MPs have urged departments to develop a framework for identifying the risk of a government contractor becoming “too big to fail”, following the failure of the UK’s largest commercial further education provider Learndirect.
The Commons’ Public Accounts Committee told government to get a grip on the number of contracts held across departments by a single private company, and how it is performing in those contracts.
Learndirect, like now-bankrupt facilities management and construction services company Carillion, had contracts with numerous government bodies, including one with the Education and Skills Funding Agency to deliver training to apprentices. That contract was assessed as “inadequate” by Ofsted last year.
In a new report, the PAC said such a contract would normally be cancelled almost immediately but Learndirect was able to threaten that such a course of action would “jeopardise its ability to deliver other key government contracts”.
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The ESFA’s usual policy is to terminate the contracts of failing providers after three months, but its parent body, the Department for Education, announced last summer its Learndirect contract would continue until July this year.
The company, which was created by the government in 1988 but sold off in 2011, expects to receive more than £105m of funding from its main government contracts in 2017-18.
The decline in Learndirect’s performance on apprenticeships was first flagged in 2013.
MPs were scathing of the behaviour of Learndirect, which they said had “received hundreds of millions of pounds of public money, while neglecting its learners in pursuit of profit and frustrating the Ofsted inspection regime with delaying tactics and spurious legal action”.
Among the recommendations made in their report is for government to learn that it needs “to understand how many government contracts a company holds at a given time and how well it is performing against each of those contracts”.
They also called on the Department for Education and other government bodies – through the Cabinet Office – to develop a “framework for identifying any risk that a commercial provider becomes so large and essential to the delivery of public services that it cannot be allowed to fail, or requires special treatment if it begins to do so”.
Meg Hillier, PAC chair and a Labour MP, said recent events had brought concerns about government’s relationship with its contractors into sharp focus. She criticised poor government oversight and the fact that Learndirect “appears to hold the whip hand” despite letting down thousands of learners.
“It expects to receive over £105m of funding from its main government contracts for this year, a consequence of assessments made about the risk to public services should Learndirect’s funding be terminated,” she said.
“It cannot be right that individual contractors should command such large sums of public money regardless of their performance. No commercial provider should be allowed to become so essential to the delivery of services that it cannot be allowed to fail.”
A Department for Education spokesperson said: “The government is ending Learndirect’s contract to provide apprenticeships and adult education because of its failure to meet the high standards expected. Our priority has always been to protect learners and make sure they do not lose out and get the opportunity to complete their courses, a point previously acknowledged by the independent National Audit Office.
“We continue to monitor Learndirect’s performance on a monthly basis and will respond in detail to the PAC’s report in due course.”