Contracting and subcontracting

Responsibilities of employer-providers and their subcontractors

Contracting and subcontracting

New for 1 August 2022:

  • EP177 - New rule: In accordance with your ESFA contract(s), you must meet the ESFA subcontracting standard as detailed in the subcontracting standard guidance, (the auditors guidance is currently in development and an update will follow). The external audit report must now be submitted via the ESFA document exchange (rather than by email). Updated for version 1.

  • Glossary: Please note the definitions for subcontracting and subcontractor in the glossary have been updated.

Employer-providers directly delivering training or on-programme assessment

EP153

Funding for all elements of each apprenticeship will be routed through you, the employer-provider. This includes funding for English and maths.

EP154

You must directly deliver some of the apprenticeship training and / or on-programme assessment associated with your apprenticeship programme. By apprenticeship programme, we mean all of the apprentices that you have been contracted to deliver training to, on behalf of any one employer, irrespective of occupational area, standard or level.

  • EP154.1 The volume of training and / or on programme assessment that you directly deliver for each employer must have some substance and must not be a token amount to satisfy this rule.

  • EP154.2 It must not be limited to a brief input at the start of each employer’s programme or involve delivery to just a few of a large number of apprentices. It does not include simply delivering English or maths, or aspects of the apprenticeship which all apprentices must have, such as safeguarding or British values.

  • EP154.3 You can find further information in the document Using Subcontractors in the Delivery of Apprenticeships.

EP155

Employer-providers must evidence the actual costs of delivery of apprenticeship training and on-programme assessment.

Using subcontractors

EP156

You must ensure that you comply with current and relevant procurement regulations. If you are a contracting authority, this means that you must comply with the Public Contracts Regulations 2015 (“the 2015 Regulations”). You must ensure that you select your subcontractor(s) fairly, transparently and without discrimination and that you ensure that potential subcontractors have sufficient capacity, quality and business standing to deliver the provision that is being subcontracted.

EP157

You must not make artificial distinctions or put in place convoluted delivery arrangements in order to avoid the application of these rules. For example, describing the arrangement as a partnership or collaborative arrangement.

EP158

You must be clear about the educational rationale for your subcontracting position, which must enhance the quality of your learner offer. You must not subcontract to meet short-term funding objectives.

  • EP158.1 We expect the rationale to meet one or more of the following aims:

    • EP158.1.1 Enhance the opportunities available for individuals

    • EP158.1.2 Fill gaps in niche or expert provision or provide better access to training facilities.

    • EP158.1.3 Support better geographical access for learners.

    • EP158.1.4 Offer an entry point for disadvantaged groups.

    • EP158.1.5 Give consideration of the impact on individuals with shared protected characteristics, where there might otherwise be gaps.

  • EP158.2 The ESFA will reserve the right to require an explanation where the funding you have retained as your management fee for a subcontract exceeds 20% of the overall contract but offers little value.

EP159

You can use delivery subcontractors to complement your own delivery. Within your apprenticeship programme (conditional on paragraph EP154) delivery subcontractors can deliver full or part-apprenticeship training for frameworks and standards.

EP160

You must only use delivery subcontractors that satisfy one of the following three criteria:

  • EP160.1 They are on the published Register of Apprenticeship Training Providers and have applied by the main or supporting application routes; or

  • EP160.2 They are one of your connected companies or charities as defined by HMRC and are on the published Register of Apprenticeship Training Providers, having applied through the employer-provider application route; or

  • EP160.3 They have applied to the Register of Apprenticeship Training Providers subcontracting exception process and been approved to be exempted from the requirement to be on the Register of Apprenticeship Training Providers and can produce written approval from DfE confirming that the exception applies to them, including its duration. This temporary exception is effective from 25 May 2022 until 31 July 2023.

EP161

You must not use of delivery subcontractors if you do not have the knowledge, skillsand experience of contracting with and managing, delivery subcontractors.

EP162

You must carry out your own due diligence checks on potential delivery subcontractors including taking account of any relevant Ofsted reports. The process and results must be available for inspection by us. You must not use a potential delivery subcontractor’s presence on the Register of Apprenticeship Training Providers, or any other public register or database, as an indicator that they are suitable to deliver to your specific requirements.

  • EP162.1 You must not use a delivery subcontractor that you assess as being unsuitable, or whose quality of delivery is demonstrably inadequate.

  • EP162.2 You must have robust procedures in place to ensure you do not inadvertently fund extremist organisations through the subcontracting of apprenticeship training and / or on-programme assessment.

EP163

You must not agree the use of any delivery subcontractor where this would require you to subcontract apprenticeship training and / or on-programme assessment to a second level. All of your delivery subcontractors must be contracted directly by you and you may have more than one subcontractor. The restriction on the level of subcontracting is in place to ensure:

  • EP163.1 That main providers / employer-providers retain clear and transparent accountability for the quality of training provision;

  • EP163.2 That proper and appropriate controls are in place to manage the apprentice experience; and

  • EP163.3 That value for money is achieved by mitigating funding being utilised for multiple tiers of subcontractor management.

EP164

You must make sure that apprentices supported through subcontracting arrangements know about you and your subcontractors’ roles and responsibilities in delivering the apprenticeship programme.

Delivery of apprenticeship training and on-programme assessment by delivery subcontractors

EP165

You are responsible for the actions of your subcontractors connected to, or arising out of, the delivery of the services, which you subcontract. If your subcontractor fails to deliver, you will be responsible for making alternative arrangements for the delivery of education and training, protecting the audit trail and / or repaying ESFA.

  • EP165.1 You carry overall responsibility for the quality of apprenticeship training and on-programme assessment undertaken by your delivery subcontractors.

EP166

You must manage and monitor all your subcontractors to ensure that high-quality delivery is taking place that meets the requirements of the agreement you have entered into with the ESFA for the provision of ESFA funded delivery (which includes compliance with the ESFA funding rules). You must ensure safeguarding is rigorously enforced.

  • EP166.1 It is not acceptable for any staff with a direct or indirect financial interest in the subcontractor to undertake any management control activities. This includes signing time sheets or invoices, as well as organising and/ or carrying out monitoring activity or visits to check the subcontractor delivery.

  • EP166.2 You must carry out a regular and substantial programme of quality-assurance checks on the apprenticeship training and on-programme assessment provided by delivery subcontractors, including visits at short notice and face-to-face interviews with staff and apprentices. The programme must:

    • EP166.2.1 Include whether the apprentices exist and are eligible; and

    • EP166.2.2 Involve direct observation of initial guidance, assessment and delivery of training and / or on-programme assessment.

  • EP166.3 Your findings must be consistent with these funding rules, your expectations and the subcontractor’s records. You must report any instances to us where this is not the case.

EP167

The Prevent duty applies to subcontracted provision. It requires training providers to have due regard to the need to prevent people from being drawn into terrorism. All further education providers must comply with relevant legislation and any statutory responsibilities associated with the delivery of education and safeguarding of students and this includes students receiving provision under a subcontracting arrangement.

EP168

If any of your delivery subcontractors undergoes a change of circumstances that affects its ability to continue to deliver under a subcontract with you, you must make alternative delivery arrangements for each apprentice affected by this. Change of circumstances include going into liquidation or administration, key delivery staff leaving the organisation, or removal from the Register of Apprenticeship Training Providers.

Contracting with delivery subcontractors

EP169

You must not enter into any agreement for brokerage. By brokerage we mean the provision by a third party of services, for a fee, to source delivery subcontractors to deliver on behalf of yourself.

EP170

Before any subcontractor starts delivery of the subcontracted provision, the subcontractor must have a legally binding, written subcontract with you.

  • EP170.1 The Department does not provide a template for subcontracts.

EP171

The subcontract must entitle you to exercise management controls over the subcontractor’s activity including access by auditors appointed by either your organisation or the ESFA. As a minimum the contracts must cover the following points:

  • EP171.1 A list of all services your organisation will provide to them and the associated costs for doing so. This must include:

    • EP171.1.1 A list of individually itemised, specific costs that you will charge for managing the subcontractor and how these are reasonable and proportionate to the delivery of subcontracted provision;

    • EP171.1.2 Specific costs for quality monitoring activities and specific costs for any other support activities offered by you to the subcontractor and how these contribute to the delivery of high-quality learning;

  • EP171.2 A requirement to give the ESFA and any other person nominated in writing by the ESFA, access to its premises and to all documents related to their subcontracted delivery.

  • EP171.3 The subcontractor must be under an obligation to provide you with ILR data so that your organisation’s data returns to the ESFA accurately reflect your subcontractor’s delivery information.

  • EP171.4 The subcontractor must provide you with sufficient evidence to allow you to:

    • EP171.4.1 Assess its performance against Ofsted’s education inspection framework;

    • EP171.4.2 Incorporate the evidence it provides you with into your self–assessment report; and

    • EP171.4.3 Guide the judgements and grades within your self-assessment report.

  • EP171.5 The subcontractor must always have suitably qualified staff available to provide the education and training funded by the ESFA.

  • EP171.6 The subcontractor must co-operate with you if the subcontract ends for any reason to make sure that there is continuity of learning.

  • EP171.7 The subcontractor must tell you if evidence of irregular financial or delivery issues arise. This could include, but is not limited to:

    • EP171.7.1 Non-delivery of training when funds have been paid;

    • EP171.7.2 Sanctions imposed by an awarding organisation;

    • EP171.7.3 Allegations of fraud;

    • EP171.7.4 An inadequate Ofsted grade; and

    • EP171.7.5 Allegations or complaints by apprentices, staff members, or other relevant parties.

  • EP171.8 The subcontractor must not use apprenticeship funding to make bids for, or claims from, any European funding on its own behalf or on behalf of the ESFA.

  • EP171.9 The subcontractor must not use apprenticeship funding as match funding for ESF projects.

  • EP171.10 You must make sure your subcontractors comply with the requirements set out in these funding rules.

  • EP171.11 You must ensure that you include in your subcontract provisions that enable you to terminate the subcontract should your subcontractor be removed from RoATP.

EP172

You should take your own legal advice about how best to incorporate these provisions and wider terms and conditions in your subcontracts.

Subcontracting threshold and exemption cases (this section does not apply to Local Authorities)

EP173

If you pay subcontractors more than 25% of the apprenticeship funding you receive from the ESFA (determined using the financial information in the subcontractor declarations), you must submit an exemption case to ESFA to obtain ESFA’s agreement.

  • EP173.1 This policy is in place as part of the subcontracting reforms which have the overarching aim of reducing the volume of subcontracting in the sector to ensure high quality provision for learners and as much funding reaching the front line as possible.

  • EP173.2 You must submit an Exemption Case, utilising Annex C (of the Reforms to Subcontracting Education for Learners over 16 document) to the Department by 31 May 2023. The exemption case should be sent to subcontracting.requirements@education.gov.uk.

  • EP173.3 We will consider your request, taking into account the detail you have provided, data and information available within and outside ESFA. We will consider:

    • EP173.3.1 Your subcontracting policy, including your fees and charges policy, in line with rule EP180 and EP181.

    • EP173.3.2 If you subcontract more than £100,000 in a funding year, we will consider the external auditor’s report on the effectiveness of the processes and controls you have in place for managing subcontractors as set out in rule EP177.

    • EP173.3.3 Whether the subcontracting is delivering to learners who may not otherwise have access to provision, including there being no alternative provision, or the characteristics of the learner mean another main provider may not be suitable.

EP174

If you do not currently subcontract more than 25%, you are still required to review all subcontracted provision in line with rule EP158.1. You should ensure you review this, on at least an annual basis, the educational rationale for entering each subcontract and ensure these remain relevant and are supported by your officers who are charged with governance.

Subcontracting reporting and external audit requirements

EP175

You must record subcontracted provision in line with the published guidance for the school census and the individualised learner record (ILR) data returns.

EP176

If you return ILR data, in accordance with your ESFA contract (s) you must submit a fully completed subcontractor declaration by the dates given to you by the ESFA. This will be at least twice during the funding year. If you do not subcontract you must still provide a nil return to confirm this.

  • EP176.1 You must also update your subcontractor declaration if your subcontracting arrangements change during the year. This is done via your MyESF account.

EP177

In accordance with your ESFA contract(s), you must meet the ESFA subcontracting standard as detailed in the Subcontracting Standard guidance If the aggregate total of all subcontractors delivering ESFA funded provision on your behalf exceeds or is anticipated to exceed £100,000 in any single funding year. Whilst otherwise excluded from these rules, for the purposes of calculating the aggregate total of subcontractor delivery you must include delivery of apprenticeships.

  • EP177.1 You must supply us with a report signed by an external auditor that provides assurance on the arrangements to manage and control your delivery subcontractors. You must send a copy of the external auditor’s final report including the action plan of agreed recommendations and certificate via ESFA document exchange by 31 July 2023. Further information can be found in the document exchange user guide. ESFA will review this as part of our overall assurance arrangements.

  • EP177.2 Alongside the external audit report, you will also need to upload the statement letter via ESFA document exchange by 31 July 2023. Further information can be found in the document exchange user guide. ESFA will review this as part of our overall assurance arrangements.

  • EP177.3 If we do not receive the auditor’s report on the subcontracting standard by 31 July 2023, you as the lead provider will be deemed as non-compliant if no subcontracting report on the subcontractor is provided by this date and funding may be affected/delayed.

Special conditions for subcontracting to supporting providers

EP178

Delivery subcontractors who have successfully applied to the supporting application route of the Register of Apprenticeship Training Providers must not receive more than £500,000, or £100,000 if the delivery subcontractor is identified as new, of apprenticeship funding for their delivery from 1 August to 31 July each year.

  • EP178.1 You must ensure that you are not one of a number of organisations making payments to any supporting provider that exceed £500,000, or £100,000 if the delivery subcontractor is identified as new, in any one year. We will place restrictions on your future use of delivery subcontractors if this happens.

  • EP178.2 We will exclude any supporting provider that has applied to the Register of Apprenticeship Training Providers through the supporting application route where they allow their funding to exceed their respective total in any one year.

Special conditions for all instances where the employer is the delivery subcontractor

EP179

Where the employer is the delivery subcontractor, they must only be paid the actual costs of delivery. Employers must not profit from apprenticeship delivery to their own employees.

Disputes and issue resolution

EP180

You are responsible for resolving issues and disputes between you and your delivery subcontractors.

EP181

Agreements entered into by you must be legally binding. Dispute resolution must be in accordance with the terms of the written agreement, which ultimately would be enforceable through the courts.

EP182

Apprentices must be made aware by you, as the employer-provider, that they can contact the apprenticeship helpline regarding apprenticeship concerns, complaints and enquiries. The contact number and website must also be included in the apprentice’s training plan.