What could better regulation of franchising look like?

And as such it’s worth looking at the other chunk of tertiary to see if we can draw lessons or inspiration.

As well as a series of scandals surrounding franchising in HE in the middle of the last decade, over in further education there have been a number of stories too.

Back in 2020 England’s Education and Skills Funding Agency (ESFA) ran a consultation seeking views from providers who have experience in and / or an interest in subcontracted delivery to inform its thinking about reforms to subcontracting arrangements.

In June 2020 it published its response to the consultation exercise (with further detail in March 2021) and since then it’s been implementing a series of reforms designed to strengthen ESFA’s oversight of the approach to subcontracting in the sector – all with the aim of ensuring learners receive the best possible education and training and to enable ESFA to have oversight of the use of public funds, ensuring these are spent appropriately and are providing value for money.

The big headline there is that ESFA has been seeking a significant reduction in the overall volume of subcontracted delivery in the FE sector – in 2020 all providers were asked to produce a plan to reduce the amount of subcontracting in order to meet the 25 per cent cap by the 2022 to 2023 funding year – with instructions to submit an exemption case if not possible.

That kind of cap would be a real problem for several universities if something analogous was implemented in HE.

Each provider has to have a published policy on subcontracting, and it has to include the rationale for subcontracting provision. It must enhance the quality of the learner offer, and providers are explicitly told that they must not subcontract delivery to meet short-term funding objectives.

That enhanced quality has to hit one or more of the following aims:

• enhance the opportunities available to learners
• fill gaps in niche or expert provision or provide better access to training facilities
• support better geographical access for learners
• support an entry point for disadvantaged groups
• support individuals who share protected characteristics, where there might otherwise be gaps

Providers also have to set out their full range of fees retained and charges that apply including:

• funding retained for quality assurance and oversight
• funding retained for administrative functions such as data returns
• funding retained for mandatory training delivered to subcontractor staff by the directly funded provided
• clawback for under delivery or other reasons
• how the provider 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

The governing body and the accounting officer (senior responsible person) must agree the policy for delivery subcontracting.

Interestingly, ESFA reserves the right to require an explanation where the funding a provider has retained as the management fee for a subcontract exceeds 20 percent of the overall contract but offers little value.

Providers are also told that they must only use subcontractors for delivery of the provision if they have staff with the knowledge, skills, and experience to successfully select subcontractors in line with the requirements of ESFA’s funding rules, contract with and actively manage those subcontractors, those charged with governance determine the subcontractors as being of high quality and low risk to public funds, and they have robust procedures in place to ensure subcontracting does not lead to the inadvertent funding of extremist organisations.

There are some quite stringent due diligence requirements to be met. Naturally, providers have to ensure any subcontractor has the financial ability to deliver the requirements of the subcontract. They’re not allowed to contract with brand new companies who are yet to submit their first statutory accounts, unless they are able to thoroughly verify the new company’s financial capability.

And where ​​subcontractors are receipt of an aggregate subcontract value that totals £100,000 or more for each funding year, providers have to share the results of checks with ESFA via a signed return. Where there’s £500,000 in play, ESFA carries out its own checks.

There are also some standard terms that have to be included in contracts. They have to list of the services provided and the associated costs for doing so, with specific costs for quality monitoring activities and specific costs for any other support activities offered broken out (with their contribution to the delivery of high-quality learning noted).

Subcontractors have to agree to give ESFA access to their premises and to all documents related to their subcontracted delivery, have to provide learner data, and must provide sufficient evidence to allow the subcontracting provider to assess performance against Ofsted’s common inspection framework, incorporating the evidence provided into the self–assessment report.

In our piece on Monday we looked at B3 outcomes – but are universities confident that provision is meeting all of the requirements in both the wider B Conditions and some of the other aspects of the OfS regulatory framework?

On monitoring, providers are responsible for the actions of their subcontractors connected to, or arising out of, the delivery of the services. They’re required to manage and monitor all subcontractors to ensure that high-quality delivery is taking place, safeguarding has to be rigorously policed, and there has to be a “regular and substantial” programme of quality assurance checks on the education and training provided by subcontractors – including spot checks and face to face interviews with staff and learners.

That programme must include verifying that learners exist and meet the eligibility criteria for ESFA funding; involve direct observation of initial guidance, assessment and delivery of learning programmes, training and/or direct observation of assessment; and the findings of assurance checks must be consistent with expectations and the subcontractor’s records.

There are some nomenclature differences here, and a range of differences to the way in which provision is funded. I’d also want to look at excessive profits and for students to be clear about which policies (on everything from personal tutoring to student hardship) are to be applied by a subcontractor and which are not.

But looking at the framework, overall I think it’s very difficult – at least in principle – to argue with anything that is there in the context of higher education. The question is whether this sort of framework can be put in place voluntarily, or will need to be imposed by the regulator.