Proportion of apprenticeships delivered by subcontractors falls dramatically

The proportion of apprenticeships delivered by subcontractors fell 15 points to just 11 per cent last year, according to government figures obtained by the Association of Employment and Learning Providers.

The drop has been attributed to more stringent rules on subcontracting, introduced in May 2017 as part of the levy reforms, and the introduction of a new register of apprenticeship training providers.

The data, obtained via a Freedom of Information request, will be laid out by AELP boss Mark Dawe to delegates at FE Week’s Annual Apprenticeship Conference which kicks off this morning.

It shows that out of the 376,000 apprenticeship starts in 2017/18, a huge 89 per cent (334,000) were directly delivered while the remaining 11 per cent was subcontracted, compared with 26 per cent the previous year.

Starts fell overall by 24 per cent in the first full year of the levy, which AELP believes is a factor in the decline of the independent training provider (ITP) share of the market, which now sits at 67 per cent – down from nearly three-quarters the year before.

Colleges, which contracted out over a third of their delivery (36 per cent) to ITPs in 2016/17, are not only subcontracting less but delivering less themselves and now make up 25 per cent of the market instead of 31 per cent.

Only 13 per cent of college-contracted apprenticeships were subcontracted to ITPs to deliver last year.

Apprenticeship subcontracting rules were changed by the government for all starts from May 2017 and mean lead contractors can no longer subcontract entire apprenticeship programmes. Instead they must “directly deliver” more than a “token” number of apprenticeships to each employer.

In addition, many providers that were previously subcontractors are now able to contract directly with levy paying employers to deliver apprenticeships.

And the new “tougher” register of apprenticeship training providers, which reopened in December, now requires all subcontractors delivering the programmes to be listed on it – meaning many more will now deliver directly.

As well as the reduction in subcontracting, 200 fewer private providers delivered apprenticeships to non-levy paying employers as a result of a controversial government procurement exercise two years ago and the halving of the budget for small business apprenticeships since April 2017, according to the AELP.

The association’s boss Mark Dawe said it is “clear” that the change in subcontracting rules and an “inability to access funding has reduced the ability for independent training providers to deliver apprenticeships and this would seem to be a major contributor to the fall in apprenticeship numbers in 2017/18”.

“While genuine subcontracting in the interests of employer need shouldn’t be banned, its use as an income source for the lead provider with little benefit to the employer or learner certainly shouldn’t be accepted,” he added.

An even bigger subcontracting drop may be on the cards for next year, as the sector is still waiting for potentially more strict rules from the government as officials mull over whether to introduce a cap on management fees.

The AELP said despite the reduction in subcontracting, the association said it maintains that the ESFA funding rules should impose a 20 per cent cap on subcontracting management fees. The agency kicked a decision on this into the long grass last year and is still debating whether or not to introduce the policy.

Dawe continued: “We are still in a state of transition on the apprenticeship reforms which may or may not lead to the end of the ESFA contracting system.

“However if the current refresh of the government’s provider register goes well, employers can be more confident of gaining access to good quality training whatever type of provider they use without worrying about funding being creamed off unnecessarily in management fees.”