Hostname: page-component-76fb5796d-vvkck Total loading time: 0 Render date: 2024-04-28T11:15:48.042Z Has data issue: false hasContentIssue false
  • English
  • Français

Contracting out publicly funded vocational education: A transaction cost critique

Published online by Cambridge University Press:  01 January 2023

Phillip Toner
Phillip Toner*
Affiliation:
The University of Sydney, Australia
*
Phillip Toner, Department of Political Economy, The University of Sydney, City Rd, Darlington, NSW 2006, Australia. Email: phillip.toner@sydney.edu.au
Get access Rights & Permissions [Opens in a new window]

Abstract

Contracting out publicly funded vocational education and training (VET) in Australia to private providers has been accompanied by persistent concern at decline in the quality of training. Using transaction cost economics, this outcome is ascribed to the characteristics of publicly funded VET as a commodity and the conditions under which it is privately produced and consumed. The article concludes that, in general, publicly funded VET does not meet the minimum conditions for efficient contracting out. The economic and social consequences of inadequate quality VET provision are potentially severe.

Keywords

I280Contracting outtransaction cost economicsvocational education and training
Type
Symposium Articles
Information
The Economic and Labour Relations Review , Volume 25 , Issue 2: Symposium - Some Impacts of Neoliberalism , June 2014 , pp. 222 - 239
Copyright
Copyright © The Author(s) 2014

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Australian Bureau of Statistics (ABS) (2008) Adult Literacy and Life Skills Survey, Summary Results Australia (Reissue). Cat no. 4102.0. Canberra, ACT, Australia: ABS.Google Scholar
Australian Chamber of Commerce and Industry (ACCI) (2008) Employer confidence in vocational training assessment. ACCI Policy Review. Issue no.2, 8 February. ACCI. http://www.acci.asn.au/getattachment/8e737b52-455c-48df-a359-a654e2a84466/Review-of-Employer-Confidence-in-Vocational-Traini.aspx (accessed 28 April 2014).Google Scholar
Akerlof, GA (1970) The market for lemons: quality, uncertainty and market mechanisms. Quarterly Journal of Economics 84(3): 488–500.Google Scholar
Allen Consulting Group (2011) Competitive tendering and contestable funding in VET: approaches to supporting access and equity. Report to National VET Equity Advisory Council, Allen Consulting Group, Melbourne, VIC, Australia, June.Google Scholar
Allen Consulting Group (2013) VET Quality Project. Melbourne, VIC, Australia: Allen Consulting Group.Google Scholar
Anderson, D (2005) Trading Places: The Impact and Outcomes of Market Reform in Vocational Education and Training. Adelaide, SA, Australia: NCVER.Google Scholar
Australian Skills Quality Authority (ASQA) (2013) Annual Report 2012–13. Canberra, ACT, Australia: ASQA.Google Scholar
Australian Government (2013) RTO report. Available at: www.training.gov.au (accessed 7 April 2014).Google Scholar
Baird, B (2010) Stronger, simpler, smarter ESOS: supporting international students. Review of the Education Services for Overseas Students (ESOS) Act 2000, February. Canberra, ACT, Australia: Australian Government.Google Scholar
Brown, T (2006) From union inspired to industry led: how Australian labour’s training reform experiment turned sour. Journal of Industrial Relations 48(4): 491–505.CrossRefGoogle Scholar
Council of Australian Governments (COAG) (2008) Meeting 29 November 2008 attachment B productivity agenda. Available at: http://www.coag.gov.au/node/294#Attachments 9 (accessed 2 April 2014).Google Scholar
Coase, RH (1937) The nature of the firm. Economica 4(16): 386–405.Google Scholar
Conlisk, J (1996) Why bounded rationality? Journal of Economic Literature 34(2): 669–700.Google Scholar
Cully, M (2008) Youth wages, training wages and productivity: the economic anatomy of traineeships. In: Proceedings of the Minimum Wage Research Forum, paper 10, vol. 1, Adelaide, SA, Australia, October. Melbourne, VIC, Australia: Australian Fair Pay Commission.Google Scholar
Cully, M, Curtain, R (2001a) New apprenticeships: an unheralded labour market program. Australian Bulletin of Labour 27(3): 204–215.Google Scholar
Cully, M, Curtain, R (2001b) Reasons for New Apprentices’ Non-Completions. Adelaide, SA, Australia: NCVER.Google Scholar
Denniss, R, Toner, P (1999) On the wrong track? an analysis of the suitability of contracting out for rail track maintenance. Economic Analysis and Policy 29(2): 117–131.CrossRefGoogle Scholar
Deveson, I (1990) Training Costs of Award Restructuring (Report of the Training Costs Review Committee, vol. 1). Canberra, ACT, Australia: AGPS.Google Scholar
Domberger, S, Meadowcroft, SA, Thompson, DJ (1986) Competitive tendering and efficiency: the case of refuse collection. Fiscal Studies 7(4): 69–87.Google Scholar
Ellison, G, Wolitzky, A (2009) A search cost model of obfuscation. NBER working papers no. 15237, August. Cambridge, MA: National Bureau of Economic Research.CrossRefGoogle Scholar
Ferrier, F, Selby-Smith, C (2003) The user choice experience of Australian firms: a further investigation. Working paper no. 49, June. Melbourne, VIC, Australia: Centre for the Economics of Education and Training, Monash University.Google Scholar
Ferrier, F, Dumbrell, T, Burke, G (2008) Vocational Education and Training Providers in Competitive Training Markets. Adelaide, SA, Australia: NCVER.Google Scholar
Finn, B (1991) Young People’s Participation in Post-Compulsory Education and Training (Report of the Australian Education Council Review Committee). Canberra, ACT, Australia: Australian Government Publishing Service.Google Scholar
Friedman, M (1955) The role of government in education. In: Solo, RA (ed.) Economics and the Public Interest. New Brunswick, NJ: Rutgers University Press, pp. 127–134.Google Scholar
Guthrie, H (2009) Competence and Competency Based Training: What the Literature Says. Adelaide, SA, Australia: National Centre for Vocational Education Research.Google Scholar
Halliday-Wynes, S, Misko, J (2013) Assessment Issues in VET: Minimising the Level of Risk. Adelaide, SA, Australia: NCVER.Google Scholar
Hampson, I (2002) Training reform: back to square one? Economic and Labour Relations Review 13(1): 149–174.Google Scholar
Hart, J (2010) Is there a future for the ‘V’ in VET? In: Beddie, F, Curtin, P (eds) The Future of VET: A Medley of Views. Adelaide, SA, Australia: NCVER, pp. 41–46.Google Scholar
Hart, O, Shleifer, A, Vishny, R (1997) The proper scope of government: theory and application to prisons. Quarterly Journal of Economics 112(4): 1127–1161.Google Scholar
Housing Industry Association (2013) Submission by the Housing Industry Association to the Fair Work Australia on the Modern Award Review 2012. Submissions and evidence in support, 25 February 2013, Housing Industry Association, Sydney.Google Scholar
Independent Commission Against Corruption (ICAC) (2004) Report on Investigation into Safety Certification and Training in the NSW Construction Industry. Sydney, NSW, Australia: ICAC.Google Scholar
Independent Commission Against Corruption (ICAC) (2005) Report on Investigation into Schemes to Fraudulently Obtain Building Licences. Sydney, NSW, Australia: ICAC.Google Scholar
Independent Commission Against Corruption (ICAC) (2009) Report On Corruption in the Provision and Certification of Security Industry Training. Sydney, NSW, Australia: ICAC.Google Scholar
Jenkins, R, Curry, I (2013) Rivers of industry involvement in VET reform. In: Beddie, F, O’Connor, L, Curtin, P (eds) Structures in Tertiary Education and Training: A Kaleidoscope or Merely Fragments? Research Readings. Adelaide, SA, Australia: NCVER, pp. 69–82.Google Scholar
Jensen, PH, Stonecash, RE (2005) Incentives and the efficiency of public sector-outsourcing contracts. Journal of Economic Surveys 19(5): 767–787.CrossRefGoogle Scholar
Karmel, T (2012) VET research for industry. In: Proceedings of the 15th AVETRA Annual Conference, Canberra, ACT, Australia, 12–13 April. Adelaide, SA, Australia: NCVER.Google Scholar
King, S, Pitchford, R (1998) Privatization in Australia: understanding the incentives in public and private firms. Australian Economic Review 31(4): 313–328.Google Scholar
KPMG Consulting (1999) National evaluation of user choice: Report to ANTA (Australian National Training Authority), Brisbane, QLD, Australia, 21 September.Google Scholar
Masten, SE (2010) Williamson, Oliver. E (born 1932). In: Durlauf, SN, Blume, LE (eds) The New Palgrave Dictionary of Economics Online. Palgrave Macmillan. Available at: http://www.dictionaryofeconomics.com/article?id=pde2010_W000141 (accessed 6 April 2014).Google Scholar
Mitchell, J (2012) From unease to alarm: escalating concerns about the model of ‘VET reform’ and cutbacks to TAFE. Available at: http://www.jma.com.au/upload/pages/home/_jma_vet-reform-document.pdf (accessed 6 April 2014).Google Scholar
National Quality Council (2010) National Strategic Industry Audit: TAA40104 certificate IV in training and assessment: Western Australia final report. NSIA TAA40104, 18 June.Melbourne, VIC, Australia: National Quality Council.Google Scholar
National Centre for Vocational Education Research (NCVER) (2012a) Apprentice and trainee collection (September). Unpublished data.Google Scholar
National Centre for Vocational Education Research (NCVER) (2012b) Australian Vocational Education and Training Statistics: Financial Information. Adelaide, SA, Australia: NCVER.Google Scholar
National Centre for Vocational Education Research (NCVER) (2013a) Australian vocational education and training statistics: students and courses 2011 (Revised August 2012). Unpublished data.Google Scholar
National Centre for Vocational Education Research (NCVER) (2013b) Historical Time Series of Vocational Education and Training in Australia from 1963 (Revised June 2013). Adelaide, SA, Australia: NCVER.Google Scholar
National Centre for Vocational Education Research (NCVER) (2013c) History of VET in Australia: Overview. Adelaide, SA, Australia: NCVER.Google Scholar
National Centre for Vocational Education Research (2014) AVETMISS Data Element Definitions: Edition 2.2, Adelaide.Google Scholar
Noonan, P and Allen Consulting Group (2010) Queensland Post-Secondary Education and Training Review (Final Report). Brisbane, QLD, Australia: Allen Consulting Group.Google Scholar
Productivity Commission (2011) Vocational Education and Training Workforce (Research report). Canberra, ACT, Australia: Productivity Commission.Google Scholar
Productivity Commission (2012) Report on Government Services 2012. Canberra, ACT, Australia: Productivity Commission.Google Scholar
Quiggin, J (2002) Contracting out: promise and performance. Economic and Labour Relations Review 13(1): 88–104.CrossRefGoogle Scholar
Ranald, P (1993) Outsourcing Information Technology in the Australian Public Service: A One Way Street? (Public sector research centre monograph no. 3). Sydney, NSW, Australia: UNSW.Google Scholar
Ryan, R (2002) Building a National Vocational Education and Training System (Flinders University Institute of International Education Research Collection no. 1). Adelaide, SA, Australia: Flinders University Institute of International Education.Google Scholar
Schofield, K (2000) The good, the bad and the ugly. Perspectives from three states on the quality of Australia’s apprenticeship and traineeship system. In: Address to 9th Annual VET Researchers Conference, Coffs Harbour, NSW, Australia, 4–7 July. Adelaide, SA, Australia: NCVER.Google Scholar
Skills Australia (2011) Skills for Prosperity: A Roadmap for Vocational Education and Training. Canberra, ACT, Australia: Skills Australia.Google Scholar
Smith, E, Comyn, P, Brennan-Kemmis, R, et al . (2009) High-Quality Traineeships: Identifying What Works. Adelaide, SA, Australia: NCVER.Google Scholar
Tisdell, CA (2004) Transaction costs and bounded rationality: implications for public administration and economic policy. Economic Theory, Applications and Issues, Working paper no. 27. Brisbane, QLD, Australia: School of Economics, The University of Queensland.Google Scholar
Tisdell, CA (2013) Competition, Diversity and Economic Performance. Cheltenham: Edward Elgar.Google Scholar
Toner, P (2011) Workforce Skills and Innovation: An Overview of Major Themes in the Literature (Directorate for Science, Technology and Industry Working Paper). Paris: Organisation for Economic Co-operation and Development.Google Scholar
Wheelahan, L, Moodie, G (2010) The quality of teaching in VET: Final Report and Recommendations. Australian College of Educators and LH martin Institute. Melbourne VIC: RMIT University. Available: http://www.lhmartininstitute.edu.au/userfiles/files/research/quality_vetteaching_final_report%281%29.pdf (accessed 27 April 2014).Google Scholar
Wheelahan, L (2012) Victorian TAFE chaos: a lesson in how not to reform vocational education. Available at: http://theconversation.com/victorian-tafe-chaos-a-lesson-in-how-not-to-reform-vocational-education-7296) (accessed 11 December 2013).Google Scholar
Williamson, O (1985) The Economic Institutions of Capitalism. New York: The Free Press.Google Scholar
Williamson, O (1998) Transaction cost economics: how it works; where it is headed. De Economist 146(1): 23–58.CrossRefGoogle Scholar
Williamson, O (1999) Public and private bureaucracies: a transaction cost economics perspective. Journal of Law, Economics, & Organization 15(1): 306–342.Google Scholar
Williamson, O (2000) The new institutional economics: taking stock, looking ahead. Journal of Economic Literature 38(3): 595–613.CrossRefGoogle Scholar