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Education briefing - Reforms to subcontracting education for learners over 16

  • United Kingdom
  • Education - Briefings




The Education and Skills Funding Agency (“ESFA”) has recently published updated guidance on its proposed reforms to subcontracting education for learners over 16. 

Colleagues will recall that the ESFA had undertaken a consultation on subcontracting reform in February 2020 which set out a number of proposals for reforming the future arrangements for subcontracting of ESFA funded post-16 education and training. Responses to that consultation were published in June 2020 and the ESFA committed at the time to provide further detail on some aspects of the proposed reforms later in the year. 

That further detail in respect of nine proposals is summarised in the briefing below and the full guidance document can be accessed on here 

The reforms will affect all funded subcontracting activity (including adult education budget (“AEB”), European Social Fund (“ESF”) funding and apprenticeship funding) though there is a primary focus in this guidance on the funding of 16 to 19 provision.

There is nothing particularly new here, though it is worth highlighting that as part of the reforms, the ESFA had intended to simplify and reduce the number of rules which applied across different funding streams and we had expected that one consolidated set of funding rules would be released from the 2021/2022 funding year onwards. The biggest news here then is that the ESFA has confirmed that it will publish one set of consolidated rules for all post 16 provision but that apprenticeship funding will continue to be subject to separate funding rules. This is based on the fact that apprenticeship funding rules need also to deal with the particular complexities involved as a result of the involvement of the employer.

The guidance does not contain anything that would directly affect the Eversheds Sutherland model subcontracting template. We will however review the rules when they are released (across all funding streams) for 2021/2022 in the Spring and then update our model subcontracting template accordingly.

Proposal 1 - Publishing educational rationale for your subcontracting position which is approved by those charged with governance.

The guidance states that for contracts, grant agreements and funding requirements issued from the 2020 / 2021 funding year onwards, lead providers should:

• be clear about their education rationale for subcontracting;

• sign off that strategy/rationale with their board; and

• have published, by 31 October 2020, their rationale on their website together with a detailed management fee structure and complete list of subcontracting partners.

For future years, lead providers will be required to review and discuss their strategy and rationale annually as well as refreshing their publication prior to the start of each academic year.

The ESFA sets out in the guidance that it intends to undertake a sampling exercise early in the 2021 calendar year to understand the progress providers have made in developing and publishing their rationale.

Proposal 2 – Distance subcontracting

The guidance states that from August 2021, the ESFA will require:

• lead providers who subcontract 16 to 19 provision to seek prior approval for the delivery of geographically distant 16 to 19 study programme provision where the delivery location is outside the lead provider’s normal recruitment area; and

• 16 to 19 subcontracted provision delivery at distance should be rarely undertaken but the ESFA recognise there will be some limited circumstances where it is appropriate.

No prior approval is required for other funding streams delivering at geographical distance but providers will need to make their own assessments as to what constitutes distance and will be expected to produce evidence of approval and arrangements for oversight should the ESFA or Ofsted wish to see it.

Requests for continuing arrangements should be made by 31 May 2021 and requests for new arrangements should be made in writing at least 12 weeks prior to the commencement of delivery.

Proposal 3 – Volume controls on the value of provision that can be subcontracted – excluding local authorities and ESF provision

The ESFA had previously indicated that it wished to see a staged reduction in the volume of subcontracting across the sector overall.

All providers were asked previously to produce a plan during the 2020 autumn term setting out the ways in which the provider would achieve a reduction over the three year period to 2022 / 2023.

The guidance emphasises again the requirement that all providers are asked to make reductions to their volume of subcontracted activity across the period to 2022 / 2023.

Proposal 4 – Whole programme subcontracting

The guidance reiterates the requirement for providers to seek the ESFA’s prior agreement for students whose whole programme of 16 to 19 provision is subcontracted. The ESFA had said it would also consider introducing the same requirement for AEB programmes that exceeded a specified guided learning hours duration effective from 2021 to 2022.

ESFA has now concluded that introducing such a requirement for AEB programmes is not practical and it will not be proceeding with this.

Proposal 5 – Volume controls on the value of ESFA funds that can be held by a subcontractor

The ESFA had said it would monitor the volume and value of aggregate provision held by a single contractor. Where this was above £3 million, the ESFA would then refer the contractor to Ofsted for inspection.

The ESFA has reiterated in the guidance that it expects subcontracting in the system to reduce overall. Where there are high value / high volume subcontractors without a lead contract, the ESFA will review arrangements at key points during the funding year which could result in a referral to Ofsted for direct inspection or direct action to require lead providers to reduce subcontracting volumes with the particular subcontractor.

Proposal 6 – Direct contractual relationships between lead providers and third parties providing specialist support

The guidance highlights the ESFA’s requirement that lead providers have a direct contractual arrangement with a sports club where one is involved in the arrangement, and that there should be no financial transactions between a subcontractor and a sports club.

The guidance makes clear that where a sports club or another third party are involved in the delivery of a 16 to 19 study programme, lead providers should assure themselves that all facilities are safe, suitable and fit for purpose as well as ensuring all safeguarding arrangements are robust. Parties should be clear about which activities are ESFA funded and which are not.

Proposal 7 – Introducing one set of funding rules for subcontracting

The ESFA has confirmed that the 2021 / 2022 subcontracting funding rules (to be published in Spring 2021) will now include all post-16 provision but excluding apprenticeships. Apprenticeship subcontracting funding rules will remain separate given the complexities involved as a result of the involvement of the employer.

Proposal 8 – Publishing information about funding retained

The ESFA will be introducing one requirement to publish information about funding retained and charges applied by lead providers, across all funding streams. This requirement will be set out in the 2021 / 22 subcontracting funding rules.

Proposal 9 – Introducing an externally assessed standard for management of subcontracting

Prior to the consultation taking place, the ESFA had required a copy of an external audit certificate in relation to a provider’s subcontracting arrangements by 31 July each year, if they subcontracted £100,000 or more of apprenticeships funding and/or £100,000 in AEB/ESF.

The current requirement is that the ESFA requires an external audit report from providers who subcontract £100,000 or more of apprenticeship, AEB and ESF funding as an overall aggregate amount. The ESFA has also now confirmed in the guidance that it intends to extend the requirement for an external audit report to also include 16 to 19 provision funding in the aggregate £100,000 threshold.

For further information and to discuss any issues you might have in respect of subcontracting, please contact in the first instance: