New funding model calculation and explanation of rates (2022)

Detailed explanation of rates

Our proposed method makes use of several different rates and formulas. These, and their origin, are set out in the following table below. In the table, the letter references A to F are used. These relate the following parts of the process:

New funding model calculation and explanation of rates (1)

*The Institute will continue to work with the sector to establish a robust approach to this aspect of the overall calculation.

The model is separated into 3 aspects of learning, assessment and administration.

The learning aspect is separated into training and consumables costs. The training costs are calculated using the tutor salary and the number of hours in group delivery and the number of hours in 1:1 delivery. An uplift is then applied to account for non-contact teaching time. The cost of consumables is calculated using the individual cost of an item, e.g. software licence, and the number of apprentices using the item.

The assessment aspect is separated into formative assessment, end-assessment and mandatory qualifications. The figure used for the formative assessment rate in the model will depend on whether a mandatory qualification is included in the apprenticeship. If a mandatory qualification is included, then a higher rate is applied. The end-point assessment element relies on the submission of a quote provided by an end-point assessment organisation which is then moderated by the Institute. The mandatory qualification element relies on the submission of a quote provided by the trailblazer. The figure used for the degree rate in the model will depend on whether the apprenticeship is a level 6 or a level 7 degree. If a level 6 degree qualification is included, then a higher rate is applied.

The administration aspect is calculated using a fixed rate mulitplied by the monthly duration of the apprenticeship.

These costs are combined to create the best estimate of typical eligible costs of learning, assessment and administration. An eligible cost margin is then applied before calculating the funding band recommendation.

Rates Table

RATE

HOW IS IT USED

ORIGIN

Non-contact teaching time costs

(‘A’ in schematic)

Calculated from the sum of synchronous learning (cohort and 1:1 teaching cost estimates) to equate to 20% of teaching costs

20%

Median cost of non-contact teaching time reported in Cost of delivering apprenticeship standards research

Formative assessment – no mandatory quals

(‘B’ in schematic)

Multiplied by duration to give an estimate for formative assessment (where standard has no mandatory qualifications)

£20 per month

Median cost of formative assessment derived fromCost of delivering apprenticeship standardsresearch where no mandatory qualification included

Formative assessment – mandatory qualification(s) included

(‘C’ in schematic)

Multiplied by duration to give an estimate for formative assessment (where standard includes at least one mandatory qualification e.g. mandatory degree qualification)

£35 per month

Median cost of formative assessment derived fromCost of delivering apprenticeship standardsresearch where at least one mandatory qualification included

Mandatory qualification estimate (Level 6 Degree)

(‘D’ in schematic)

Allocated where at least one degree mandatory qualification included in apprenticeship

£2000 fixed rate

Median cost generated from publicly available credit reassessment cost data and Cost of delivering apprenticeship standards data

Mandatory qualification estimate (Level 7 Degree)

(‘D’ in schematic)

Allocated where at least one degree mandatory qualification included in apprenticeship

£1000 fixed rate

Median cost generated from publicly available credit reassessment cost data and Cost of delivering apprenticeship standards data

Administration rate

(‘E’ in schematic)

Multiplied by duration to give estimate for administration costs

£30 per month

Median cost of administration reported inCost of delivering apprenticeship standards research

Eligible cost margin

(‘F’ in schematic)

Applied to sum of teaching, formative assessment, and admin estimates

9%

Percentage uplift to reflect the need for a commercial organisation to have some level of margin above those costs deemed eligible, derived from ESFA Financial Health Assessment https://www.gov.uk/government/publications/esfa-financial-health-assessment

ANNEX 2 – ADDITIONAL NOTES

End-point assessment costs

In time, we expect to generate an estimate of end-point assessment using a rates-based model that reflects differences in assessment methods. In the meantime, when an occupational proposal is approved, we will provide a temporary initial estimate end-point assessment as 18% of all costs, in line with research findings, and use this to generate a preliminary estimate for trailblazers.

When the assessment plan is available, the Trailblazer will source and provide the institute with quote(s) from end-point assessment organisations. We will moderate these to arrive at a more precise estimate of the typical cost of end-point assessment. This refined estimate will be used when making the funding band recommendation and will replace the temporary initial estimate.

Initial funding band calculation and early funding information

Up until May 2019, when an occupational proposal was approved, we provided the trailblazer with an ‘initial funding band’. If the trailblazer considered this level of funding to be too low, they could choose to submit quotes from training providers and end point assessment organisations to allow the Institute to generate a funding band.

When we reviewed the initial funding band in early 2019, we found three main issues. First, it was adding very little value to the process of recommending a funding band, as around 95% of trailblazers rejected it. Second, it performed poorly as a predictor of the actual level of funding recommended for an apprenticeship standard, as less than 4% of initial funding bands were within £1,000 of the actual level of funding recommended. Third, trailblazers did not find it helpful to be provided with initial funding bands which they would then routinely reject.

We replaced the initial funding band with ‘early funding information’ in spring 2019. Feedback from the consultation suggests this has been a significant improvement. Trailblazers will continue to receive information on funding levels early in the process of developing an apprenticeship standard, giving them information about the range of funding assigned to similar standards to provide a reference point.

Managing the impact of funding band changes on revised standards

When a standard is revised for any reason through the new funding model, the funding band may be revised to recognise changes to the content or duration of the standard. Our revisions process sets out how this works in detail. Whilst we have confidence in our data points the pilot implementation is live testing of our new funding model. To manage volatility we will utilise a stability mechanism to manage significant changes to revised funding bands.

To minimise disruption, we will apply a stability mechanism that will limit the impact of reducing the funding band for existing standards that go through the new model. For example, this will mean that as part of the pilot implementation funding bands can reduce no more than two funding bands.

To balance the effect that this stability mechanism would have on overall apprenticeship funding levels, we will also apply a similar approach where the model generates a significant increase to the funding band for an existing standard. For example, this will mean that as part of the pilot implementation funding bands can increase no more than two funding bands.

In some cases, it may not be appropriate to apply a stability mechanism. The criteria for exemption from the stability mechanism is set out below:

Category​

Clearly defined category criteria

Where significant structural changes​have been made to the published apprenticeship

· ​​Significant change to KSBs (typically 50%+ of KSBs)

· Significant change in typical delivery duration (typically 25%)

· Significant change in delivery method (typically 25%)

· Removal or addition of a mandatory qualification/degree

Where an apprenticeship is separated, or two or more apprenticeships are merged

· Two or more apprenticeships brought together into a core and options apprenticeship​

· Splitting out a core and options apprenticeship into separate apprenticeships with unique ST codes​

Where thepublished apprenticeshipisn’t beingdelivered becauseof the fundingband​

· ​​There are no starts, or very low* starts, and the Institute has identified that there are no other reasons for this apart from the level of funding available

Where the fundingband was set along time agounder a very oldprocess​

· ​​​Apprenticeships with a funding band assigned pre IFATE/pre 30 band structure/3 or more years ago, or where indicative/initial funding band was accepted and therefore no costing quotes submitted​

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