DD1400 FE Capital Investment Fund fast tracked project

Type of decision: 
Director's decision
Date signed: 
21 September 2015
Decision by: 
Fiona Fletcher-Smith, Executive Director of Development, Enterprise and Environment

Executive summary

This paper sets out and requests approval for 1 project from Round 2 of the FE Capital Investment Fund with a grant award of up to a maximum of £544,246 capital expenditure to Fashion Retail Academy (FRA), following recommendation to proceed from the LEP and IPB. Delegated authority was provided to the Executive Director in MD1420.


That the Executive Director approves capital grant funding of up to a maximum of £544,246 to Fashion Retail Academy (FRA) to modernise the college estate and improve IT infrastructure and the consequent formation of a funding agreement with respective Further Education provider.

Part 1: Non-confidential facts and advice

Introduction and background

1.1    The London Enterprise Panel (LEP) has been awarded £55m in 2015/16, an indicative £65m for 2016/17 from Growth Deal 1 and a further indicative £38m from 2017/18 as part of Growth Deal 2 for capital investment in further education colleges and providers. This FE Capital Investment Fund is for a programme of capital expenditure on infrastructure which will facilitate the delivery of further education services in London. This paper seeks approval for 1 fast-tracked application for funding from the 2015/16 funding provision.

1.2    Previously, 14 Round 1 projects have been approved by the LEP, IPB and the Executive Director in DD1368, through their delegated authority provided under the provisions contained in MD1420.

1.3    At its meeting in February the FE Capital Steering group agreed to the fast track process and at the LEP meeting in March, the LEP agreed the fast track process for applications needing full agreement between LEP meetings and that the FE Capital Steering Group could endorse bids on behalf of the LEP, prior to onward approval as per the GLA’s Financial Delegations.  This is to enable projects to commence works over the summer period. IPB has already approved one project – Westminster Kingsway College (contained in DD1368) – through the fast track process. On the 13th May the FE Capital Steering group agreed to be consulted on the Fashion Retail Academy (FRA) project application by written procedures.

1.4    The evaluation of this project has been in line with the evaluation of the Round 1 bids. This involves a two stage bidding process of an Expression of Interest followed by a full Detailed Application. This project has been fast tracked as it is dependent on being delivered over the summer vacation period.

1.5    The application was received on the 15 May 2015, and subsequently updated and resubmitted on 3 June 2015, following considerable dialogue between LEP Delivery Officers and the FRA. The resubmitted application was then evaluated by the internal officers as well as external consultants. 

1.6    The following specialist due diligence was undertaken:
•    A detailed cost review of the scheme to ensure it is reasonable and represents good value for money; and
•    Property and building surveying advice to ensure appropriate and realistic plans.
1.7    The project costs changed considerably from the Expression of Interest. The total project costs increased from £787,020 at the Expression of Interest stage to £1,632,736 at detailed application stage, which increased the requested amount of grant funding by 107%. LEP Delivery Team officers worked with the project to understand the difference in costs, whether the project can be scaled back, whether further match funding could be provided and any additionality that would be delivered by the uplift in funds. 
1.8    The stage 1 and 2 papers were presented at the July 2015 IPB, and the project was approved to proceed for an FE Capital Investment Fund grant award of £450,000 due to these factors;
•    The project can be scaled back to 2:1 match to grant ratio funding and will still produce tangible outputs and outcomes;
•    The uplift in costs from the Expression of Interest was insufficiently justified by the applicants to warrant an increase in proportionate funding;
•    The minimum requirements for uplift in funding, 40% or more of the estate being in poor (C or D) condition has not been met; and
•    To maintain an approach consistent with the principles of the prospectus.

1.9    At the July meeting, IPB agreed that, provided the 2:1 match funding can be secured for the full project (as opposed to the recommended scaled back option), the Executive Director is to agree a funding package with the FRA up to the level of grant funding that would be required due to the increased benefits that the full project will deliver. The FRA have since secured further match funding of £188,490 to make a total match funding contribution of £1,088,490. As such, approval is sought for the total FE Capital Investment Fund grant awarded to the FRA to be £544,246, in line with 2:1 match to grant funding ratio guidelines. 

1.10    Approval is sought by way of this Director’s Decision to award £544,246 grant funding via the Further Education Capital Investment Fund to the Fashion Retail Academy to modernise the college estate and improve IT infrastructure. 

1.11    Payment for the project will be profiled for the entire allocation of funding to be made in the 2015/16 financial year. This will be fixed in the project funding agreement.

1.12    A wider strategic review of FE colleges is planned which is intended to establish the right set of institutions to offer high quality provision that meets the current and future needs of learners and businesses. As an independent provider the Fashion Retail Academy sits outside of scope of the review process. Nevertheless, FE Capital Working Group officers have reviewed the Net Present Value and income assumptions presented within the application and summarised that the college has demonstrated financial stability in the event of future budget cuts being announced.

Objectives and expected outcomes

2.1    The London Enterprise Panel’s Growth Deal for London established a comprehensive request to HM Government to invest in the Further Education (FE) estate in London. 

2.2    The Prospectus, launched in January 2015, invited applications to deliver against the LEP’s Jobs and Growth Plan priorities as well as the following priorities and objectives specific to the FE Capital Investment Fund:
a. Renewal, rationalisation and modernisation of the FE estate
b. Creation of space which is versatile, fit for purpose, transformational and tolerant to change 
    c. Proposals that help to meet the ambitions of the Mayor’s Smart London Plan or which support LEP priority areas 
d. Proposals focused on progression to the highest levels of vocational study    
e. Proposals that demonstrate collaboration with schools, other education providers and employers

2.3    The approximate primary outcomes delivered as facilitated by the investment are summarised below, further outputs are detailed in appendix 1. Table 1 quantifies the outputs in the five financial years following completion of the project.

No. of learners supported 7144
Improve education outcome (STEM) 1346
Improve education outcome (Priority areas) 5798
No. of business supported to start-up 85
Cost saving £98k


Equality comments

3.1    All projects will be developed and delivered in compliance with relevant Codes of Practice and in line with the requirements of the public sector equalities duty.

3.2    The project has been required to submit the institution’s equal opportunities policy as part of the Detailed Application process, which has been reviewed by the GLA Diversity and Social Policy team.

3.3    Responses to equality requirements raised in the due diligence process have been approved by the GLA Diversity and Social Policy team.

3.4    The FE Capital Investment Fund seeks to address issues of modernisation and rationalisation of FE Estate. In doing so, specific equality benefits include;

a.    Increase in accessibility of college estate (measured in m²)
b.    Increase in opportunity for Learners with Learning Difficulties and Disabilities to be engaged  and retained in vocational and academic study.
c.    Increase in course provision, enabling more learners per annum.
d.    Increase in apprenticeships and traineeships, allowing students from deprived areas an economic incentive when obtaining a qualification. 

Other considerations

a)    key risks and issues

4.1    Project is not deliverable. The Detailed Application received has been scored on the basis of detailed information on deliverability and affordability, including assessment by independent due diligence consultants. Any queries resulting from due diligence have been raised with the project and a resolution or mitigation has been provided. In addition, the proposed procurement of an Independent Monitoring Surveyor services will provide appropriate assurance that the requirements of the funding agreement are met with regards to build time, cost, and quality before a project is able to drawdown funds.

4.2    Proposed project does not deliver outputs. All bids have been assessed against this criterion initially at the Expression of Interest and furthermore for robustness of the output and outcome data at the Detailed Application Stage, including understanding the implications of recent SFA budget cuts from projects. However, there is a risk of further cuts to future budgets which may have implications on the outputs/outcomes that projects can deliver further. To mitigate this, bidders have been ask to present plans that are flexible and tolerant to change, which are assessed by internal evaluators and specialist consultants

b)    links to Mayoral strategies and priorities

4.3    Applications received have been assessed on their alignment to the Mayor’s Smart London Plan, Economic Development Strategy and links to the London Plan. 
In addition, applications have been assessed on the ability to meet the ambitions of the LEP Jobs and Growth Plan in the following criterion;
• skills and employment: to ensure that Londoners have the skills to compete for and sustain London’s jobs;
• micro, small and medium sized enterprises: to support and grow London’s businesses;
• digital creative, science and technology: for the capital to be recognised globally as a world leading hub for science, technology and innovation – creating new jobs and growth; and
• Infrastructure: to keep London moving and functioning.

c)    Impact assessments and consultations.

4.4    A Memorandum of Understanding (MOU) between the GLA and SFA has been signed. This MOU will provide an extra level of assurance by verifying financial statements and providing information that the GLA may not otherwise receive.

4.5    The FE Capital Survey has completed and is undergoing analysis from Economic and Business Policy Unit colleagues (skills and employment policy leads). This will provide an evidence base to identify opportunities and support the decision making process for the programme. This survey will support providers and the LEP in identifying any key opportunities for rationalisation and will also explore potential developments around specialisation within the sector. 

Financial comments

5.1    The grant award of up to £544,246 recommended for approval will be funded from the £53.5 million FE capital budget and all of this would be incurred in 2015-16. It will be subject to a funding agreement governing release of the funds which will be only be drawn down on evidence of spend.

5.2    The college has demonstrated that it has match funding of up to £1,088,490 in place required for the project, an increase of £188,490 since approval by IPB, but this is in line with IPB approval conditions that the total estimated cost of the project does not increase and 2:1 match funding is maintained. The GLA will not be carrying any risk of any cost overruns. There are no reasons to place any further conditions on funding in light of financial due diligence checks of the college.

Planned delivery approach and next steps

7.1 The GLA will enter into grant agreement with the FE Capital provider for each project. Individual projects will be required to monitor and report their progress on a monthly and quarterly basis and each will be required to complete an evaluation at following completion.



Enter into Funding agreement

August 2015


August 2015


July 2015 – September 2015.

Activity table

Appendix 1: Fashion Retail Academy detailed profile.(included with signed decision form)