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'Cap subcontracting management fees at 15% to end odious exploitation'

The prime-subcontractor model has many benefits which are being overlooked in heated debate, writes one expert

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As the managing director of a prime provider, I’d like to dispel a few myths about subcontracting and perhaps provide an emollient to the TES article "Subcontract Killing: how colleges make millions".

It's easy to take a swipe at apprentice prime providers, with some unethical practices from a minority providing suitable ammunition. But there are not only good reasons for prime-subcontractor models, there are also, in my opinion, more good reasons than bad.

I'd like to underscore five ways in which prime providers have supported the apprentice sector, namely by:

  1. Providing routes to market for new and smaller providers.
  2. Quality assuring subcontracted provision on a monthly basis to ensure it is fit for purpose.
  3. Ensuring ongoing compliance with Skills Funding Agency (SFA) funding rules.
  4. Safeguarding public money by assuming liability for funding errors to the tune of millions.
  5. Filtering out the poor providers whilst nurturing and protecting the better.

Yet, despite these benefits, the noise from our detractors drowns out rational discussion and the mantra "Subcontractors good, primes bad" simplifies a complex and multi-faceted environment into the tub-thumping of the mob. Politicians appear to lend their ear to the populist message that only a market free-for-all will ensure employer satisfaction and quality. I would argue the very opposite. It is time for prime providers to articulate the clear benefits of these arrangements to government. Under the reform of apprenticeships, the very complexity and pace of change strengthens the need for the experience and infrastructure of prime-subcontractor models.

Here are three ways that prime providers will mitigate risks under the reform of apprenticeships:

  1. Prime providers can reassure employers that their quality assurance expertise, often established over decades, will safeguard their money. Furthermore, just as primes currently indemnify the SFA on behalf of their subcontractors so can they transfer this indemnity to employers. Prime providers will guarantee employers' financial contribution when working with subcontractors. If a subcontractor fails then the prime provider will be there to pick up the pieces. With the backing of a serious and credible prime provider, employers can feel confident that their financial contribution is secure.
  2. An established prime provider with a quality-assured supply chain will be the best option for solving the complex needs of levy-paying employers new to apprenticeships. Furthermore, smaller providers in this chain will be able to access these larger employers by virtue of their involvement with a prime provider. This model of delivery is tried and tested in other sectors, most notably construction, enabling complex projects to be completed by an alliance of providers all playing to their strengths. There is safety and security in numbers.
  3. Registering of training organisations is not a quality assurance methodology, it is a box-ticking exercise. Ofsted and SFA audits are too infrequent. Prime providers will be best placed to support the implementation of reforms on an ongoing basis and ensure that the ideals and practices of the reforms are seen through. By virtue of their existence and experience, prime-subcontractor arrangements will be the foundations upon which the new era of apprenticeships can be built.

I want to focus on the positives of prime-subcontractor models and not the risks associated by a laissez-faire free-market approach. However, in a nod to the points made by some commentators, it is vital that good subcontractors are able to go it alone. I am in no way advocating perpetual serfdom for subcontracting providers. To motivate strong subcontractors wishing and able to become directly funded, I would suggest the following:

  1. Providers currently acting as subcontractors should be given a framework to attain "approved" status so that they do not have to work via a prime provider.
  2. The framework should include a time threshold (eg, five years' delivery experience) as well as a quality threshold (such as achievement rates).
  3. The framework should also include an excellent track record under SFA audit and evidence of good performance via their prime providers' Ofsted experiences.
  4. In return, prime providers should be expected (perhaps mandated) to support their good subcontractors progressing to "approved status".
  5. Where it appears that a prime provider is preventing a subcontractor from breaking free then the local Local Enterprise Partnership (LEP) should have the power to determine if the current arrangements offer value for money. If it is obvious the prime provider is being obstructive then the LEP should be able to intervene.

Maintaining the positive and stabilising qualities of prime-subcontractor models, combined with a clear route for subcontractors to break free, is a fair and secure compromise.

It is fair to say that many critics of the prime-subcontracting model don’t know what the former actually does in return for the management fee. A good prime provider should be investing resources not just into compliance but also into the development of the subcontractor so that their provision is strong and good value for money. The relationship should add value to the subcontractor and make them a better provider. It is why I describe the relationship as being protective and nurturing. In my opinion, to do this well a management fee between 10 to 15 per cent is quite adequate. I believe that a great deal of the heat could be taken out of this debate by capping management fees for provision subcontracting at 15 per cent. This would mitigate some of the odious examples outlined in Julia Belgutay’s article.

It is time for prime providers (the good ones who are not ripping off the tax payer) to get together and to speak the truth to power. The message is simple: we are the stewards for those who pay for apprenticeships, ensuring stability, quality and value for money for employers and learners.

Matt Garvey is managing director of West Berkshire Training Consortium. He tweets at @WBTCNewbury

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