Why is the NHS London Procurement Partnership charging fees to apprenticeship providers?

The NHS London Procurement Partnership responds to FE Week’s questions about new charges it plans to implement for apprenticeship procurement services.

The LPP response – from which quotes for the news story ‘NHS defends apprenticeship brokerage fees‘ were taken – has been published here in full for the sake of clarity.

NHS London Procurement Partnership

Thank you for forwarding the questions you sent originally to Health Education England. To be clear, the procurement you are referring to is an NHS London Procurement Partnership activity, not a project run jointly with HEE or the Skills Funding Agency. To refer to a ‘no win no fee’ percentage is also to misunderstand what Activity Based Income is, and how public sector frameworks are managed. I hope what follows explains the process more clearly, but if not please do come back to me.

I think it would be helpful to give you some background to LPP. LPP is an NHS membership body – we are funded and governed by our members, primarily NHS organisations, but much of our work is now accessible by the wider public sector. (Doing so magnifies the benefit the public sector can realise from our work, as it is no longer limited to our membership.) We are not an independent or commercial entity, and we do not make a profit. Our running costs are covered by membership fees – and since we were set up in 2006, we have saved the NHS and the taxpayer more than £950 million.

Apprenticeship Dynamic Purchasing System

LPP is developing the Apprenticeship Dynamic Purchasing System at the request of HEE and our members. The aim is to give public sector bodies a route to contract with apprenticeship training providers which complies with the EU procurement rules laid down for the public sector. Currently, a public sector organisation sourcing an apprenticeship training provider from the SFA list of providers is not complying with the EU rules.

The new DPS also ensures that apprenticeship training providers used by the public sector provide a service of a suitably high quality. Many stakeholders – including would-be suppliers – have been involved in developing the DPS. HEE has provided valuable insight into, for example, the type of categories of apprenticeship available, and provided guidance on suitable criteria for evaluating would-be providers. The Skills Funding Agency was invited to take part but has not done so. Consequently your query about SFA ‘approval’ or sanctioning the method of managing the DPS is not relevant and neither is it one we can comment on.

Activity Based Income

As you will note from the slide you forwarded to me (pictured left), ABI ‘covers management and further administration by LPP of the overall DPS and associated documentation with surplus being fed back to members’. In other words, once a framework or DPS is established, ABI is used to cover the costs of the ongoing management and running of the framework or DPS for the life of the framework (or DPS). A DPS takes a significant amount of management – by its very nature, it has a continually growing and changing number of suppliers – unlike a framework, providers can apply to join a DPS at any stage during its life. To put this in context, there are several hundred potential providers of apprenticeship training – 1,500 on the current SFA list alone. Any surplus over and above those costs is handed back to LPP members at the end of the financial year based on their use of our frameworks and DPSs.

A management charge is a common way of covering the costs of running a framework or DPS, once it has been established. ABI has different names in different procurement organisations, and may be managed in a variety of ways. Crown Commercial Service, for example, has a Management Charge – like LPP, CCS requires suppliers to provide it with Management Information on a monthly basis. These charges are well established methods of supporting the public sector to manage contracts.  Managing contracts ensures the NHS is getting best value for taxpayers from its contracts with strategically important suppliers, ensures that public money is not misappropriated, and that public sector expenditure is transparent, in line with the procurement regulations.

The slide you have forwarded to me states that ABI must be accounted for in a supplier’s tender to be awarded a place on the framework. This is to ensure that there are no ‘surprise’ extras for public sector organisations – the price proposed by the would-be supplier at the time of tendering must be the price they then charge the public sector for using their service (if they are successful in being awarded a place on the framework and are subsequently commissioned by a public sector body). How the supplier covers the cost of the ABI is up to the supplier. Legally LPP is unable to stipulate to suppliers where the ABI payment comes from or how to manage this cost internally.  The onus is on the supplier. To comply with any SFA rules, suppliers should ensure that the 1% is not taken directly from the levy funds.   

NHS Shared Business Services

You’re right that the Apprenticeship Training Services Framework will run from May 2017 to April 2021. It has been developed to provide NHS – and other public sector – organisations with the means to procure high-quality and compliant services quickly and easily, whilst at the same time offering suppliers access to a significant market and thousands of potential customers.

The 0.95 per cent levy is charged to service providers to cover the up-front investment of establishing an OJEU[Official Journal of the European Community]-compliant framework and the costs associated with the on-going management of the contract. 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.

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