Sector bodies recommend 20% cap on management fees for subcontracting

Representative bodies in FE system publish new best practice guidance for a relationship between a prime provider and subcontractor

Management fees charged by a prime FE or skills provider should not be more than 20% of the programme funding and will generally be much less.

This is the lead recommendation of new best practice guidance issued by AELP, Collab Group and HOLEX to their respective members to facilitate value-for-money relationships between a prime provider and a subcontractor. Leaders of the three bodies have expressed an expectation that all of their members should follow this and the other three recommendations contained in the guidance.

The publication of new guidance has been largely prompted by the creation of new subcontracting relationships that have resulted from the ESFA procurement exercises for the Adult Education Budget and non-levy apprenticeship funding. The three sector bodies are concerned about recurring reputational issues around ‘top slicing’ with the perception that the management fee removes funds from learners.

AELP, Collab Group and HOLEX remain firmly of the view that subcontracting plays a vital and valid part in the FE system for reasons set out in the guidance, such as the reality across the country that not all providers can deliver all of an individual employer’s needs, but action needs to be taken now to stop potential abuses of the practice.

The new guidance includes a list of examples of best practice activity which the prime provider should be providing as part of their offer to subcontractors, such as quality monitoring, data and management information, and contract management.

In addition to the recommendation of the 20% cap on management fees, the guidance recommends that despite the recent change in the ESFA funding rules, prime providers should continue to publish their fees and the rationale for them on their websites. It also says that if a potential subcontractor is considered high risk, then the prime provider should refrain from working with it at all rather than increasing the fee.

With prime providers following these recommendations, more tangible, healthy and collaborative partnerships will result for the employer and the learner.

AELP, Collab Group and HOLEX are membership organisations and not regulatory bodies. Nevertheless they will be encouraging providers to whistleblow on any prime provider members who choose to ignore the guidance’s recommendations so that the matter can be taken up.

The three organisations are determined that unjustifiable top-slicing in the sector should become a thing of the past and they hope that other sector bodies will sign up to the guidance.

Link to Best Practice Guidance