Introduction

BIS issued guidance on its programme of area based reviews of post-16 provision outside schools in September 2015. BIS has now issued updated guidance, which is accessible here:

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/505693/BIS-16-118-reviewing-post-16-education-and-training-institutions-updated-guidance-on-area-reviews.pdf

This briefing outlines the main changes from the initial document of which college principals, corporation chairs and members should be aware as they prepare for or participate in reviews.

Foreword from the Minister for Skills

Nick Boles’ Introduction reflects on the protection for FE and the opportunity provided by the  increased investment in apprenticeships through the employer levy provided by the autumn 2015 Spending Review. The Minister also stresses that there will be a one off opportunity to apply for restructuring facility funding and support on implementation. However, this is on the basis that area reviews are a one-off opportunity for colleges to put themselves on a strong footing – subsequently only those providers which can show they are providing good quality provision on a financially sustainable basis will receive public funding and an insolvency regime will be introduced to ensure fairness when a provider is no longer financially viable.

Context for reviews

The policy context for reviews remains Reviewing post-16 Education and Training Institutions. However, this section of the Updated Guidance has been greatly shortened, with Governance and Roles and Responsibilities moved to the section on Conducting reviews. The section on the need for financial sustainability and efficiency has been much shortened, so that the drivers of reviews appear to be as much or more concern for meeting areas’ differing needs, increased specialisation of providers, access to high quality and relevant training and (very clearly signposted) the need for colleges to respond proactively to the reform and expansion of apprenticeships. The last will mean colleges operating “competitively in a more market-style environment” if they are to take a greater share of the apprenticeship training market. 

Conducting reviews

Governance

This section is essentially unchanged save that principals are now mentioned (as supporting their chairs)!

Roles and responsibilities

Minor changes here include:

  • The FE and Sixth Form College Commissioners are said to be responsible for ensuring the full range of options is considered.
  • There is now mention of the Deputy FE Commissioners, FE Advisers, SFC Advisers and the Joint Area Delivery Unit, and in particular the Deputy Commissioners’ close work with institutions and stakeholders. This group is now responsible for keeping records of the Review (formerly this was down to review steering groups).
  • Local authorities are now told to take account of the review’s analysis “to inform their deliberations about schools provision”.
  • Governing bodies are advised “where necessary [to rely] on their own independent advice on financial and legal matters”.
  • There is extended mention of the Regional Schools Commissioners. It is said to be particularly important for the RSC to attend meetings where school and academy provision and options are discussed. RSCs should take analysis and findings of reviews into account in any decisions about future post-16 provision in academies, free schools and UTCs.
  • The Education and Skills Funding Agencies will be establishing a cross-agency Transaction Unit to assess applications to the restructuring facility.
  • The membership of the National Area Review Stakeholder Advisory Group is listed in Annex E.
  • The principles to be followed in reviews are largely unchanged, save that parties are now expected “to consider and judge objectively” a range of structural options rather than just “be aware” of them. There is a new reference to “the capability to discern where and how the best use of digital technologies can make a significant impact on meeting needs, achieving… outcomes and improving efficiencies”.

Scope and timing

This and the next section are substantially extended and amended compared with the sections on Project Start and Gateway and Review phases in the original guidance.

Timescales

These should now largely be governed by the published indicative timings. However, the National Steering Group may change start dates in the light of a change in institutional risk profile or a request by a local area.

The Updated Guidance suggests that in the light of experience a typical review timescale is 4-6 months, compared with the 3-4 months suggested in the Original Guidance. This reflects our experience.

Scope - border issues

The Updated Guidance indicates that where an institution is affected by more than one review it should “formally take part in one review, but also …be fully engaged in any other review where it has an interest without being a primary member.” Similarly, LEPs and local and combined authorities with an interest in a neighbouring area “will also be fully engaged and will have direct access to the relevant Deputy FE Commissioners”.

Scope – institutions

The government has now reviewed the criteria for proposing new school sixth forms and the guidelines “seek to test the quality and financial viability” of all new proposals. Guidance is to be published separately.

SPAs and early intervention

A common query by colleges is how area reviews fit with the need for colleges to undertake Structure and Prospects Appraisals before changing delivery model; and with early intervention where a college gets into difficulties.

In relation to SPAs:

  • Where a college considers there is a case for a separate SPA in advance of an area review they should “engage with the FE Commissioner of SFC Commissioner to ensure the SPA does not remove options which a review would want to consider”.
  • Where colleges, having conducted an SPA, are “already significantly far down the track of merger for good reasons and it would be counterproductive to delay that process it is logical for them to proceed without delay”. However, the Updated Guidance adds that “where further options emerge through the area review “they should represent a second stage for these colleges”. It is unclear whether that means that the merger process should be halted to facilitate this or whether the merger should proceed and the merged college should then consider any  further options that may be appropriate.
  • Where colleges are considering merger or federation and are likely to be in a late wave review “we would expect them to initiate a formal SPA …but in undertaking the analysis they should invite local stakeholders and agencies to engage with the SPA and consider broader structural issues which may be considered by the area review in due course”.
  • There are some cases where rapid mergers are required or the range of options is few. In these cases “we would except the colleges to follow the approach above”, but the SPA can be “proportionate”.

If government intervention in a college needs to take place urgently, an area review will not prevent this. The interaction between the review process and intervention is described in Annex B, which is unchanged save that it is confirmed that during a review the monitoring of a college subject to FE Commissioner–led intervention will continue. Such college is likely to be required to actively participate in the review and to implement recommendations that come out of it. A college in administered status is unlikely to be removed from intervention during a review.

Process

This section has been extended to reflect developments since reviews started. It is now stated that “a key part” of preparation for a review “is for the local authorities and LEPs in an area to ensure they are clear that they have a coherent picture of the skills needs and any local issues, and to ensure that data is available to provide the economic and educational context for the review and the vision for what is needed…”. The section on economic need analysis now refers also to educational need and in particular to apprenticeships and traineeships and to Level 4+, basic skills and SEND. There are new sections on estates analysis and financial and performance analysis. Having agreed on the direction of the curriculum offer “steering groups may recommend that some rationalisation of estates across the area is possible”. Where this results in costs, these “should wherever possible be funded by the colleges themselves” though in some cases applications for support may be made to the restructuring facility. The financial analysis will compare each college with a range of benchmarks and views from the Commissioners, the aim being for each institution to develop a business plan providing a route to “financial viability, sustainability…resilience and a high quality offer that meets the needs of the local area.”

The section on options analysis has been re-written, and now includes mention of academisation of sixth form colleges. The statement in the Original Guidance that the review process “will lead to fewer but stronger individual institutions” no longer appears, but it is questionable whether there has been any shift in policy towards mergers, the Updated Guidance saying that “Implemented effectively, mergers can provide benefits…”. There is a new Annex F setting out the indicators and benchmarks (separate for FECs and SFCs) that will be used by the College Commissioners’ teams in evaluating the options.

Governing bodies will remain responsible for deciding whether to accept the steering group’s recommendations. However, there is a new warning that Exceptional Financial Support will no longer be available once changes from a review have been implemented.

The section on stakeholder engagement now mentions that “consideration will be given to the views of any Higher Education providers who have an interest in the review” and that the NUS is holding discussions on the reviews. There is a new section on lessons learned from the first wave of area reviews.

Sixth Form College Academisation

This new section stresses that applications for academisation “will need to show how academisation would enable the college to develop closer partnerships with schools and would contribute to the wider objectives of the area review…Applications will need the support of the local steering group and be part of the recommendations of the …review.”

Implementation

This section has also been expanded and re-written, with most of the new material being devoted to issues arising from mergers of colleges. Suggestions include:

  • the advantages of the transitional board being chaired by an independent person and of having “a number” of other independent members;
  • putting in place a dedicated turnaround resource, reporting to the transitional board and its chair, and support where appropriate by a “part time, paid, senior adviser”;
  • considering remunerating the Chair or lead governor for the additional work during the review and implementation, with the consent of the Charity Commission;
  • where the new college “is significantly larger or different in nature from the predecessor colleges, undertaking open recruitment of the new principal, with incumbent principals able to apply.

There is also a description of the key stages in the process of structural change, including merger, namely developing a strategic business plan, undertaking due diligence on the institutions involved, and creating a detailed implementation plan including the statutory consultation where one or more colleges is to be dissolved. This section stresses the need for appropriate resources and, in many cases, the need for additional specialist expertise.  Government is investigating how due diligence activities can be aligned, e.g. to meet the concerns of governing bodies, banks and government, and so save cost.

Further work underway

To help institutions government is undertaking development work on the following:

  • more detailed implementation guidance, to be issued in spring 2016;
  • simplification of the statutory process of dissolving college corporations;
  • reporting by BIS and DfE of performance of colleges forming parts of the new corporation;
  • possible inspection by Ofsted of component colleges or campuses as well as the whole corporation, consultation to be undertaken in late spring 2016.

Restructuring facility

This facility is only to be accessed where the short term investment needed to deliver review recommendations cannot be secured through private lending or asset sales. The restructuring of the sector is seen by government as a one-off process. Applications will be subject to stringent approval processes “including by HM Treasury and Ministers”. In the future, if a college fails “there should be an orderly [insolvency] process “which allows them to close in an orderly way which protects learners” as well as creditors. This regime will come into effect “around the end of implementation of the area review process”. Further information will be published “in due course”.

Applications will need to relate to review recommendations, be made within six months of the final steering group meeting and provide detailed evidence that the objectives and criteria set out in Annex H will be satisfied. Funding will normally be provided as a loan on commercial terms, which may include payment of interest, provision of security etc., and cover only a proportion of the total costs. Some or all funding may be provided on a non-repayable basis in a limited number of restructuring cases where liabilities would result in significant detriment to the finances of one of the parties or where repayment would be unaffordable for the new institution even over a significant period. No funding will be available after March 2019 and funding for waves one and two will “largely be provided by March 2017”. Funding will be provided under a legally binding agreement and governing bodies will be expected to obtain their own legal and financial advice.

Institutes of Technology (IoTs)

Annex A to the Guidance has been amended but remains very short of detail. New points are:

  • IoTs will have their own independent identity and governance and will be nationally branded;
  • Initially “the numbers of IOTs will be small but will increase progressively over time” so there will be more than one opportunity for areas to be considered as candidates for an IoT;
  • Government is working with stakeholders on case studies to test different governance models, with results and next steps for establishing IoTs being published in autumn 2016.

Annex C: The role of the governing body in area reviews

This remains as in the Original Guidance with two new points on implementing review recommendations:

  • commitment to implementing recommendations;
  • clear objectivity in implementing review outcomes and “willingness to work openly with other governing bodies to achieve common goals”.