The Cost of VET in Schools: An analysis of the costs of delivering VET in Schools including an analysis of cost efficiencies - Executive Summary

The National VET in Schools Cost Model presented in this report reflects the critical VET in Schools inputs and outputs. It establishes a framework to collect and collate cost information at school and institution level in a way that reflects the utilisation of resources in the delivery of VET in Schools. The cost model identifies average costs for VET in School for delivery mode and jurisdictions and hence allows identification of the highest and lowest cost for those dimensions. It identifies the factors that drive cost differences and trends and provides vital information on the relativities among costs. The model ultimately facilitates analysis of efficiency issues of VET in Schools delivery.

This model has been developed through extensive consultation and refinement and is a significant step forward in analysing costs and efficiencies associated with the delivery of VET in Schools. The model provides a framework in which costs incurred at school

and non-school levels can be analysed and understood. In this regard the model should serve State/ Territory and Commonwealth Governments and non-government schools in their own on-going cost analysis and planning for VET in Schools. The model can be used for future assessment of costs as well as provide a structure for a more refined and discrete analysis of jurisdiction of delivery mode elements.

The Commonwealth Department of Education, Science and Training (DEST) engaged the consortium of The Allen Consulting Group, Deloitte Touche Tohmatsu and the National Centre for Vocational Education Research (NCVER) to undertake a project that analysed the costs of delivery of vocational education and training (VET) in Schools, including an analysis of cost efficiencies.

The project had two overarching objectives:

• undertake research and analysis of the Report on Costing of VET in Schools (April1999) prepared by Ernst & Young in order to test the validity of the costing model for VET in Schools as outlined in the report; and explore actual and potential options for developing cost efficiencies for the delivery of VET in Schools while maintaining/improving outcomes.
• The project was overseen by a Project Steering Committee, chaired by DEST with representatives from a number of States and Territories and national organisations.

This report considers VET in Schools programmes that are undertaken as part of a senior secondary schooling and are recognised under the Australian Qualifications

VET in Schools has experienced significant growth in participation — from 60,000 in 1996 to around 169,000 in 2001.1 Around 95 per cent of schools offering a senior secondary curriculum are now involved. School-Based New Apprenticeships (also known as traineeships and apprenticeships) are, at this stage, small in number at around three per cent of VET in Schools but growing in significance.

Whilst over 40 per cent of senior secondary students are enrolled in VET in Schools nationally, the participation in VET in Schools by senior secondary students varies significantly across the jurisdictions. In 2001, at least half of the senior secondary students in Queensland (57 per cent), South Australia (74 per cent) and Northern Territory (50 per cent) were enrolled in VET in Schools. On the other hand, Victoria and Tasmania had less than 25 per cent of senior secondary students enrolled in VET in Schools in 2001.

VET in Schools courses are offered across a broad range of industry areas. Four industry groupings — tourism and hospitality, business and clerical, general education and training and computing — comprise 62 per cent of total enrolments. The remaining 38 per cent of students are enrolled in course across 16 industry areas.

The varying structure and nature of VET in Schools across the jurisdictions accounts for the average annual hours within each jurisdiction ranging from 106 hours in South Australia to 380 hours in Victoria. The national average number of annual student contact hours per VET in Schools student was 205 in 2001.2

Increasingly, VET in Schools includes Structured Workplace Learning (SWL) placements. SWL involves the student undertaking learning or training in work placements, including on-the-job training under normal operational conditions and onsite training. The proportion of VET in Schools students participating in SWL nationally has increased from 27 per cent in 1997 to 60 per cent in 2001. In the same period, the national average annual number of SWL hours per student undertaking SWL has decreased from 92 hours to 70 hours. There is a considerable variation across jurisdictions in both the proportion of students undertaking SWL and the absolute amount of time students spent in SWL placements.

There has been strong growth in the number of students undertaking School-Based New Apprenticeships from 1500 commencements in 1998 to 5755 commencements in 2001, representing around three per cent of total students VET in School enrolments.3

The delivery of VET in Schools involves a wide spectrum of administrative arrangements and delivery choices. One of the most striking features in the evolution of VET in Schools is the significantly different forms adopted in different jurisdictions and the breadth of objectives pursued by school and other stakeholders. The administrative histories in each jurisdiction have inevitably laid the foundation for how VET in Schools has been adopted and the characteristics it has assumed in each State and Territory today. Developing a national cost model therefore requires analytical tools that take account of this diversity.

The analytical methodology was activity based costing. The process for the model development involved the following stages.

• Cost model development. An issues paper was distributed April 2002 to provide the basis for structured interviews with key stakeholder groups in all jurisdictions in Australia. In addition a survey of industry bodies and unions sought views of efficiency and quality of VET in Schools training – 56 bodies surveyed and 15 responded. The cost model development process included analysing stakeholder input on cost drivers and cost items; reviewing the Ernst and Young 1999 model; and input from the Project Steering Committee.
• Data gathering. A survey and case study process was used to generate the data required to populate the cost model and provide results.
• Surveys were sent to 66 schools in November 2002, selected by States and Territories, to collect information needed to examine the characteristics of predominant delivery mode, jurisdiction, school sector and geographic location. Fifty schools responded to the survey from December 2002 and April 2003.4
• Surveys were also sent to 43 non-school organizations December 2002 with 34 responding by April 2003.
• The survey results are complemented by case studies of six schools conducted in December 2002 and selected by the jurisdictions to demonstrate special instances of additional costs and the characteristics of efficient practices.
• Analysis of options for developing cost efficiencies. The school survey collected views on efficiency and quality issues and provided the opportunity for ‘free-form’ responses pertaining to VET in Schools efficiency.
• Regular reporting, testing of approaches and conclusions. At key points throughout the project, proposed approaches and initial conclusions were presented to the Project Steering Committee for review and discussion.

The scope and nature of this project required the identification of a framework for the model, against which results could be meaningfully reported. With the agreement of the Project Steering Committee, the National VET in Schools Cost Model was developed to report on the key parameters of:

• Jurisdiction; and
• VET in School delivery modes:
• Auspiced/Partnership;
• Purchased delivery;
• Regional RTO; and
• School as RTO.

Reflecting these key model parameters, the results of the model are presented in a Jurisdiction Model and a Delivery Mode Model. In addition, results for a summary model, referred to as the National Model, are also presented. Each presentation of the model includes costs at school level and the costs of non-school organizations with a direct role in VET in Schools, including government education and training departments, boards of studies and non-government administering bodies.

In addition to the model parameters, it was necessary to establish a set of VET in School cost drivers to underpin the model. The cost drivers are important because they are the factors that ultimately determine the final cost incurred to perform an activity. As with the model parameters, the scope of the project required identification and inclusion of a limited set of key cost drivers for VET in Schools. The cost drivers that underpin the model were selected because they were reasonably consistent across all jurisdictions and are fundamental to the experience of all schools delivering VET. Ultimately, the cost drivers in the National VET in Schools Cost Model are well known and accepted as important for both general education and VET.

Having developed the National VET in Schools Cost Model, the project collected data to populate the model and continue the process of understanding VET in School cost relationships and trends and efficiency issues.

The key mechanism for the collection of data was via a survey of schools to capture the actual experience of schools delivering VET. A further strength of this approach is the consistency of information collection across all jurisdictions.

This use of a survey assumed that school and non-school organizations were in a position to report information about their experience delivering VET. For schools this information included the courses they offer, student enrolment, time spent at the school performing teaching and associated tasks, and some costs. Most schools were able to report information about factors associated entirely with VET. However, schools were unable to report on indirect costs incurred at school level, such as library services, payroll support etc. Hence, school level indirect costs are not included in the cost model results.

Importantly, data was also collected from non-school organizations including school education systems, curriculum and assessment authorities and training departments. This approach was adopted to capture the costs incurred by these organizations, and also to recognise the different arrangements across jurisdictions, in terms of which organizations (school or non-school) incur costs.

As with any survey-based approach to information gathering, attention needs to be given to appropriate interpretation of results. The survey results are based on the survey responses from 48 schools. These schools are located across jurisdictions and were selected for inclusion in the project by Project Steering Committee representatives or by relevant State or Territory departments.

The small sample size means that the results are not statistically significant. Nevertheless, the presentation of results for each of the National, Jurisdiction and Delivery Mode Models report the average experience of the schools and non-school organizations responding to the surveys. The model results provide indicators of cost trends and relationships and useful information on relativities between different costs, trends in costs, and comparison of costs by individual activities such as say work placement or AQTF compliance activities.

The dollar amounts are indicative of the actual cost experience of the schools in the sample and are a reasonable representative estimate of average costs across all schools across the dimensions examined. While variances in sample size have played a significant role in determining the actual dollar amounts reported, this has not changed the nature of the trends and relationship between activities and costs. The model results are reported to the cent, to reflect the detailed level of activity analysis that underpins the model.

The following is a summary of the key findings of the National VET in Schools Cost Model at the school and non-school organization level. The model reports against costs in four broad areas:

• Set-up of VET in School Costs — the costs incurred at school level to commence delivering a VET in School course;
• School VET Administration Costs — the on-going administrative costs incurred at school level to run VET in Schools;
• School VET Course Delivery and Assessment Costs — the costs associated with teaching and assessment of VET in Schools; and
• Non-School Organisation Costs — the costs incurred by education systems (Government, Independent and Catholic), curriculum and assessment authorities and state training boards. To provide context, these costs are identified at three main activity levels: ‘VET in Schools policy development’, ‘VET in Schools administration’ and ‘VET in Schools delivery and assessment’.

The key findings have indicated that the following cost drivers are of most significance to the cost of VET in Schools:

• For the Set-up of VET in Schools Costs, the key driver of total cost is infrastructure requirements supported by the number of courses/programmes administered;
• For School VET Administration Costs, the key drivers are teacher hours and number of courses/programmes administered; and
• For School VET Delivery and Assessment Costs, the key drivers are student hours and the proportion of these student hours delivered within a school classroom.

As described above, the model results are presented from three perspectives: a National Model that presents a summary of information, a Delivery Mode Model and a Jurisdiction Model. A summary of the results for these three cuts of the National VET in Schools Cost Model is presented below.

In addition to the summary data in the exhibits below, there are alternative cost estimates that arise from varying the assumption of the total regulated hours teachers work. The primary models assume 38 hours per week, which are the regulated hours for Victoria and the highest in Australia. Using 38 hours provides the lowest bound of the cost estimates for VET in Schools. An assumption of 32 hours, which is the jurisdictional average, has been used in the calculation of an alternative set of costs.

The National Model incorporates survey responses across schools and non-school organizations to determine a national average cost of delivering VET in Schools. The high level results the National Model are in Exhibit 1. Some of the major findings of the National Model are:

• the average cost of delivery per student hour is $6.91. This includes costs incurred at school level ($5.60) and non-school organisation level ($1.31) with an average class size of 15 students, who spend 185 hours per year in a VET course, including 40 hours in work placement; with schools offering an average of 9 VET courses.
• The alternative cost is based on the revised assumption of regulated teacher hours is $7.72.
• there is a very wide variance in the set-up costs incurred by schools to commence delivery of VET in Schools. Nine schools invested on average $1.1 million in setup costs, while 34 schools invested on average $47,200. This variation reflects the range of school preferences for investment in infrastructure and how best to access infrastructure — on school premises or by accessing infrastructure outside the school — as well as the diversity of courses being offered by schools.

The Delivery Mode Model reports costs by delivery mode across the nation. The high level model results for the Delivery Mode Model are in Exhibit 2. The cost analysis by delivery mode indicates the following key results:

• The School as RTO delivery mode is the most cost effective model, with a VET in Schools delivery cost of $5.38 per student hour, for delivery of an average of 9 VET in Schools courses.
• The alternative cost for School as RTO delivery is $6.23.
• When the cost of direct school administration is included, the Regional RTO model is the most expensive delivery mode at $7.60 per student hour. It offers students access to, on average, 6 VET in School courses5. The Regional RTO model involves the lowest proportion of administrative time to co-ordinate work placement, but the highest proportion to meet AQTF requirements.
• The alternative cost for Regional RTO delivery is $8.20.
• The Auspice/Partnership model is slightly less expensive than the Regional RTO model with cost of delivery estimated at $7.13 per student hour. The model results include a high school VET administrative cost, associated with teacher time required for administration. It would seem the intended benefits of partnering with an external provider do not create administrative cost efficiencies for the school. This model offers students the broadest course selection, providing access to an average of 10 VET in Schools courses.
• The alternative cost for the Auspiced/ Partnership is $8.05.
• The set-up costs incurred at school level are lowest under the Regional RTO model at $150,696,6 and highest under the Auspice/Partnership model at $508,214. The set-up cost for School as RTO is $434,510. There were differences in the way these costs were incurred across delivery modes. For example, for infrastructure and investment, the Auspice/Partnership model average expenditure was $433,151 per school which is almost double the amount spent by Schools as RTO at $231,850 per school. Whereas for teacher professional development, the School as RTO spent $82,414 per school compared to the Regional RTO expenditure of $44,947 per school and Auspice/Partnership expenditure of $19,891 per school.

The Jurisdiction Model reports the average cost of VET in Schools for each individual jurisdiction’s survey respondents. By jurisdiction there is reasonable variance in set-up costs and direct school costs and indirect costs across all jurisdictions (see Exhibit 3).

• Overall, the total cost per student hour of delivering VET in Schools is lowest in Victoria at $5.33, followed by Queensland at $6.17 and South Australia the most costly at $11.99.
• The alternative costs are Victoria at $5.88, Queensland at $7.14, South Australia at $13.37.
• The Northern Territory exhibits the lowest set-up cost, at an average of $137,779 per school. Western Australia is the most costly at an average of $860,865 per school. Consistent with the fact that different course types have substantially different infrastructure requirements, set-up costs are strongly influenced by the type of the VET courses offered at a school.
• The majority of direct costs incurred at school level are incurred for course delivery and assessment activities. The key drivers of delivery and assessment activities are: average class size; student hours per course; and the proportion of student hours delivered in a school classroom. Tasmania exhibits the lowest direct school cost, at an average cost per student hour of $4.14 and South Australia is the most costly at an average of $9.23 per student hour. The South Australian cost of $9.23 per student hour, is significantly higher than the remaining jurisdictions.
• The alternative costs are Tasmania at $4.78, and South Australia at $10.61.
• Non-school organisation costs incurred by non-school organizations supporting VET in School delivery range from a low of $0.28 per student hour in Queensland to a high of $3.68 per student hour in the Northern Territory. Jurisdictions incur the majority of these costs in administrative activities, rather than activities associated with policy development or school course delivery and assessment activities.

The National VET in Schools Cost Model provides a framework and an approach for the purpose of identifying and understanding the cost of delivering VET in Schools. This model has not been developed as a funding model, however it is evident that the funding of VET in Schools is a key policy debate currently taking place. In that context the following comments are provided about the potential application of the model. The model results indicate that the:

• cost of delivering VET in Schools is affected by the particular delivery mode adopted and by the jurisdiction in which it is delivered. However, the final cost outcome is a reflection of many influences – not simply delivery mode or jurisdiction.
• direct school cost and non-school organization cost of VET in Schools in Australia in 2002 was in the order of $227 million. (The alternative sum is in the order of $247 million.7)

In considering the application of the model results it is important to understand some of its boundaries.

In the absence of data on quality of VET in School outcomes, the cost model results cannot take into account the outcomes achieved or quality of VET in School delivery. Thus, the cost model results cannot provide guidance on relationships between the delivery of high quality VET in Schools and cost. Issues around outcomes are considered qualitatively in the case studies and efficiency and quality discussion in the report.

This model has been built on a consistent national basis. This necessarily involves the use of consistent assumptions that do not necessarily reflect precise differences across jurisdictions.

As noted above, the model results do not include costs associated with infrastructure costs (these are identified separately as set-up costs) or indirect costs incurred at school level.

Finally, it is useful to understand that the model results do not provide a directly proportional relationship between the calculated cost per student hour and the cost of providing an additional student hour. The model results reflect the current fixed and variable cost structures given the current student hours.

The case studies examined the decisions six schools have made to arrive at best practice delivery of VET in Schools. Consistent with the cost modelling, the case studies found that negotiating for partnerships of various forms including clustering, either formally or informally, is costly. It requires additional teacher time and ‘commitment’, which is a proxy for further time spent on administration. Schools believe economies of scale can be reached, in the first instance, by adopting an inclusive philosophy to VET in Schools, which maximises the numbers of students enrolled in VET in Schools at one site. This applied also to schools with students with a disability. Students from other schools may add to the size of the cohort but clustering in itself did not appear to deliver significant economies of scale.

Clustering was also found to be a cultural as well as logistical challenge. All schools interviewed for the case studies sought to retain management control over their students, preferring on-site delivery – often with a selected external trainer — and sought the freedom to ‘mix and match’ modes to suit their capability. Clusters were, however, especially valued for networking, particularly in relation to work placements and are seen as a special benefit of VET in Schools.

Case studies also found that a school in a remote location with disadvantaged students and a school with students with a disability incur additional costs over and above those conducting mainstream VET in Schools. The costs are due to travel and additional time required by teachers and support staff in consultations and teaching time — around 50 per cent more time for Indigenous students. These factors are also present in general education, hence are not a VET in Schools specific issue, with the exception of the additional equipment and resources that VET in Schools requires.

Administrative costs are also greater for School-Based New Apprenticeships compared with VET in Schools — managing partnerships, individualised timetables, securing subsidies and the like, and managing the travel for on-the-job training.

An important aspect of this project was to investigate options for cost efficiencies in the delivery of VET in Schools. As noted above, the National VET in Schools Cost Model estimates average dollar values of VET in School delivery and sets out how individual cost items impact on costs. However, efficiency is concerned with more than the absolute dollar cost. Efficiency is also concerned with the outcomes that are achieved.

The degree of efficiency that is achieved in the delivery of VET in Schools reflects the interaction of many factors. Some factors are managed at school level, while government education/training departments and non-government school administering bodies manage others, usually around administrative, institutional and policy arrangements. The division of school managed and government managed factors varies according to jurisdiction and school type.

The consideration of efficiency was made according to jurisdiction approach, delivery mode and quality.

Across jurisdictions there are diverse institutional, policy and administrative arrangements applying to VET in Schools. Each jurisdiction develops an approach to best meet its objectives, consistent with the national VET in Schools objectives, given characteristics such as geography, school types and school populations.

Jurisdiction approaches to institutional and administrative arrangements and policy impact at school and non-school level on the costs of VET in School delivery. Impacts may increase or decrease the cost of VET in School delivery and may also shift costs between schools and systemic levels. In five jurisdictions, over 40 per cent of the cost per student hour for VET in Schools delivery is used for administrative activities (at school and systemic level).

When selecting a delivery mode for VET in Schools, decision makers face complex decisions and trade-offs between administrative efficiency, and cost and responsiveness to student and industry needs. Analysis of the indicative cost results by delivery modes shows that:

• School as RTO model provides the lowest cost of direct delivery per student hour, and offers students a relatively broad selection of courses;
• Regional RTO model has high administrative costs, which might be expected with a centralised model. However, the centralised approach shifts the burden of administration from schools. The Regional RTO model has the narrowest course selection for students, although courses offered under this mode are selected considering labour market needs and capacity to deliver; and
• Auspice/ Partnership model has the highest direct delivery cost and provides some benefit to schools in terms of reducing AQTF compliance. Overall, the transaction costs incurred to co-ordinate the multiple parties involved in this model are high. Auspice/ Partnership model provides the broadest course selection for students.

Decisions about the choice of delivery mode are made at both jurisdiction and school level and appear to be based on a jurisdiction assessment about the best way to ensure delivery of VET in Schools across the jurisdiction given both equity and efficiency considerations.

The role of individual schools in the effective operation of VET in Schools, and ultimately the delivery of high quality VET in Schools, cannot be under-estimated. Hence, understanding the motivations behind school decisions on VET in Schools issues provides an insight into the trade-offs being made at school level about cost and non-cost issues, including quality. This is valuable information for the on-going effectiveness of VET in Schools. Schools are strongly focused on how best to maximize the benefits of VET in Schools for their students. The views of schools on quality were the following:

• In making decisions, school’s primary objective is achieving the best outcome for the students, with cost and efficiency considerations being a second order issue. Schools do not always consider that on-going administrative/AQTF requirements contribute to improved student outcomes;
• Schools perceive that the contribution of teachers is the cornerstone of high quality delivery. Schools see this as often involving high demands on teacher time, and on-going training to keep pace with changing VET requirements. However, schools report that there is a limit to additional demands that can be placed on teachers, especially in terms of unpaid time that teachers are willing to contribute;
• Schools also reported that access to good quality infrastructure and students work placement are important in determining good quality VET delivery. The National VET in Schools Cost Model reports that across jurisdictions there is considerable variation in the average hours of workplacement undertaken by students.

At State/Territory and national level, the issue of quality is managed through a focus on ensuring the quality of inputs through the AQTF. ANTA is currently undertaking work to examine issues around the consistency in quality between VET in Schools and mainstream VET.

Given the trend of increasing student participation and positive outcomes associated with VET in Schools the on-going efficient management of the programme is critical.

The project used detailed cost information from 48 schools about their experience of delivering VET in Schools in 2002 and 34 non-school organizations with a role supporting that delivery. While the sample size for schools is small, and results are necessarily indicative, it is apparent that the cost of delivering VET in Schools is affected by the particular delivery mode adopted and by the jurisdiction in which it is delivered. However, the final cost outcome is a reflection of many influences — not simply delivery mode or jurisdiction. Indeed, the value in this model is in the detailed understanding it provides about VET in School activities that take place at school and non-school level, and about how different approaches to these common activities impact on the final cost of delivery.

The case studies demonstrate the diversity of VET in Schools, considering alternative delivery approaches and course types, the impact of school type and location and student characteristics. The discussion of efficiency and quality issues has highlighted the need to ensure that the analysis of the costs of delivering VET in Schools is considered in the context of the outcomes achieved for students.

This project is an important step in contributing to the understanding of VET in School cost and efficiency issues. The model supports consideration of cost trends and relationships by the key factors: delivery mode and jurisdiction. It highlights opportunities for jurisdictions to work together in understanding similarities and differences and therefore to be in a strong position to achieve cost efficiencies while maximising VET in School outcomes for students. Importantly, it provides a sound basis for the potential future development of predictive model that could be used to inform policy debates around funding of VET in Schools.

Such work is important to support the effective and on-going delivery of high quality VET in Schools to increasing numbers of Australia’s school students.

1. 2002 participation rates had not been issued at the time of writing this report. Nationally agreed data is expected to be available late July 2003.

2. 2002 Report to MCEETYA from the Transition from School Taskforce, Appendix 5 ‘The Growth of VET in Schools Programs: A National Overview’.

3. 2002 Report to MCEETYA from the Transition from School Taskforce, Appendix 5 ‘The Growth of VET in Schools Programs: A National Overview’.

4. Two of the fifty school survey responses were unable to be used due to outstanding questions over the quality of the data. Thus, the cost model   results are based on the survey responses of 48 schools.

5. New South Wales DET provided data that reported the number of VET in School courses available at the New South Wales government schools taking part in the survey. However, the data provided by DET showed a higher number of courses than those reported by schools in their survey response. The survey data has been used in the National Cost of VET in Schools Model.

6. New South Wales DET advised that additional infrastructure costs are incurred centrally, and therefore not known by schools responding to the Cost of VET in Schools survey. DET advised that at this time, no estimate of those additional costs is available.

7. The calculation of both figures is based on data collected via the National Cost of VET in Schools Survey conducted as part of this project and MCEETYA data on student numbers.