The case for including for-profit higher education providers in the demand driven system

Reaction to the report of the demand driven review, which I co-authored with David Kemp, has been pretty positive overall. But our proposal to extend Commonwealth supported places to non-university higher education providers, especially those operated on a for-profit basis, is attracting some negative comment.

Professor Greg Craven, vice-chancellor of Australian Catholic University, said:

There is a basic psychological difference between a statutory body (university) ploughing money back into the enterprise and a private college whose modus operandi is to make a profit.”

Whether or not that is true, a higher education system needs to be robust to the weaknesses and variability of human motivations. Indeed, the public universities themselves are a case study in the limitations of a ‘just trust us’ model in higher education.

As the report discusses (pages 9-10 especially) the universities were for a long time, and still are to a lesser extent, able to get away with poor practices in teaching. This showed in the abysmal results of the first national student surveys conducted in the mid-1990s. Things have improved since through a combination of public information, government programs and incentives, market competition, and more recently regulation.

The report recommends that all these measures apply to the non-university providers as well. Indeed, they have another layer of scrutiny that the universities lack, which is that their courses need to be individually approved by the Tertiary Education Quality and Standards Agency. It also recommends extending the University Experience Survey to the non-university providers, and publishing the results on a replacement for the MyUniversity website to make it easier for potential students to compare courses.

Although the non-university providers have had only patchy involvement in previous student surveys, they typically do better than the public universities when they do participate. This probably reflects their teaching focus, with smaller classes and more personalised attention than is usual in public universities. This has been their competitive advantage in the contest for students with public universities, who are much better known and through public subsidy have been able to offer students lower fees.

One reason for including non-university providers in the demand driven system is to step up pressure on public universities to improve teaching against their internal pressures to do less on teaching, including relucant academics and the desire to improve research output and rankings (discussed in this Grattan report).

In my view the for-profit providers are an essential part of the reform package we propose. The universities have generally been very supportive of the recommendation to encourage more students to begin their education in diploma-level pathway courses by including them in the demand driven system. But pathway colleges were pioneered by the for-profit higher education sector (especially the providers that are now part of Navitas), and still dominated by it, although some universities have set up their own pathway colleges.

If we want to go down the pathway route, should we wait for the public universities to try to set up courses in an area where they, for the most part, have no special expertise, or use the organisations that have already developed a model that is working well? I suspect that many of Professor Craven’s vice-chancellor colleagues would much rather preserve their existing and successful relationships with Navitas than do it themselves.

More broadly than pathway colleges, the for-profits are important to developing a competitive higher education sector. Generally speaking, they are the organisations with the financial capacity and expertise needed to have an impact beyond the industry, professional or discipline niches of most current not-for-profits. Some of these will be the ASX-listed companies to which Universities Australia, the biggest university lobby group, seems to object.

Neither the Bradley committee, which first recommended inclusion of the private sector, nor the authors of the demand driven review are naive about the potential risks of expanding eligibilty for Commonwealth supported places. That is why both reports recommended new measures to extend prudential supervision and public reporting of results. But both reports also conclude that the advantages of expanding the higher education sector significantly exceed the risks.

  1. Pathways are essential for increasing access to higher education for many students and I agree with you that the private sector has to date been an important player in this area. I have concerns, however, that the private sector profits in this area by exploiting public services. Research by Leesa Wheelahan shows that in some cases, private VET suppliers supplement their own courses with local (government funded) TAFE resources (physical, IT, support services). If this is aberrant behaviour then it can and should be weeded out. But if it is an essential foundation of their business model, that is of far greater concern.

    In regards to your co-authored report I think it was an excellent piece of work and, notwithstanding certain, specific concerns (which I have raised elsewhere), if the recommendations were to be accepted holistically, this would overall be an excellent outcome for the sector. I just hope the Government doesn’t cherry pick…

  2. Discussion would be the better if it did not align funded with public and non funded with private (particularly for profit). Andrew – I don’t include you as doing this to any great extent.

    Greg Craven highlights this well. ACU is not a publicly owned or established institution. It is a creation of the Catholic Church and a jolly good one at that.

    It operates within the funded system without any problem.

    Many of the non funded are not profit making but set up by non profit groups, some quite manipulative of their professional area but that is another question.

    Government funds profit groups in many areas – in aged care since at least 1953. Child care subsidies support use of many profit centres. Quality of delivery is the key concern.

    The oft critiqued slowness of the HE approval system is important here – no-one can set up a new course let alone a new provider in a hurry. They need TEQSA approval.

  3. Tim, with respect to private sector for profits ‘exploiting’ public services, I’m not sure if you have quoted Wheelahan’s report correctly. I would suggest the word ‘maximised’ would be a better choice. Walk down the corridors of any TAFE Institute on a Friday afternoon and I am sure you will find a myriad of rooms, unused. Private providers are keen to rent and maximise the return on investment of these public resources, revenue which will go back into lining the public purse. And so long as ASQA regulates all providers on equal footing along the way, surely this is a win-win for all :?:

    • Hi George, the scenario you describe is fine as there is a transparent and commercial arrangement. Slippage however occurs when private providers encourage their customers to use TAFE student/pastoral support services (e.g. developing communication skills, academic writing, etc) which are subsidised by the tax-payer. The extent to which this occurs has not yet been quantified but perhaps should be.

      • Hi Tim, yes I agree, these should be charged back on a fee for service basis. Interestingly this has been happening in other areas such as private providers paying for the use of public university library access. So long as it can be measured, it can be managed.

  4. The best national system of higher education in the world is indisputably the USA which seems to accommodate public and private colleges and universities without the anxiety your recommendations have triggered. Not all providers are likely take up access to a commonwealth supported place (e.g. Bond) and even if access to commonwealth support is on the same price capped basis as public universities in the short term, one can see price flexibility emerging as a natural consequence of enhanced diversity. One would think that some of those offering a negative outlook would have an eye on the long game.

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