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Government to Consult on Subcontracting Limits

The government is set to launch its consultation on a radical overhaul of subcontracting rules this week – and is expected to include a proposal to limit out-of-area deals.

Government to consult on subcontracting limits
Eileen Milner

Eileen Milner, the chief executive of the Education and Skills Funding Agency, sent a sector-wide letter in October warning of rule changes and that she will take strong action against any provider that abuses the system.

She said there were 11 live investigations into subcontracting at the time, with issues underpinning them ranging in seriousness from “complacency and mismanagement”, through to matters of “deliberate and systematic fraud”.

As per Milner’s letter, areas expected to be under consideration in the consultation include “placing limits on the permitted geographical distance between a directly funded institution and the location where subcontracted provision is delivered”.

It comes just months after the Greater London Authority announced plans to end out-of-area providers subcontracting in London.

This year, the GLA provides around £14 million of AEB grant funding to providers located further than what is considered to be a “reasonable travel-to-learn distances for London learners”.

Officials say the majority of this funding is subcontracted to training providers based in London who are then charged a “substantial” management fee.

Mayor Sadiq Khan has now announced plans to stop funding for providers based outside the capital’s fringe – typically more than 30 miles away from central London.

Aside from out-of-area subcontracting, the ESFA’s consultation is expected to cover how much funding can be subcontracted by a single provider, actions to prevent non-compliance, failure and fraud, and potentially precluding the use of some subcontractors.

It is not expected that the ESFA will suggest imposing a cap on management fees under subcontracting arrangements, as called for by sector bodies such as the Association of Employment and Learning Providers.

Milner said at the time of the October letter that where “poor subcontracting practice is evident to us we will act decisively”.

The review will be concluded this academic year and the ESFA plans to start implementing the changes at the start of 2020-21.

There have been a number of high-profile subcontracting scandals in recent years, including the Luis Michael Training case where its owners, which included two former professional footballers, created “ghost learners” and were jailed for over 25 years combined.

The most recent subcontracting scandal, exposed by FE Week, involved Brooklands College and resulted in the ESFA demanding a £20 million clawback.

Milner has said the ESFA will, in future, be “more forensic in our examination of the data and information available to us to hold individuals and organisations to account”.

“We will recover public money where appropriate,” she added in her letter from October.

The ESFA isn’t the only body taking a closer look at subcontracting: Ofsted announced in November that it was launching research into the practice.


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