Is competition driving inefficiencies in universities? | KPMG | AU
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Is competition driving inefficiencies in universities?

Is competition driving inefficiencies in universities?

Australian Higher Education policy in the last decades has been premised on the idea of competition and quasi-markets forcing differentiation, efficiency and performance improvement.

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Associate Director, Policy, Programs & Evaluation

KPMG Australia

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Australian Higher Education policy in the last decades has been premised on the idea of competition and quasi-markets forcing differentiation, efficiency and performance improvement. The government now wishes to impose an efficiency dividend, relying on the argument that expansion in size must have created some scale economies, enabling the return of a dividend to the taxpayer.

However, the university sector is not a real market. Almost all universities are established under statute, and in most cases the government providing the most funding (the Commonwealth) is not the jurisdiction which “owns” the university. Unlike other sectors, no amount of market forces can impel a restructuring of the sector.

Hence, apparent anomalies and seeming inefficiencies bank up, with no release valve. Research intensive institutions, for example, appear at first glance to be the most effective. But this is largely the result of a competitive grants system that only partially covers the costs of research and forces these universities to foot the bill for a raft of ancillary costs.

Alternative solutions?

It is impossible to think about efficiency as a universal measure, and the efficiency solution might not be as simple as reducing university funding. There are a host of alternative policy, governance and funding mechanisms that could be looked at. For example, given all universities effectively are governed by the same regulatory mechanisms, there are opportunities for shared services models across procurement, finance, recruitment, reporting and so on.

More radically, given competitive research funding is clearly inefficient, rebalancing the funding mix away from project based funding in favour of greater block grant funding may free up academics’ time for core business of teaching and research, as opposed to applying for and reviewing grants.

Perhaps it is time to investigate alternatives to competition, to consider what kind of efficiencies we can achieve with greater levels of cooperation, collaboration and coordination across the sector. To open up such a conversation is a bold thing to do, and we would need first to have a vision of what we are trying to achieve as Australia thinks ahead to the future world of work and what it needs to do to equip us for that, as a society and as an economy.

Time to get serious

To have a fully informed discussion about efficiency and productivity in higher education and research we would need to reintroduce words which recently have been taboo, such as regulation, intervention, mergers and closures.

If we are serious about finding efficiencies, maybe the time has come to have a discussion about how many universities Australia actually needs. The entire Australia higher education workforce, at a squeeze, can fit into the MCG, and yet within that we have 41 universities, four university cohort groups, 22 discipline groupings most of which are represented by a deans’ group, four learned academies and various other levels of competing interests.

These are complex and difficult questions. But it is already abundantly clear that efficiency is more complicated than simply asking universities to do more with less.

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