Prime FE or skills providers should not “top-slice” more than 20 per cent of programme funding for subcontracting or management fees, according to new guidance from three membership organisations. 

The Association of Employment and Learning Providers (AELP), the Collab Group of colleges and adult education body Holex have issued guidance to their respective members to “facilitate value-for-money relationships between a prime provider and a subcontractor”.

The new guidance 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.  

‘Continue to publish fees’

The document 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.

The publication of new guidance was prompted by the creation of new subcontracting relationships that have resulted from the Education and Skills Funding Agency (ESFA) procurement exercises for the Adult Education Budget and non-levy apprenticeship funding.

In addition to the recommendation of the 20 per cent 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.

‘Encouraging providers to whistleblow’

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

In a joint statement, the three organisations said they 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.

AELP chief executive Mark Dawe said he had heard of some prime providers charging a 40 per cent subcontracting or management fee. “I think it is an outlier but we don’t get all of the stories,” he added.

“We’re stepping in and saying to our members from all three organisations we all know what good looks like. There’s really good sub-contracting going on - this is showing what good practice is and what might be charged for that. What we’re saying is come to us if you’re seeing an abuse and feel confident that you can raise it,” he added.

‘Transactional approach’

Julian Gravatt, deputy chief executive of the Association of Colleges, said they had been discussing the idea of more work on sub-contracting with AELP and Holex in the last week but had not yet had time to consult with their members. “The guidance has some useful parts to it which we are supportive of, but our view is that it’s always better to tackle the causes rather than try to regulate the symptoms.

“Government’s transactional approach to deciding who should offer publicly funding training and the constant changes in both funding and rules have created an over-complicated system that sometimes leads to poor behaviour and waste that could be avoided with a more strategic approach. The current ESFA rules already prohibit poor behaviour and we are keen that those rules are enforced more robustly and urgently. Ofsted is also rightly looking more closely at sub-contracting and will be able to shine the light on what good and not so good looks like.”

Chief executive of Collab Group, Ian Pretty, said big national employers wanted to be able to go to one provider for their training needs, so sub-contracting was a useful way to meet their needs for specialist skills.

“We have to maximise the amount of money for the training of apprentices. I don’t think 20 per cent is an unreasonable amount to manage the contract and for risk mitigation.”

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