SFA publishes £283m of inter-lead subcontracting for first time

Lead providers took on nearly £300m of subcontracted provision last academic year, Skills Funding Agency (SFA) figures have revealed.

More than 1,600 subcontracting agreements, totaling £283m of funding, were in place between providers who already held their own direct contracts with the SFA.

It is the first time that the extent of inter-lead subcontracting has been disclosed by the SFA (click here to download).

Meanwhile lead providers gave out £569m of business, via 2,235 contracts, to organisations that didn’t hold direct contracts (click here to download).

However, more subcontracting could be taking place because the figures are based on self-declarations and only agreements worth £100,000 or more are included the SFA spreadsheets.

County Durham-based Learning Curve had a direct SFA contract worth £2.7m last year and was also by far the biggest subcontractor.

The firm, which has a direct SFA contract for £2m for the coming year, had £18.4m in subcontracting arrangements with 32 lead providers last year.

Tony Outhart, Learning Curve director and co-owner, said subcontracting played such a part in his business — set up with Judith Moran [Learning Curve chief executive] in 2004 — because “in the early years it was difficult to get a direct funding contract with the then-LSC [Learning and Skills Council], so the natural way forward was to work in partnership with colleges.”

He said: “Then when Train2Gain was launched we were offered direct contracts in four regions, and we have continued to grow our SFA contract year-on-year ever since.

“This year we also became a direct Education Funding Agency [EFA] provider to extend our provision to 16 to 18-year-old learners in addition to our core Adult Skills Budget-funded workplace and classroom provision.

“Although we are a directly-funded SFA/EFA provider we want to continue to build on the strategic delivery partnerships we have developed with our college partners over the past nine years.”

He added: “We are hoping to increase both our direct contracts with SFA and EFA, and at the same time continue to develop high quality, sustainable partnerships with FE colleges.”

The firm pays anywhere between 10 and 20 per cent in management fees for the provision it takes on from lead contractors.

“I think this is a fair arrangement given the QA, funding, MIS and audit support our partners provide,” added Mr Outhart.

An SFA spokesperson said Learning Curve had “quarterly opportunities to make a case for growth in relation to its direct contract”.

He said: “If and when such a case is received, we will consider it … in accordance with our published process and subject to affordability at that point in time.”

Learning Curve, which was rated as good by Ofsted in early 2009, also dishes out provision to subcontractors and is listed on the SFA website as doing so with five providers.

The next biggest subcontractor was the Skills Network, which does not have a direct SFA or EFA contract and so is not subject to full Ofsted inspection. It took £9.1m of business from 14 colleges and one independent provider last year.

Nobody from the North Yorkshire-based Skills Network was available for comment.

However, a statement by the firm on the issue of subcontracting from colleges was issued by its chief executive, Mick Cox, two months ago.

He said: “Good training providers can add value to a college’s curriculum offer, through the provision of niche services.

“We have our own contacts within relevant business communities, and our own experienced staff who understand the needs of these sectors. Colleges are able to use a training provider’s longstanding relationship with employers to build on their own employer engagement.”

The SFA spokesperson said it had conducted apprenticeships pilots over the last 12 months to see if subcontractors wanted to become lead providers.

“The organisations were invited to participate through our e-tendering portal and 62 training organisations were successful in their application for a direct contract with us as a result,” he said.

“The Skills Network did successfully apply to deliver apprenticeships through one of the pilots, but elected not to enter into a contract.”

Based on management fees of 20 per cent, and total SFA subcontractor funding of £853m via 3,883 deals, up to £170m could have been taken from front line delivery of education.

However, that figure could be even higher with a number of primes charging around 30 per cent — and FE Week has even learned of one prime charging fees of up to 35 per cent.

“We do not determine how much subcontracting a provider can undertake,” said the SFA spokesperson.

“There are clear funding rules and contract clauses that support subcontracting arrangements, however we are clear it is the responsibility of the provider to ensure that its subcontracting arrangements represent good value for money and that there is sufficient funding being allocated for the delivery of high quality education and training.

“Providers who contract directly with us are responsible for the entirety of the value of their contract and all of the provision that it funds.”

Read Mick Fletcher’s expert article about subcontacting here.

Download the AoC/AELP/LSIS Supply Chain Management Guide here.

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  1. I feel another government review on the horizon…..
    There does appear to be something over complicated about the contracting and allocation mechanism if we are in a position that we have lead contractors sub contracting to lead contractors. ‘The system’ has created an internal industry of contracting relationships and ‘management fees’ which add nothing but ambiguity and administration. If funding is truly meant to follow the learner for their experience and also be demand led to meet the requirements of the labour market, our current position could do with an analytical review.

  2. I agree with Mark and would point readers to the Mick Fletcher viewppoint accompanying this news piece. Is anything of quality added through sub-contracting that couldn’t be better created by a more intelligent approach to direct funding? Politicians should look at the disaterous history associated with such arrangements; for example, remember how the franchising fiasco skewed the market away from skills training the UK really needed, lowering strandards and reducing quality in the process. Then we had the more recent Coalition Government’s short-course and bogus Apprenticeships masquerading as quality training, with ministers erroneously claiming record levels of expansion. Who is monitoring subcontracting now – and how closely – in this new age of deregulation?

  3. Management fees charged by Primes I have worked with are purely profit making on monies which could have been spent supporting learners could someone define value for money for me…

  4. Vicky - Quality Warrior

    Well said Gill, having seen some very greedy lead providers contracting with some equally greedy supply chains and making far too much money through ‘roll em in stack em high’ approaches makes this type of arrangement beyond any understanding!!