Sixteen universities have, according to a media release today, been allocated places in 38 STEM-related courses intended to support the AUKUS nuclear submarine program. The government says it is investing $128 million over four years. In reality, however, universities will need to divert resources from other activities to support nuclear submarine training.

The 75% costing methodology

Universities will need to self-finance some AUKUS places due to what the program guidelines call ‘the standard 75 per cent costing methodology’. In the program’s second year its funding for the first year’s continuing students will be 75 per cent of their commencing year allocation, and so on in subsequent years until no money is left.

Some reduced funding to take account of student attrition is reasonable, but 25 per cent is not. Over the 2005 to 2020 period the proportion of domestic commencing bachelor students leaving their university after first year peaked at 18.4 per cent. Nearly half the nuclear submarine places went to Group of Eight universities, which have lower attrition rates than the national average.

The 75% pipeline funding is made more incongruous by the selection criteria, one of which was ‘evidence-based strategies for maximising student academic success.’ So despite choosing universities with strategies for student success, the funding formula assumes below average success rates.

What this means is that continuing students who began under the nuclear submarine program will partly – and perhaps entirely as the next section explains – be funded from the university’s general block grant for higher education courses.

The justification given for the 75% pipeline is that places have been allocated this way in the past. But past bad practice does not make current or future bad practice any better. Some ‘evidence based’ funding policy would be better.

Some universities may get no funding for their submarine places

If current soft domestic higher education demand continues it is possible that some universities will not receive any additional funding for the students in nuclear submarine places.

Zero submarine places funding could occur because the submarine policy is grafted onto what was intended, in the higher education funding legislation, as a block grant system.  The legislation has no provision for niche or ad hoc funding other than for ‘designated’ courses, of which medicine is currently the only one.

Instead, universities are paid the lesser of a) the maximum grant specified in the university’s funding agreement and b) the value of student places delivered, which is calculated using a number of full-time equivalent students multiplied by the relevant discipline-based funding rates formula. If universities enrol too few other students to reach their original higher education courses maximum grant the submarine places will be funded from within their existing funding allocation.

The problem of no recurrent funding

The AUKUS submarine deal is a multi-decade project that requires a partial restructuring of the Australian labour market to provide the necessary skills. Universities need new capacity to support this. Yet the government is effectively paying less than the usual per student funding rate for a program that will terminate in 2030, before any nuclear submarine joins the Australian navy.

The program FAQs say that the Australian Submarine Agency will engage with universities separately over potential university research partnerships. But surely training the submarine workforce also needs direct investment in long-term teaching capacity. A fixed term teaching contract to terminate in 2030 will not attract the academic talent these courses need. There is no money for additional facilities and equipment.

More bureaucracy for universities

As is normal these days, there was a detailed selection process for the submarine places. As noted, universities had to report their strategies for student success. They also had to report their ‘student support and equity policies and programs in place to attract, retain and support students from under-represented backgrounds whilst studying, including wrap-around services and flexible learning modes.’ (Fortunately, however, the places are not restricted to equity group members – they will be hard enough to fill as it is.) Universities will also have to report on the numbers of students enrolled in the approved courses.

Why do universities sign up to bad deals?

So why did at least 16 universities decide to put themselves through all this extra bureaucratic effort when they are likely to lose money on the deal? Perhaps they are betting that eventually someone in Canberra will realise that the submarine program cannot be effective without suitably skilled staff (the navy is already restricted by a lack of personnel). At that point serious money might flow, with universities that have already made a start in this space likely to claim most of it.

But history suggests another scenario – that universities will sign up to any proposal the Commonwealth puts to them, no matter how unattractive it is in a business sense. And as they keep accepting dud deals they continue to be offered dud deals. It’s hard to imagine a sector less suited to an ‘Accord’ process of distributing funding.

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