Ben James

Applying the TNP reduction

Created

If RPL shows a need for a price reduction, are people applying the reduction to the combined training and assessment cost (TNP1 + TNP2) or just the training cost (TNP1)? 

P25.5 covers reducing the 'total negotiated price', but doesn't explicitly mention whether this is reducing the individual training and/or assessment costs.. however the glossary states the 'total negotiated price' is;

The price negotiated between an employer and main provider for all the eligible costs of an apprentice’s training and assessment, after relevant prior learning has been taken into account. 

Obviously this doesn't represent a huge difference, but it will all add up. Just curious how other people apply it. 

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Martin West

I think it is clear in the following that it is TNP 1 + TNP 2.

P25.5.2 Reduce the total price by at least 50% of the prior learning percentage, from the maximum funding band (the 50% reduction recognises that there are fixed costs in the programme). For the example in P25.5.1 above, where the apprentice has 30% prior learning, this means there must be a reduction in total price of at least 15% of the maximum funding band. This reduced price is the maximum that will be paid using apprenticeship funding (e.g. £8,500 for a £10,000 funding band where there has been a 15% reduction).

HTH

Ben James

That was my feeling. So you'd suggest the total negotiated price would be option 2 (below)? On the basis that it's 90% of 10,000, rather than 90% of 9000 (+1000 after the reduction);

 

Martin West

Where do you get 90% for RPL%, should it not be 10% of which the price is reduced by 50% of this to give a total new CAP of £9,500 for total price?

Ben James

Nowhere in particular, was just an example percentage really - 90% remaining/10% reduction. But yes, we'd obviously take into account reducing the TNP by at least 50% of that RPL percentage, so anywhere between 500 (50%) to 1000 (100%).

Ruth Canham-James

I think the glossary wording is misleading. We were having this conversation this morning. I assume the fixed costs consideration includes Assessment.

What we've just been considering, is how then you work out TNP1. If you know the Assessment Cost up front, it's your new total price (taking into account RPL), minus your Assessment Cost. If you don't know the Assessment Cost, we'll just have to go with an assumed one to do that calculation (obviously we wouldn't record that as TNP 2). We already have an assumed Training Price per apprenticeship, and we used to just RPL that, and so the Assessment Price didn't come into the equation.

I don't think we can apply the RPL to just the TNP1 where we don't know TNP2 up front, if we've been instructed to apply it to the whole price. I really don't want to faff about re-applying the RPL to the whole price once we know TNP2 though. If we use an assumed TNP2, even if it ends up different, it would have only a tiny impact on the total price. In most cases, the TNP2 will either be the same as, or lower than any assumptions we make. That would only ever mean we'd slightly over reduced the price if anything, so I assume that's acceptable.

It's so much more complicated to reduce the whole price rather than just TNP1, but I do agree with Martin, that the rules do say the whole price.

Martin West

I do not see the total price (TNP1+TNP2) being a problem as most providers start at the CAP anyway.

Ruth Canham-James

Martin West How would you work out TNP1 when you don't know TNP2 at point of enrolment? Would you reapply the RPL reduction to the whole price once known?

Martin West

I would apply the reduction to the CAP and reduce TNP 1 by this amount.

Ruth Canham-James

Martin West So if the cap is £10k, and you found RPL of 10%, you apply 5% reduction to get £9,500 total price. That's fine, but how much of that is TNP1 and how much is TNP2? If you know TNP2 already, then TNP1 is £9,500 minus TNP2.

What if you don't know TNP2 yet?

You could guess that TNP2 is £2k. That makes your TNP1 and you "price for now" £7,500, as the rules are clear we must not record a guess for TNP2, and the DAS price must represent only TNP1 until we know TNP2.

What if the TNP2 ends up being £1k? Obviously you don't just keep your total price as £9,500 by increasing TNP1 to £8,500*. You'd reduce your total price to £8,500 (TNP1 = £7,500 and TNP2 = £1,000).

However, if you'd known from day one that that one particular employer had used a different EPAO with a lower price, your total price with no RPL should have only been £9,000. If you apply 5% reduction to £9k, that's £8,550 (TNP1 £7,550, TNP2 £1k). I know that's a tiny difference of £50, but for the more expensive apprenticeships, and higher RPL %, that could be hundreds we lose, unless we recalculate RPL on the new lower price.

*How would we justify to an auditor, 20 apprentices with no RPL, all on the exact same standard and same duration, and us charging £8k TNP1 for 19 of them, and £9k TNP1 for the one apprentice where is just so happens that employer negotiated a good price on the EPA? If the employer knew we'd charged them £1k extra for training, simply because they got a good EPA discount, they'd be pretty annoyed. TNP1 is not supposed to fluctuate depending on how much EPA discount was negotiated. What would be the point of the employer getting a good price, if we're just going to ask for the difference because we can? Our non-RPLed TNP1 price should remain pretty static for all students on the same standard.

Martin West

TNP 2 is not intended and cannot be  reduced as it represents the cost of the EPA and you are not required to enter an amount over the CAP in DAS for 22/23, you also cannot enter TNP 2 into DAS where it is not known or agreed by the employer.

As TNP 1 is known you apply the cap reduction to it and use this while TNP 2 is unknown and then update/amend both TNP 1 and TNP 2 when known.

Ruth Canham-James

So are you suggesting (where TNP2 is not know at the start) apply the 5% reduction to the £8k TNP1, then re-apply the reduction based on the total price, once you know the TNP2? So original price with 5% reduction would be £7,600? Then once you know TNP2 is £1k, you'd change TNP1 to £7,550, and add TNP2 as £1k?

That works fairly, but it demonstrates exactly why I was asking the question, and why just default applying the RPL to the CAP as you suggested, doesn't work if TNP2 is not known from the start.

Martin West

You could apply the CAP reduction to your known training price where the EPA cost is unknown, once you know the EPA price you enter it as the cost of the EPA and if then the total cost is over the CAP including RPL reduction adjust the training amount to match so that TNP 1+ TNP 2.

 

Ben James

Just to throw something else out there.. at a recent SDN webinar, they seem to be advocating for calculating the reduction against only the Training Price, rather than the combination of Training Price and Assessment Price (which they refer to as the Anticipated Total Price);

 

Ruth Canham-James

What's SDN? 

Reducing just the Training is what we've done in the past, but the new rules are really clear that's it's the whole price (Martin quoted P25.5.2 above), and that you reduce it by 50% of the % RPL you've identified, specifically to allow for fixed costs, including the EPA. If you're going to just reduce the Training Price, you'd need to reduce it by more than 50% of the % RPL you'd found.

Ben James

Strategic Development Network, via their recent 'How to practically implement the new 2022-23 Apprenticeship Funding Rules' webinar on Friday. 

I completely agree with both of you, which is kind of why I raised the query initially. It's just going to mean a lot of people are probably going to applying the rules/reductions differently.. which I suppose is no real departure from what normally happens to be honest, but it's slightly frustrating.

Martin West

It is clear, see Glossary:

Total negotiated price (TNP)

The price negotiated between an employer and main provider for all the eligible costs of an apprentice’s training and assessment, after relevant prior learning has been taken into account.

Steveh

Just confirmed on ESFA Webinar (17 minutes in, so you can point to it when it's on their youtube) that it's off the max band, not just the programme cost.

Ruth Canham-James

That is what they just confirmed, but it's not clear in the rules;

P25.5.2 Reduce the total price by at least 50% of the prior learning percentage, from the maximum funding band (the  50% reduction recognises that there are fixed costs in the programme).

"Reduce the total price" then "from the maximum funding band". The band max is not necessarily the price!

It also means that we're fundamentally losing more training funding when the EPA cost is less than the expected cost, as we're reducing based on band max, not total negotiated price.

(Edited)

Ben James

"Reduce the total price" then "from the maximum funding band". The band max is not necessarily the price!

True. I think the assumption is that most people default to the maximum, but I completely understand your point. Let's say you know the EPA cost, the funding band maximum is £20,000, but you've opted to charge £15,000.

If the RPL is 10%, and you then look to "reduce the total price by at least 50% of the prior learning percentage, from the maximum funding band" are you reducing the price by 5% of what you originally intended to charge (£750), or 5% of the maximum funding band (£1000)? The rules suggest the latter.

Steveh

Yeah, because they know that 99% of us are charging the max, let's not get too daft...

The intention is that you work out the reduction first and *then* start "negotiating" from the new, lower max isn't it?

Martin West

I did say 'you apply the cap reduction'

Ben James

I think a lot of people will have interpreted it in the same way and will apply the cap reduction before then negotiating, but find solace/comfort in talking it through on here before recommending that course of action to their directors! It’s invariably those who on discussing the rules on here that are held accountable, and there’s at least safety in numbers.. sometimes

Ruth Canham-James

Martin West In with the "I told you so" :) You were absolutely right, but I think the rules still aren't crystal clear. And yes Steve, we do all charge the max most of the time, so generally not an issue.

On that note, if you have 10 apprentices on the same standard with a cap of £20k, and a usual EPA cost of £2k, but one employer negotiates an EPA at £1k, do you just increase your training price for that one apprentice to £19k whilst the rest of the cohort is £18k? I have made it clear to our team that they cannot do that, it's unethical. That's also a bit of an academic distinction, as I think we're yet to encounter an employer who even wanted to pick the EPAO, let alone negotiate a different price. We do have scenarios where we don't know the EPAO price up front, quote a training price alone based on taking the assumed EPA cost of the band max, and then the EPA cost ends up being lower. Again, we don't then increase the training price to total the band maximum, as that's taking advantage of the employer. I'm not sure all providers think about it that way.