Sector Response – ESFA reduction in subcontracted activity and crackdown on brokers

@ESFAgov – new subcontracting standard to tackle poor oversight and fraud. Crackdown on brokers.  

ESFA, as part of new measures, will implement a subcontracting standard and reduce, significantly, the volume of subcontracted activity in the sector.

We will also apply a cap on the volume of subcontracting and will take forward work this academic year to establish the right threshold for that cap and timescales for a staged reduction. All providers’ Corporations and Boards who choose to subcontract will have to publish a curriculum rationale for their limited subcontracted activity.

The new measures are being introduced gradually, following a sector wide ESFA consultation launched earlier this year, to improve the management and oversight of the limited, but necessary, future subcontracting arrangements entered into.

Before the consultation launched, ESFA’s chief executive, Eileen Milner wrote to the sector highlighting concerns about the continued rise in cases of fraud linked to subcontracting arrangements managed by ESFA lead providers despite ESFA’s tightening of subcontractor arrangements.

The consultation received over 400 responses, with a large proportion from independent training providers. The majority of proposals were supported, including the requirement for a clear curriculum rationale; control of the volume and value of provision delivered by subcontractors; simplifying third party arrangements with specialist providers such as sport; rationalising funding rules; requiring the publication of fees and charges across all funding streams; and the introduction of an externally validated standard.

Eileen Milner 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.

ESFA will develop the new subcontracting standard through 2020/21, will trial it in 2021/22 and fully implement, once externally validated by audit firms, in 2022/23.

Other areas that will change include:

• placing restrictions and limits on types of subcontracting that have been identified as higher risk
• acting on the use of brokers to ‘sell on’ provision to subcontractors
• improving, across ESFA, the use of the data and audit returns to identify and act on risks

Although the implementation of these reforms will begin in time for the next academic year, the changes will be brought in over the next three years, to allow for a period of adjustment.

The changes will also need to align to plans for the reform of further education and adapt as necessary.

Sector Response to ESFA reducing the volume of subcontracted activity in the sector:

Mark Dawe, Chief Executive of the Association of Employment and Learning Providers (AELP) comments:

“The foremost priority in the regulation of subcontracting should be maximising the amount of public money that reaches frontline delivery of learning and 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% cap on management fees.  We still hear too many cases of subcontractors being held to ransom over the level of fess 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 bone fides reasons.

“The three-year plan should be accompanied by a fundamental change in the funding approach for the adult education budget.  If 90% 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.”

Matt Garvey, Managing Director, West Berkshire Training Consortium said: 

“Another layer of bureaucracy, just what we all need! With declining Apprentice participation, falling achievement rates and a looming recession you’d think the ESFA would have better things to do right now than revisit their obsession with subcontracting. It strikes me that if UK Plc is to rise to the post Covid19 challenge that we should be exploring every opportunity to increase the availability of high quality training provision not creating further bureaucracy.”