ESFA cracks down on subcontracting activity

The Education and Skills Funding Agency says that it will take active steps to reduce subcontracting activity over the next three years

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Kate Parker

ESFA cracks down on subcontracting activity

The Education and Skills Funding Agency (ESFA) has today set out the measures it will take to reduce subcontracting activity over the next three years.

In a consultation response published by the ESFA today, the agency said that it remains its view that “subcontracting represents a greater risk to public funding than provision that is directly delivered and the changes that we will introduce reflect that position."

All providers will be asked to review their existing subcontracting activity and take steps to reduce that activity across the next three years, the ESFA said, and a cap on the volume of subcontracting will be applied, the threshold of which is yet to be decided. 

Providers will also be expected to publish a “curriculum rationale” for their subcontracted activity. 


Background: ESFA currently investigating 11 FE subcontractors

More: Ofsted launches research into subcontracting in FE

Opinion: ‘Don’t demonise all apprenticeship subcontractors’


Elieen Milner, the chief executive of the ESFA, said: “I have been clear that the current arrangements in place for subcontracting were not going far enough from an agency, accounting officer and sector perspective. We must all be satisfied that public money is being managed properly.

“The changes ESFA is introducing will strengthen oversight by lead providers and give confidence that the limited subcontracting that is necessary in the future evidentially and defensibly meets the needs of specific learners or employer, is of good quality and is managed responsibly by the lead provider.

“We will work with the sector to test and implement these changes gradually to ensure that the outcome for learners is central.”

There will also be restrictions and limits on the types of subcontracting which have already been identified as high risk, a crackdown on the use of brokers to “sell on” provision to subcontractors and an improvement by the ESFA on the use of data and audit returns to help to identify and act on risks.

The ESFA will develop the new subcontracting standard through 2020-21, trial it in 2021-22, and then fully implement it in 2022-23.

Mark Dawe, chief executive of the Association of Employment and Learning Providers, said the foremost priority of the regulation of subcontracting should be maximising the amount of public money that reaches frontline delivery of learning. 

"Our initial response to today's announcement is that the ESFA is taking a measured approach towards achieving this aim. It seems to largely mirror the changes we saw with apprenticeships when the levy was introduced."

"AELP especially welcomes the renewed commitment to crack down on brokerage, but we remain perplexed as to why the agency doesn’t join the combined authorities in imposing an outright 20 per cent cap on management fees. We still hear too many cases of subcontractors being held to ransom over the level of fees in order to retain business. At least we will see a return to greater transparency with the requirement on providers to publish the details of their subcontracting arrangements.

"Subcontracting isn’t a black and white issue and we should always remember the desire of many large employers to work with one main provider, recognising that the provider may need to subcontract to ensure coverage by level, sector, specialism and region. Hopefully, the requirement to publish one’s rationale for subcontracting should allow the practice to continue for bona fide reasons.

"The three-year plan should be accompanied by a fundamental change in the funding approach for the adult education budget. If 90 per cent of the budget wasn’t going to grant-funded institutions, then the need and desire to subcontract would be much reduced. The ESFA should recognise that the rules alone are not the issue here and that the entire budget should be procured."

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