Welcome ALP Minimum Contract Levels Seminars 20 May 2010 Presented to ALP By Jane Lyon, Senior Account Director, North East

Outline Context and Background Minimum Contract Levels 2010/11 Developing a sub-contracting framework Issues (including levels of sub-contracting and proportion of direct delivery) Next steps

Context and Background £240m efficiency savings from Skills Funding Agency participation budgets in 2010/11 – with further efficiencies likely in future years One third of the colleges and training organisations account for less than 1.5% of total funding New structure which is more streamlined & will need to be increasingly efficient with lower costs An important minority of provision is currently delivered through sub-contracting arrangements, but without an agreed framework This has led to the introduction of a minimum contract level & sub-contracting framework which we will implement over the course of 2010/11

Minimum Contract Levels (MCL) Current contracting practices are not sustainable under the Skills Funding Agency For 2010/11 we are introducing a minimum contract value of £250k for those who only have a a train to gain contract Contracts for 2010/11 have not been affected, but we will be working with those involved to find an alternative means of contracting before the end of 2010/11.

Sub-contracting framework (1) There is no agreed framework for managing current sub-contracted delivery It is important for both existing sub-contracted delivery and those that would want to become sub- contractors in the future Third Sector National Learning Alliance have been asked to develop recommendations from a third sector perspective We also need to learn the lesson from the experience of others, particularly DWP and their move to a prime contracting model.

Sub-contracting framework (2) There are some important themes emerging from the TSNLA work that are likely to be common across all training organisations:  A framework for agreeing roles and responsibilities as well as outcomes, MI requirements, and quality and performance standards upfront  Common and shared data between Skills Funding Agency and lead contractor on performance of sub-contracted delivery  Transparency in the setting of management fees that would allow benchmarking in the future The lead contractor would still be responsible for sub-contracted delivery, but their management of this delivery could form part of the performance management system.

Issues There are still a number of issues that need to be addressed in developing a sub-contracting framework:  Levels of sub-contracting – currently only one is allowed but this may prevent certain types of organisations from continuing to be part of the delivery chain  Treatment of consortia – we would need to clarify how different forms of contracting relationship might be treated where they are not a traditional lead/sub contracting relationship  Rules over direct delivery – colleges and training organisations are required to deliver more than half of provision directly, which could become increasingly difficult in the future  Extension of MCL – if MCLs need to be increased or extended to other areas then the impact of this needs to be considered

Next Steps Initial TSNLA work has been completed This work alongside the outcome of these seminars will inform the development of the sub- contracting framework Keen to work with ALP and AoC as well to make sure that we get this right In May/June a Guidance Note is planned on the process for supporting those affected by MCLs and the next steps on the sub-contracting framework.