For independent AP providers, understanding how places are funded and commissioned is not an abstract policy question. It shapes cash flow, informs pricing decisions, and determines which local authorities and schools are realistic commissioning partners. For local authorities and schools, understanding the same landscape from the other side helps in negotiating fair, sustainable placement agreements. This guide sets out how AP funding and commissioning actually works in practice.
Where AP Funding Comes From
Alternative provision is funded through several overlapping routes, and most settings will encounter more than one. Local authorities commission places directly, often through a central AP budget, to meet their Section 19 duty to provide suitable education for pupils who cannot access mainstream schooling. Schools also commission AP places directly, using their own delegated budgets, most commonly for pupils at risk of exclusion or those requiring part-time alternative provision alongside their mainstream timetable.
High needs funding, allocated through the local authority's high needs block, supports placements for pupils with more complex or long-term needs, frequently those with an EHCP. Top-up funding may also apply where a pupil's needs exceed what standard per-place funding covers, requiring a specific application and evidence of need.
How Placement Fees Are Typically Structured
Independent AP providers generally charge either a day rate or an hourly rate, multiplied by the agreed number of sessions per week. The commercial terms of these arrangements vary considerably. Some commissioners pay only for days a pupil actually attends. Others pay for the full agreed timetable regardless of attendance, reflecting the reality that the provider has reserved capacity and allocated staffing whether or not the pupil arrives on a given day.
Both models are legitimate and the right choice depends on the nature of the placement. Attended-only billing is easier for commissioners to reconcile against their own attendance data. All-hours billing better protects providers from the financial risk created by a pupil's inconsistent attendance, which is common in AP and rarely within the provider's control.
The Commissioning Process in Practice
Most local authorities maintain an approved provider list or a dynamic purchasing system, requiring AP settings to go through a quality assurance and registration process before they can receive referrals. This typically covers safeguarding policies, safer recruitment evidence, curriculum offer, premises standards, and increasingly, evidence of outcomes for previous placements.
Once approved, referrals usually arrive through the local authority's AP coordination team or directly from a commissioning school, often following an initial assessment of the pupil's needs. Placement agreements set out the fee structure, the expected duration, review points, and the specific outcomes the placement is intended to achieve, whether that is a successful reintegration to mainstream, progress towards an EHCP outcome, or stabilisation ahead of a further decision.
The Shift Towards Outcome-Based Commissioning
Commissioning practice has moved noticeably in recent years towards demanding clearer evidence of impact, not just attendance figures. Local authorities under budgetary pressure are increasingly scrutinising which providers demonstrate genuine progress for the pupils they place, and which are simply providing a holding placement without measurable improvement.
For providers, this shift makes the ability to produce clear, evidenced outcome data a genuine commercial advantage, not just a compliance nicety. Being able to show a commissioner attendance trends, behaviour improvement, attainment progress and EHCP target achievement, drawn from consistent data rather than reconstructed for the purpose of a review meeting, differentiates a provider in a commissioning environment that is becoming more competitive.
Cash Flow and Invoicing Realities
Independent AP providers frequently cite payment delays from local authorities as one of the most persistent operational challenges they face. Invoices that are incomplete, inconsistent, or slow to produce make this worse, giving commissioners a legitimate reason to delay payment while queries are resolved.
A professional, consistently formatted invoicing process, generated automatically from accurate attendance data and issued promptly at the start of each billing cycle, reduces the friction that causes payment delays. It will not resolve every cash flow challenge in a sector where local authority payment processes are often genuinely slow, but it removes the delays that a provider can control.
What Local Authorities Look For
From the commissioning side, local authorities are typically balancing cost, quality and capacity across a limited number of approved providers. The settings that secure the most consistent referrals tend to be those that communicate clearly and promptly, provide reliable data on request rather than requiring repeated chasing, and can demonstrate a track record of positive outcomes rather than relying on reputation alone.
This is, in practice, another argument for good data infrastructure. A provider that can respond to a commissioner's query about a specific pupil's attendance or progress within minutes, rather than days, builds the kind of confidence that leads to further referrals.
Planning for a More Demanding Commissioning Environment
The direction of travel in AP commissioning is towards more scrutiny, more evidence, and tighter budgets across the sector. Providers who invest now in the systems that make evidence-based commissioning straightforward, rather than an annual scramble, will be better placed as the commissioning environment continues to tighten.
Read more about automated invoicing for LA placements and how provision analytics support the kind of outcome evidence commissioners increasingly expect. For a deeper look at billing mechanics specifically, see our guide to invoicing LA placements in alternative provision.