DfE blocks MAT’s bid to take shares in outsourcing firm

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”.

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  1. Peter Endersby

    How could such an idea even be entertained by those charged with managing public funds earmarked for children and young people? The board of this MAT should consider their positions after this decision. There needs to be better national and local oversight of MATs financial decisions, this is warning, alongside obscene boardroom pay, that they are pushing the the boundaries of the acceptable use of public funds.

  2. It would be interesting to see what independent legal advice the TFT board took and how it managed the clear conflict of interest held by its former chair as it embarked on this process.

    Just what exactly had the Trust identified as its needs that it was seeking to address for its IT and HR? Why did the rest of the Board feel that Delf was uniquely qualified to provide these without going to advert? How indeed did the board secure independent advice when the HR department itself was the subject of the proposed transfer and conflicted too?

    Equally important, how did the board assess the values at which assets and obligations were to be transferred to Delf and what ongoing assurance does it have to ensure that it is receiving the correct returns from the contract?

    What has the TFT board to say about its oversight of this?

  3. Paul Walker

    Outsourcing central services may bring advantages, but it may bring a significant disadvantage with regard to pensions for those whom, as a result, are not employed by the academy trust.

    Whereas outsourcing did not proceed in the reported case, there are examples of academy trusts that replace central team employees with the services of a separate entity.

    First, The Diocese of Norwich Education and Academies Trust and The Diocese of Norwich St Benet’s Multi-Academy Trust (MAT) each have ‘up to 50%’ of the ownership of shares and of voting rights in the not-for-profit company, Diocese of Norwich Education Services Company Limited (DoNESC). On its website, DoNESC clarifies that it is ‘owned’ by these two MATs and states that DoNESC ‘provides back office services to [academy, voluntary aided and voluntary controlled] schools’. In fact, its 2021 recruitment pack for a Head of Governance explained that its services are not restricted to schools, where it wrote that DoNESC also ‘provides … back office services for two multi-academy trusts’ and that, while two governance officers would have responsibilty for the two MAT boards, they also would be employed by DoNESC.

    A second example of an academy trust replacing central team employees with the services of a separate entity is Avanti Schools Trust whom, its recent advertisement for a ‘Multi-Academy Trust Trust Governance Officer’ explained, would be employed by Avanti Services Limited. Avanti Schools Trust has ownership of a minimum of 75% of shares in Avanti Services Limited.

    So what, you may ask, does it matter? Well, if you are employed by a MAT, but are not eligible for membership of the occupational Teachers’ Pension Scheme (TPS), you are eligible for membership of the occupational Local Government Pension Scheme (LGPS). And while your own view may differ, a great many people would regard either scheme as an advantage of the employment that enttles to membership.

    However, Avanti School Trust’s advert said that the successful post-holder would, instead, be eligible for membership of NEST, which caught my attention because its interpretation is that, if you are not a teacher and you are not employed by a MAT (if the role is outsourced), then you do not have access to either the TPS or the LGPS. And that’s my understanding, too.

    I’ve asked the Department for Education to clarify the position but, in the meantime, prospective job applicants and, perhaps, recruiters as well, should take into account the loss of the potential benefit that membership of the occupational schemes is perceived to have by many job hunters. And there is an obvious irony in the Avanti case. Whereas NEST was established by the Government to ensure that a workplace pension is available to those who otherwise would not have one, the only reason that those staff providing central team services to MATs might not have access to to the LGPS may be because their MAT removed that entitlement by exporting their post to/creating their post in a third party in the first place.