge a brokerage fee to training providers that win levy-funded apprenticeship contracts.

FE Week has seen two examples of the health service preparing to charge providers around one per cent of the value of their contracts, raising concerns that it might be included in the levy price, a practice the Skills Funding Agency has banned.

Our understanding of funding rules is that these charges will be allowable if they aren’t included in the negotiated levy price, but brokerage fees are nevertheless a controversial topic.

The NHS apprenticeship levy pot is estimated to be worth around £200 million per year nationally, and £27 million in London alone, which means its brokerage charges could reach up to £2 million if they’re spread across the country.

John Hyde, executive chairman of the specialist training and apprenticeship provider Hit Training, said the SFA must investigate “a clear example here of a breach of their rules”, adding: “they need to step in straight away, otherwise it opens the door for all sorts of other people.”

“If the NHS can get away with it, then why can’t other multi-national companies get away with it?” he asked.

The NHS London Procurement Partnership is planning to enforce a one per cent “management charge”, based on the value of work it wins on behalf of providers looking to deliver apprenticeships. 

A spokesperson told FE Week that management charges are “a common way of covering the costs of running a framework or DPS once it has been established”. 

“These charges are well-established methods of supporting the public sector to manage contracts.”

From April 3, the LPP will manage apprenticeships in the capital through its electronic dynamic purchasing system’, which it will use to buy services through an “open market” of potential suppliers.

The membership body, founded and funded by NHS organisations, hosted events in London for suppliers wishing to apply to join its DPS on March 8, 13 and 14 this year.

On a slide shown at one of the conferences and seen by FE Week, it explained details of a “management charge” that “must be incorporated into the overall commercial bid response to any invitation to tender”.

This slide confirmed the charge would amount to “one per cent of all charges” based on the “value of work won under the DPS”, and would cover “management and further administration by LPP of the overall DPS and associated documentation with surplus being fed back to members”.

It will be the supplier’s responsibility “to decide to what extent this cost is passed onto the contracting authority”.

The LPP has explained its system to FE Week in detail – you can read their full response in our experts section.

In a separate case, NHS Shared Business Services, a national joint venture between the Department of Health and the information technology consultancy Sopra Steria, plans to charge providers 0.95 per cent on a quarterly basis for all business it secures through what is being described as “a new framework” for the provision of apprenticeship training services.

This will be its primary contracting vehicle for levy-paying public sector employers to purchase apprenticeship training services.

It will run from May for four years, and is inviting providers registered on the Skills Funding Agency’s register of apprenticeship training providers to apply.

A spokesperson told FE Week that the system had been developed to “provide NHS – and other public sector – organisations with the means to procure high-quality and compliant services quickly and easily, while at the same time offering suppliers access to a significant market and thousands of potential customers”.

The spokesperson insisted that the charge to providers is “to cover the up-front investment of establishing an Official Journal of the European Union-compliant framework, and the costs associated with the ongoing management of the contract”.

He continued: “It means that, for example, if a supplier wins a place on the framework, they would pay £95 for every £10,000 they receive in orders.”

In February, the SFA officially ruled that public funds could not be used to pay brokers’ fees through its final rules for apprenticeship funding.

Its decision represented a win for FE Week after our investigation in April 2016 exposed brokers who were charging up to five per cent of every deal just to match subcontractors with government-funded providers.

Asked whether the SFA had approved the management fee for apprenticeship procurement in London, the partnership’s spokesperson said the agency had been “invited to take part” in the development of the digital procurement service, but had declined to do so.

An SFA spokesperson said: “Under current SFA rules, main providers are not allowed to use government money to pay brokers’ fees. We will take action against any provider we find has broken these rules.

“SFA is strengthening the rules so that from May 1, 2017 no government money can be used to pay brokers’ fees.”

Broker fees are back again – read Paul Offord’s editorial here.

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