Contracting and subcontracting

Responsibilities of providers and their subcontractors, including when they’re not on the Register of Apprenticeship Training Providers (RoATP).

Contracting and subcontracting

New for 1 August 2022:

  • P197 - 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.

Main providers directly delivering training or on-programme assessment

P173

Funding for all elements of each apprenticeship will be routed through a single main provider that the employer has chosen. This includes funding for English and maths.

  • P173.1 You can only be funded for apprenticeship delivery to employers who do not pay the apprenticeship levy if you are working with employers who have reserved funds.

P174

You must directly deliver some of the apprenticeship training and / or on-programme assessment associated with each employer’s 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.

  • P174.1 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.

  • P174.2 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.

  • P174.3 You can find further information in the document Using Subcontractors in the Delivery of Apprenticeships. Agreeing the use of subcontractors with employers

Agreeing the use of subcontractors with employers

P175

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.

P176

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.

P177

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

  • P177.1 We expect the rationale to meet one or more of the following aims:

    • P177.1.1 Enhance the opportunities available for learners;

    • P177.1.2 Fill gaps in niche or expert provision, or provide better access to training facilities;

    • P177.1.3 Support better geographical access for learners;

    • P177.1.4 Offer an entry point for disadvantaged groups; or

    • P177.1.5 Give consideration of the impact on individuals with shared protected characteristics.

  • P177.2 You must also publish, before agreeing the use of subcontractors with any employer, the services you will provide when subcontracting and how you determine the associated costs.

  • P177.3 You must set out your full range of fees retained and charges, which must be eligible costs, that apply including:

    • P177.3.1 Funding retained for quality assurance and oversight; and

    • P175.3.2 Funding retained for administrative functions such as data returns.

  • P177.4 You must also set out how you will determine that each cost claimed by a subcontractor is reasonable and proportionate to the delivery of their teaching or learning and how each cost contributes to delivering high quality learning.

  • P177.4.1 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.

  • P177.5 We expect these policies, including the rationale, to be reviewed by you ahead of each funding year and signed off by those charged with overall responsibility for your organisation in your governance structure. Once reviewed, the updated policy must be published by 31 October each year.

P178

You can use delivery subcontractors to complement your own delivery if requested by an employer and agreed at the start of an apprenticeship. Within an employer’s apprenticeship programme (conditional on paragraph P173) delivery subcontractors can deliver full or part-apprenticeship training.

P179

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

  • P179.1 They are on the published Register of Apprenticeship Training Providers and have applied by the main or supporting application routes; or

  • P179.2 They are either the apprentice’s employer, a connected company or charity as defined by HMRC and are on the published Register of Apprenticeship Training Providers, having applied through the employer-provider application route; or

  • P179.3 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.

P180

You must not agree to the use of delivery subcontractors with an employer if you do not have knowledge, skills and experience of contracting with and managing, delivery subcontractors.

P181

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 and employers. 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, or the employer’s, specific requirements.

  • P181.1 You must not agree with an employer the use of a delivery subcontractor that you assess as being unsuitable, or whose quality of delivery is demonstrably inadequate, even where the employer decides not to work with you as a consequence.

  • P181.2 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.

P182

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:

  • P182.1 That main providers retain clear and transparent accountability for the quality of training provision;

  • P182.2 That proper and appropriate controls are in place to manage the apprentice experience; and

  • P182.3 That value for money is achieved by mitigating funding being utilised for multiple tiers of subcontractor management.

P183

You must maintain the relationship with each employer at all times. You must not allow a delivery subcontractor to lead that relationship.

  • P183.1 You must make sure that learners supported through subcontracting arrangements know about you and your subcontractors’ roles and responsibilities in delivering the apprenticeship programme.

Your written agreement with each employer

P184

You must clearly describe to each employer and potential subcontractor, before each subcontracting relationship is agreed, the reason for subcontracting and all services you will provide and the associated costs when doing so. This must include a list of specific costs for managing the subcontractor; specific costs for quality monitoring activities and specific costs for any other support activities offered by you to the subcontractor. All of these costs must be individually itemised and describe how each cost contributes to delivering high quality training. You must also explain how such costs are reasonable and proportionate to delivery of the subcontracted apprenticeship training.

P185

If you and an employer agree the use of delivery subcontractors, you must have an up-to-date written agreement in place with each employer that sets out the following for the delivery of their apprenticeship programme:

  • P185.1 The apprenticeship training and / or on-programme assessment that you will directly deliver;

  • P185.2 The amount of funding you will retain for your direct delivery;

  • P185.3 The apprenticeship training and / or on-programme assessment that each delivery subcontractor will contribute to the employer’s apprenticeship programme;

  • P185.4 The amount of funding you will pay each delivery subcontractor for their contribution;

  • P185.5 The specific amount of funding you will retain to manage and monitor each delivery subcontractor;

  • P185.6 The specific amount of funding you will retain for each other support activity you will provide to each delivery subcontractor;

  • P185.7 The specific amount of funding you will retain for the monitoring you will undertake to ensure the quality of the apprentice training and / or on-programme assessment you have contracted each delivery subcontractor to carry out;

  • P185.8 A detailed description of how the funding retained for each activity detailed in P183.5 to P183.7 contributes to delivering high quality training and how the funding retained is reasonable and proportionate to delivery of the apprenticeship training described in P183.3; and

  • P185.9 Any actual or perceived conflict of interest between you and any delivery subcontractors. For example, where you and a delivery subcontractor are part of the same group, share common directors or senior personnel, or where you will benefit financially from using a particular delivery subcontractor.

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

P186

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.

  • P186.1 You carry overall responsibility for the quality of apprenticeship training and on-programme assessment undertaken by your delivery subcontractors.

P187

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.

  • P187.1 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.

  • P187.2 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:

    • P187.2.1 Include whether the apprentices exist and are eligible; and

    • P187.2.2 Involve direct observation of initial guidance, assessment and delivery of training and / or on-programme assessment.

    • P187.3 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.

P188

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.

P189

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, in agreement with their employer. Change of circumstances include going into liquidation or administration, key delivery staff leaving the organisation, or removal from the Register of Apprenticeship Training Providers. The change of delivery arrangements must be recorded in your written agreement with the employer.

Contracting with delivery subcontractors

P190

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.

P191

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

  • P191.1 The Department does not provide a template for subcontracts.

P192

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:

  • P192.1 A list of all services your organisation will provide to them and the associated costs for doing so. This must include:

    • P192.1.1 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.

    • P192.1.2 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.

    • P192.1.3 Reference to your delivery subcontracting policy, including your rationale for subcontracting and where it can be found on your website.

  • P192.2 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.

  • P192.3 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.

  • P192.4 The subcontractor must provide you with sufficient evidence to allow you to:

    • P192.4.1 Assess its performance against Ofsted’s education inspection framework;

    • P192.4.2 Incorporate the evidence it provides you with into your self–assessment report; and

    • P192.4.3 Guide the judgements and grades within your self-assessment report.

  • P192.5 The subcontractor must always have suitably qualified staff available to provide the education and training funded by the ESFA.

  • P192.6 The subcontractor must co-operate with you if the subcontract ends for any reason to make sure that there is continuity of learning.

  • P192.7 The subcontractor must tell you if evidence of irregular financial or delivery issues arise. This could include, but is not limited to:

    • P192.7.1 Non-delivery of training when funds have been paid;

    • P192.7.2 Sanctions imposed by an awarding organisation;

    • P192.7.3 Allegations of fraud;

    • P192.7.4 An inadequate Ofsted grade; and

    • P192.7.5 Allegations or complaints by apprentices, staff members, or other relevant parties.

  • P192.8 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.

  • P192.9 The subcontractor must not use apprenticeship funding as match funding for ESF projects.

  • P192.10 You must make sure your subcontractors comply with the requirements set out in these funding rules.

  • P192.11 You must ensure that you include in your subcontract, provisions that enable you to terminate the subcontract should your subcontractor be removed from RoATP.

P193

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)

P194

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) and you do not think this can be reduced to less than this, you must submit an exemption case to ESFA to obtain ESFA’s agreement by 31 March 2023.

  • P194.1 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.

  • P194.2 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 March 2023 and each year thereafter. The exemption case should be sent to subcontracting.requirements@education.gov.uk.

  • P194.3 We will consider your request, taking into account the detail you have provided, data and information available within and outside ESFA. We will consider:

    • P194.3.1 Your subcontracting policy, including your fees and charges policy and whether this has been signed off by your officers who are charged with governance in line with rule P176.5.

    • P194.3.2 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 P197.

    • P194.3.3 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.

P195

If you do not currently subcontract more than 25%, you are still required to review all subcontracted provision in line with rule P176.1. 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

P196

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

P197

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.

  • P195.1 You must also update your subcontractor declaration if your subcontracting arrangements change during the year. This is done via your MyESF account.

P198

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.

  • P198.1 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 (the auditor’s guidance is in development).

  • P198.2 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.

  • P198.3 If we do not receive the auditor’s report on the subcontracting standard by 31 July 2023, you as the main 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 employer-providers

P199

Organisations who have successfully applied through the employer-provider route of the Register of Apprenticeship Training Providers are only eligible to deliver apprenticeship training and / or on-programme assessment to apprentices employed either by them or a connected company or charity as defined by HMRC. You must ensure any employer-providers who are delivery subcontractors to you meet this requirement.

P200

Employer-providers must evidence the actual costs of delivery of apprenticeship training and on-programme assessment (see apprenticeship funding rules for employer-providers).

Special conditions for subcontracting to supporting providers

P201

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.

  • P201.1 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.

  • P201.2 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

P202

Where the employer is the delivery subcontractor you must only pay them for actual costs of delivery. Employers must not profit from apprenticeship delivery to their own employees.

Disputes and issue resolution between the employer and main provider

P203

You are responsible for resolving issues and disputes between the employer and your delivery subcontractors. Main providers and assessment organisations must provide employers and apprentices with their written complaints and dispute resolution procedure, policy and process. The first contact point for this must be included in the written agreement and in the training plan.

P204

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

P205

Apprentices and their employers must be made aware by the main 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 employer’s written agreement and in the apprentice’s training plan.