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.