OfS introduces tighter controls on subcontracted provision

Background

The Office for Students (OfS) has confirmed a new condition of registration intended to strengthen oversight of subcontracted provision of higher education courses.

A sub contractual arrangement (also known as a franchise arrangement) arises where one provider (a lead provider) contracts another organisation (a delivery provider) to deliver all or part of a higher education course on its behalf.

The OfS has identified that these arrangements have expanded significantly in recent years and may create risks for students and taxpayers where oversight by the lead provider is inadequate.

As discussed in our earlier article, the OfS consulted on introducing a new ongoing condition of registration relating to sub contractual course delivery in 2025.

Following that consultation, the OfS has confirmed the introduction of a new ongoing condition of registration, Condition E10, which will apply to providers delivering courses through certain sub contractual arrangements from 31 March 2026.

Overview of the new Condition E10

The new condition relates to the oversight of sub contractual arrangements.

Scope

Condition E10 will apply to all registered providers, but a provider will only have obligations under the condition if its subcontracted provision meets certain criteria. A provider within scope of Condition E10 must have (i) 'relevant sub contractual arrangements' and (ii) the total number of students registered on the provider’s 'relevant sub contractual courses' is 100 or more during an academic year. The OfS may vary this 100-student threshold from time to time but has said it would seek to ensure it understands relevant views before making changes.

Condition E10 includes further detail as to which sub contractual arrangements and courses are within its scope and which are specifically excluded. The lead provider must provide 50% or less of the total course delivery hours of a subcontracted higher education course to fall within scope. Notably, all subcontracted provision through transnational education (TNE) arrangements, where students are taught outside of the UK, is excluded.

The OfS has clarified that validation arrangements are not included in the scope of Condition E10. However, the OfS is aware that some providers may seek to avoid the regulatory scrutiny of subcontracted delivery using validation arrangements and has indicated that, if it observes increasing risk in validation arrangements, it will consider whether further regulatory activity is appropriate and respond accordingly. The OfS has introduced a new reportable event if a partnership changes from a sub contractual to a validation arrangement, which applies from 31 March 2026, to monitor providers in this area.

Overarching obligation

The new condition introduces an overarching obligation on providers to ensure that any risks to the interests of students and/or taxpayers posed by its existing and future relevant sub contractual arrangements are effectively identified and addressed, including, but not limited to, by maintaining and operating in accordance with a single subcontracting information source (SIS) which sets out policies, procedures and other provisions relating to its existing and future relevant sub contractual arrangements.

Each provider within the scope of Condition E10 will need to create and maintain an SIS for their relevant sub contractual arrangements from 31 March 2026. The OfS has also published detailed minimum content requirements for the SIS with which providers must comply with all times. These specify that the SIS must include information about:

The provider's rationale for engaging in sub contractual relationships;
The provider's processes for approving new sub contractual arrangements;
The control and oversight mechanisms of the provider's governing body and, where applicable, other governance structures or individuals with responsibility of risk and audit functions, to meet the overarching obligation and ensure delivery of its strategic rationale for subcontracting;
The relevant policies and procedures the provider has in place to meet its overarching obligation; and
How the provider will adapt the above information arrangements in the event of changes to its relevant sub contractual arrangements.

How does the final condition differ from the consultation proposals?

The final condition broadly reflects the approach set out in the consultation, although the OfS decided not to proceed with the proposed power of direction that formed part of the consultation. The OfS will instead rely on its existing regulatory tools to address concerns about provider compliance with this new condition, including (but not limited to) imposing a specific condition of registration.

Publication of course fees retained by the lead provider

The OfS has also introduced changes to its accounts direction, in line with its consultation, to include additional financial disclosures for providers with sub contractual arrangements within the scope of Condition E10.

Those providers must include in their audited financial statements (i) a statement of subcontracting rationale and (ii) prescribed information about the course fees retained by the lead provider. The advice also specifies the required format and content of these disclosures which must include the following information on a partner-by-partner (and not aggregate) basis:

The number of students on courses within scope;
The total course fees received (whether from the Student Loans Company, directly from students or on their behalf);
The total course fee retained by the lead provider (expressed as both a monetary amount and a percentage);
The total course fee retained by the delivery partner (expressed as both a monetary amount and a percentage); and
The average course fee retained per student by the lead provider.

This requirement is applicable for accounting periods ending on or after 1 July 2026. The OfS has introduced this requirement, accepting there are risks to the subcontracted provision market including unintentionally fixing prices, but placing greater weight on the transparency to students about how their course fees are shared between the parties.

Where existing contractual arrangements (those in force as of 31 March 2026) do not permit disclosure of this financial information without breach of contract, providers are not required to publish this information. In those circumstances, providers are required to take all reasonable steps to enable publication of this information as promptly as possible. The OfS expects providers to take all reasonable steps to renegotiate contract terms with partners to permit disclosure, including using contract break clauses for this purpose. If, after exhausting all reasonable steps, renegotiation has failed and publication of this information would put the provider in breach of contract, the provider must make a reportable event to the OfS.

Affected providers should ensure that any new subcontracts signed after 31 March 2026 permit disclosure of this financial information, as this exception will not apply to new subcontracts.

What's next?

Condition E10 applies from 31 March 2026. All registered providers with sub contractual arrangements within the scope of Condition E10 must act now to ensure compliance.

Compulsory registration of large franchise providers

The OfS has explained that these reforms sit alongside an upcoming Department for Education (DfE) requirement for delivery partners with at least 300 students to register with the OfS, forming part of a broader framework intended to safeguard student outcomes and ensure public funding is used appropriately.

The OfS has also published guidance summarising the new requirements for franchise providers with 300 or more higher education students to register with the OfS. The Government has not yet laid down the legislation to enact this requirement and intends to do so in April 2026. The timetable set out in the new guidance aligns with the DfE’s response to its consultation on this registration requirement.

Franchise providers with 300 or more higher education franchised students must submit an application to register with the OfS by 1 July 2026 to continue accessing student finance for new students from the academic year 2028/29. This requirement will not apply to certain public sector or statutory bodies, including further education corporations.

The DfE will confirm which providers’ courses are designated for student finance for new students in the academic year 2028/29 in September 2027. Providers which have applied on time but not received a decision by September 2027 will continue to be funded until the OfS decides.

If an unregistered provider exceeds 300 franchised students after implementation of this new registration requirement, it will lose eligibility for student finance for new students for one year, even if they register later. Repeated breaches lead to multiple consecutive years of ineligibility.

How we can help

Our team can support you with understanding the new requirements; to review your governance and oversight of subcontracted provision; and to review your franchise agreements (subcontracts), policies and procedures.