Universities to remain contracting authorities

We previously reported on a preliminary view from the Department of Business Innovation and Skills (BIS) that changes to student funding arrangements might take many universities outside the EU public procurement regime.

BIS repeated this view in June in their response to the consultation on the white paper 'Students at the Heart of the System':

Ultimately it is for institutions to take their own legal advice on whether or not they are contracting authorities for the purpose of these regulations. But BIS's view is that a student loan is a contractual agreement between the student and the Government with any public subsidy benefiting the student not the institution. The agreement between the student and the institution to pay a fee in return for teaching is not public financing. On that basis we think the shift in funding from grant to loans may mean that more HEIs will fall below the 50% threshold for public funding in future and so be exempt from these regulations.

Mills & Reeve has on both occasions taken a different view and in order to confirm the position we have obtained an opinion from a QC who is a leading procurement specialist.

The opinion confirms our view that the recent increase in the value of student loans to cover higher tuition fees does not affect the status of universities as contracting authorities and it is difficult to see how it could ever do so while the Student Loans Company pays the relevant tuition fee loan funding to universities direct. The SLC is owned by BIS and the Secretary of State for Scotland and has been classified as as a non-departmental public body.

The QC confirms that the student loans would still be held to be public funding for the purposes of the Public Contracts Regulations so that the loans would not reduce the percentage of public funding received by universities.

A small number of universities escape the Regulations by performing an annual calculation to confirm that less than 50% of their funding is public funding.

The QC's opinion supports our own view that the proportion of tuition fees paid via the Student Loans Company as opposed to HEFCE is not relevant in making any such calculation - both are public funding for the purposes of the Regulations.

The QC suggests that the position is reviewed in the event of a change in the operation of the student loan system.

Whilst this outcome may be a disappointment for many university procurement teams the QC's opinion provides some welcome clarity on the current position.

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