The new VET Student Loans Program, recently announced to replace the VET-FEE-HELP, shows a perception that is hurting the VET sector: training is a cost.

The debate around funding training and education is focused on cost. The actions taken by the government demonstrate that VET is considered as a cost and not as an investment. The rhetorical political speech talks about connecting training with industry needs, including statements such as: "Restoring Integrity to Vocational Education" or "... a win-win for students and taxpayers".

It is not clear how the VET Student Loans Program will ensure a return on investment (ROI) for taxpayers, and seems to be more about controlling expenditures, and not focused on producing an ROI.

Why is training seen as a cost and not as an investment?
Basically because the evaluation of training has been poorly planned, and there is no credible data available that demonstrates the benefits of training.

To demonstrate these benefits we need to follow the chain of effects through Kirkpatrick's levels of evaluation. Students must be motivated and have a positive reaction to learn (level 1), must actually learn something (level 2), must apply the skills and knowledge learnt in the workplace (level 3), the application of those skills and knowledge must produce an effect (level 4), and finally if we compare the value of that effect against the cost of the training program, we can calculate the ROI, as well as identify other valuable "intangible" benefits.

RTOs usually start planning for training products at the wrong end of the chain of effect: Learning objectives. For training to have a positive effect in society and industry, planning and design must start with the definition of the "effect" expected. From there we can analyse what needs to be done to produce the effect, what support is required for that to happen, what skills and knowledge are needed, what the context will be for the application of those skills and knowledge, and then, only then, we can start thinking about Learning objectives.

Most of the data currently available about VET is how much the program costs, how many hours of training were delivered, how many enrolments, and satisfaction levels of students. But not even this data is accurate and credible. Satisfaction levels of students and employers are collected using the AQTF 2007 surveys, and while research demonstrates students' satisfaction levels (level 1 data) is always consistent with other levels (level 2 and 3 data), according to NCVER students' satisfaction levels are at 90% plus, but completion rates are under 35%. On the other hand, while employer satisfaction levels are at 90% plus, when employers need PD training they don't use RTOs or NRT in 80% of the cases.

The current compliance crisis also puts many doubts about level 2 data (learning), and being competent in a VET assessment, doesn't mean much for the industry. For example, we have around 200,000 individuals that have been deemed competent in Certificate IV in Training and Assessment, but how many of them can actually do the job?

There are many quality providers in the marketplace, that offer quality training products to good students (a good student for this article is defined as one for whom the training product is relevant and suitable to his/her current or future employment), but these quality providers, in most of the cases, are not measuring results beyond assessment of learning.

How can RTOs demonstrate value and return on investment?
RTOs need to work closely with employers to measure the application of the skills in the workplace. How quickly graduates integrate into the workplace environment. How long it takes graduates to apply the skills to the standards required. How long it takes graduates to perform at the industry standards. How good graduates use the required techniques.

Furthermore, we need to measure the effect, analyse changes in business metrics (industry), and other economic and demographic metrics such as unemployment, tax data, etc.

I have had the opportunity to talk to many owners and managers of RTOs over the last few days about their submissions for the new VET Student Loan, and in most cases they focus on their cost. Many will say that $5,000, $10,000, or $15,000 will not cover their costs. My recommendation is not to focus on training costs, because costs can always be cut; focus on benefits. The problem is the same again; no credible data has been produced about the benefits and value of VET.

How the government can promote ROI in VET
Matching eligible courses with the skills needed in industry will not necessarily do the job. There are other factors to consider such as potential salary of graduates, and industry capacity to take more employees. It has been lack of transparency in these and other areas that have been considered, and the results of such considerations.

Yesterday Minister Birmingham mentioned his concerns about current VET completion rates (23%), and a high number of individuals enrolled in two qualifications simultaneously.
There are no doubts that if students don't complete the course the money is lost, and it is the government's obligation to protect us from that happening.

But the government should also lead the debate about the benefit of investing in VET, and look to include measuring benefits in contractual agreements and not only cost.

How can benefits be measured? Industry must play a critical role here. ASQA can support the system by regulating RTOs' operations, with regards to their application of quality management systems, but it is not fit for the purpose of evaluating industry outcomes of training, we need independent industry bodies to perform this role.

Meeting industry needs and making VET a win-win for students and taxpayers needs to see a different dynamic around funding VET. I would like to suggest four conditions for that to happen:

1. Employers that participate in funding programs such as apprenticeships and traineeships, must be motivated for a long-term return in the investment. Be prepared to invest in training today to produce an effect on tomorrow's performance. The current situation shows that employers are mainly motivated to participate in this program because they get instant access to cheap labour.
2. RTOs to design training to meet industry requirements and not compliance requirements. Being able to evaluate and report the benefits of training and not only the cost.
3. Industry to participate in regulating RTOs.
4. Government to fund outcomes and not inputs. Funding contractual requirements should include reporting training outcomes at least at level 3 (application of skills). Create a national evaluation framework for training, where data can be easily accessible and comparable.