The DfE blocked a MAT's bid to take shares in an outsourcing company.

An outsourcing firm has urged the government not to be “hung up on fear of the different” after officials thwarted a multi-academy trust’s bid to take shares in the for-profit company.

Schools Week revealed in March that Transforming Futures Trust (TFT) had signed a £1 million deal to outsource most of its central staff and services.

But it has now emerged that the Education and Skills Funding Agency (ESFA) blocked a more radical plan — dubbed “Project Blaze”— in which the trust would become a shareholder in the company it transferred staff to.

School finance experts said such models deserved wider debate or a pilot, but others defended ESFA’s caution.

‘Bold’ trust launches Project Blaze

Board minutes for the Plymouth-based trust, which runs several alternative provision sites and special schools, suggest HR and IT were “huge problem areas” when Covid struck last year.

Annette Benny, the trust’s former’s chair, introduced the trust to Delt, a back-office services company founded by Plymouth council and the NHS which she previously worked for.

Delt installed a new IT system, but then proposed a much bigger move – outsourcing staff and the trust becoming a shareholder.

Giles Letheren, Delt’s chief executive, said it wanted to deliver “real value” in education, and saw the trust as “willing to try something bold”. The trust would have kept all savings.

Trustees approved the move last June, with minutes suggesting ESFA and the regional schools commissioner were informed and “comfortable”.

Yes to outsourcing, no to shareholding

But the plan was later rejected. The reasons remain unclear, with the agency and the trust declining to give further details.

Sources close to discussions said ESFA was concerned about the limited oversight of non-education bodies, and perceived risks of shareholding. Trust board minutes show discussion of ESFA having reportedly “moved some of the goalposts” and wanting “full procurement procedure”.

The trust initially planned the Delt deal without competition, which a legal loophole known as the “Teckal” exemption allows if bodies retain control over contracted parties. It carried out a “soft market” test, but other interest was apparently limited.

After ESFA’s intervention, a watered-down outsourcing deal without shareholding went out to tender in November.

Delt was the only bidder and won in March. Savings will be split 50:50, but the trust noted no money would “exit into private hands” as Delt is publicly owned.

A DfE spokesperson said the trust “decided to follow a conventional procurement process that provided the services it requires”.

ESFA also voiced concerns over trust governance, but Dr Clive Grace, who became board chair in a wider trustee shake-up, said it was now “significantly improved”.

A trust spokesperson said Benny’s departure last year was for personal reasons and she had played no part in decisions about Delt.

‘Interesting’ joint venture model

Letheren said Delt was disappointed Project Blaze was blocked. Business and education “can work really effectively together if we don’t get hung up on fear of the different”.

Abi Agidee-Adekunle, an education business consultant, said joint ventures were an “interesting model” worthy of debate.

There is room for innovation if trusts’ purpose, DfE oversight, Nolan principles and vulnerable stakeholders were not undermined, she added. But she cautioned innovative solutions were “not silver bullets”.

Susan Fielden, a school finance specialist, said such arrangements were best explored through a DfE pilot, adding: “ESFA might have concerns about transfer of risks.”

She said there could also be concerns about trusts being junior in existing joint ventures, and “significant professional adviser costs and risks” in launching new ones.

David Bagley, the chief executive of DRB Schools and Academies Services, said ESFA had been “bitten too many times due to business interests and related party transactions”.

James Gare, a partner at chartered accountant Monahans, said academy rules put financial security ahead of maximising income. Rulemakers knew that poor investments “would go down like a lead balloon with the public”.

A DfE spokesperson said it worked with trusts to ensure the “right balance” between innovation and maintaining “robust accountability and transparency”.