Trade Training Centres in Schools programManaging a Trade Training Centre

Published by the Department of Education andTraining April 2015

©State of Victoria (Department of Educationand Training) 2015

The copyright in this document is owned by the State of Victoria (Department of Education and Early Childhood Development), or in

the case of some materials, by third parties (third party materials). No part may be reproduced by any process except in accordance with the provisions of the Copyright Act 1968, the National Education Access Licence for Schools (NEALS) (see below) or with permission.

An educational institution situated in Australia which is not conducted for profit, or a body responsible for administering such an institution may copy and communicate the materials, other than third party materials, for the educational purposes of the institution.

Authorised by the Department of Educationand Training, 2 Treasury Place, East Melbourne, Victoria, 3002.

Contents1. Overview 3

1.1. Purpose of this manual 3

1.2. Background 3

2. Glossary 4

3. Your TTC 5

3.1. Integrated model 5

3.2. De-centralised model 5

3.3. Hub and spoke model 6

3.4. Centralised model 6

3.5. Hybrid model 7

4. Key Areas 8

5. Strategy 8

5.1. Leadership 8

5.2. Effective governance and management 9

5.3. Creating a viable business strategy and plan 11

5.4. Building partnerships with industry 14

5.5. Keeping cluster schools engaged 17

5.6. Recruiting and retaining specialist teachers 19

6. Revenue 21

6.1. Revenue streams and marketing 21

6.2. Third party use of TTCs 24

7. Costs 30

7.1. Transporting students around the cluster 30

7.2. Funding the replacement of TTC equipment 31

7.3. Getting value for money from an RTO 38

8. Further Information 41

Contents8.1. Contacting the Department 41

8.2. Business planning toolkit 42

8.3. Governance committee charter 42

8.4. Governance reporting checklist 43

8.5. Total cost of ownership model 45

8.6. Third party usage agreements 46

1. Overview

1.1. Purpose of this manual

The Department of Education and Training (DET) has produced this manual as part of a range of initiatives to assist schools in managing Trade Training Centres (TTCs) in Victoria. The content of the manual has been developed after consultation with Trade Training Centre (TTC) operators and stakeholders to address the delivery of services according to the TTC Project Funding Agreement with the Commonwealth Government over the 20 years of the Designated Use Period.

In October 2013, Protiviti Risk and Business Consulting was engaged to conduct a detailed review of policies and documentation relating to TTCs. A sample of eight regional and metropolitan TTCs were selected for analysis and meetings were conducted with key stakeholders from the eight TTCs to identify common and pressing challenges. The experiences shared by stakeholders during these meetings were used to inform the structure and content of the manual.

1.2. BackgroundTTC funding includes no recurrent component. Both Commonwealth and State governments are focussed on helping TTCs to become self-sustaining. This means TTCs will need the autonomy, skills and tools to manage their own revenue and costs.

Consultation with a range of TTCs showed that people who operate TTCs have very different views on how their TTC fits into the education landscape within and around their school. To illustrate, some TTCs do not have a separate identity and serve as venues for the delivery of Vocational Education and Training (VET) within an existing Vocational Education and Training in Schools (VETiS) structure. At the other end of the spectrum, there are standalone TTCs managed independently and built on a separate site, that provide a full fee-for-service model to their cluster schools and other clients. There are many variations in between. None of these is the ‘right’ model, but all of them have positive and negative aspects and different challenges to the achievement of sustainability.

This manual provides specific advice and assistance on common management tasks and a way of thinking that works for the corporate world which can be applied to TTCs.

2. GlossaryDET Department of Education and Training (Victoria)

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TTC Trade Training Centre

VET Vocational Education and Training

VETiS Vocational Education and Training in Schools

MoU Memorandum of Understanding, used to establish a non-binding agreement between parties. Memoranda of Understanding are used by TTCs to establish the agreement between a cluster or consortium of schools and other entities to apply for TTC funding and operate a TTC

PSS Project Specific Schedule. This document is attached to the overarching funding agreement between the Commonwealth Government and DET. It describes the funding and obligations of the TTC

SERS School Equipment Reinstatement Scheme. The self-funded insurance scheme run by DET and administered by Echelon Claims Services which covers a range of school equipment. Also known as School Equipment Insurance Scheme (SEIS) and School Equipment Coverage Scheme (SECS).

Joint Use Agreement

A binding agreement between the Minister for Education, the Lead School Council and Partner School Councils or Third Parties to construct and operate a TTC. This agreement outlines the financial and other obligations of the signatories.

SPAG Schools Policy and Advisory Guide, published by DET

Overarching Funding Agreement

The agreement between the Commonwealth Government and DET which details statewide arrangements for TTCs. Approved individual TTC proposals become an attachment to this agreement.

SBAT School Based Apprenticeships and Traineeships. SBAT offers students the option of combining part-time employment, school and training. The program is undertaken under a training contract with an employer, has a Training Plan signed by the school and formally registered with the Victorian Registration and Qualifications Authority (VRQA) and leads to a nationally recognised qualification.

RTO Registered Training Organisation. VET courses regardless of the delivery location must be delivered by RTOs. These services are often purchased.

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3. Your TTCThis section is designed to help you focus on the specific areas of management of your TTC. It also serves to alert you to the range of TTC models in operation. Most TTCs can be categorised into one of the five models below.

3.1. Integrated modelSome TTCs are completely integrated into their associated school (or schools, if there are multiple sites). There is no separate TTC co-ordinator or manager, the bills are paid in exactly the same way the bills are paid for the rest of the school(s) and it is both difficult and unnecessary to separate the costs and revenue of the TTC from the rest of the school(s).

TTC governance is usually dealt with at regular meetings between the cluster principals which focus on operational issues (e.g. adjusting the formula used to cross-charge fees between schools, encouraging cross-enrolment of students to provide access to all the VET courses in the cluster, sharing teachers, etc.).

Integrated TTCs don’t have or need a separate strategy. They are integral to the school’s overall strategy and contribute to, or are subsidised by the school’s other activities. Often, the only central function is mandatory annual TTC reporting.

The challenges facing these TTCs are the same as those facing the wider VET program in the school, with the possible addition of:

Funding the replacement of TTC equipment

Transporting students around the cluster

Recruiting and retaining specialist teachers

Getting value for money from RTOs.

3.2. De-centralised modelA cluster may have several facilities with no obvious centre. This model is usually arranged so that each site can offer courses that are not duplicated within the cluster.

De-centralised TTCs are different to integrated TTCs only when there is a separate strategy or management approach for the TTC as a whole. For example, the strategy may be to centrally co-ordinate efforts to seek revenue from outside the cluster.

Additional challenges faced by De-centralised TTCs can be:

Creating a viable business strategy and plan

Identifying additional revenue streams and marketing the TTC to potential clients

Uncertainty around legal / contractual / insurance arrangements when allowing third parties to use TTC facilities

Building partnerships with industry.

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3.3. Hub and spoke modelIn this model there is one major facility and one or more satellite facilities. Usually (but not always) the major facility is at the lead school’s site and to some extent the lead school takes the responsibility for managing the TTC on behalf of the cluster. The key challenge for this model is that cluster schools may have different perspectives on the TTC. Decisions may be difficult to make and there may be disagreement about priorities. The authority of the lead school to act may be unclear.

Keeping cluster schools engaged (particularly if there is no facility on their site) is an additional challenge faced by hub and spoke TTCs.

3.4. Centralised modelCentralised TTCs are those which have a single large facility. There may have been minor upgrades or supply of equipment to other cluster schools as part of the original Funding Agreement, but for all intents and purposes the TTC entity and name is associated with a single facility. Often, centralised TTCs are on third party sites and may be managed by a separate entity, such as a University or TAFE Institute (e.g. Knox Innovation Opportunity and Sustainability Centre TTC on the Swinburne University Site and the Dandenong Regional Educational Alliance Model TTC on the Chisholm Institute of TAFE site).

TTCs which have a single major facility have the advantage of a clear identity, which helps people to form a common perception of the TTC, makes it easier to visualise strategies for the TTC and market the TTC’s services. Centralised TTCs can also have the advantage of scale, which might justify having a dedicated manager or co-ordinator. In this model it is generally easier to get a clear picture of the revenue and costs associated with the TTC.

Centralised TTCs face most of the challenges already covered above, including:

Creating a viable business strategy and plan

Identifying additional revenue streams and marketing the TTC to potential clients

Uncertainty around legal / contractual / insurance arrangements when allowing third parties to use TTC facilities

Building partnerships with industry

Funding the replacement of TTC equipment

Transporting students around the cluster

Recruiting and retaining specialist teachers

Getting value for money from RTOs

Keeping cluster schools engaged

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3.5. Hybrid modelA hybrid of two or more of the arrangements above is likely to be the most challenging model for a TTC. Stakeholders may find it difficult to understand the TTC model and may have different views of what it is. People working in the TTC may have different views on priorities.

In Hybrid TTCs there is an imperative to have strong and effective governance and management.

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4. Key AreasThis Manual provides more detail on the following key areas: - Strategy, Revenue and Costs.

Strategy – a key component in the ultimate success or failure of a TTC.

Revenue - common to many TTCs and revolves around enrolments and marketing.

Costs - common to all TTCs and requires constant vigilance to ensure the TTC is operating as efficiently as possible. However, cost management should not consume management attention at the expense of revenue growth.

5. StrategyStrategic challenges are often keys to ultimate success or failure. Strategic failings can limit the chance of success but a good strategy can triumph in the face of adversity.

5.1. LeadershipAn important success factor for any enterprise is leadership.

During the consultation period with TTCs it was clear that principals and TTC managers have considerable leadership skills.

However, it is common for TTC leaders to feel uncertain about the scope of their authority and control over the TTC in the context of Commonwealth Government agreements on funding, the role of DET and the relationship of the TTC to other legislative and regulatory functions and policies affecting schools.

The level of autonomy encouraged by DET in the management of TTCs is high. TTC leaders should not doubt the authority they have to make decisions that contribute to the sustainability and success of their TTC. Changes to Project Specific Schedules (PSS), cluster members, governance arrangements, strategic plans, marketing concepts and revenue innovations are all within the power of TTC leaders to contemplate and execute.

DET will provide support to TTCs in their endeavours wherever possible.

The potential for TTCs to help each other is very high. Many TTCs face the same challenges in the same timeframes and are in a good position to co-operate to achieve better outcomes and share costs. For example:

TTCs delivering similar courses could share teachers (and teaching costs), creating full-time roles out of part-time work in separate TTCs. Full-time roles are likely to attract more and better qualified candidates.

TTCs with similar equipment replacement challenges could work together to establish equipment standards, increase purchasing power and share the cost of

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managing a tender to achieve the best value-for-money result (see ‘Getting the best deal’ in Section 7.2.3 for more details).

Similarly, TTCs could work together to tender for RTO services.

A permanent TTC network could co-ordinate partnership agreements and sponsorships, run tenders to achieve best value-for-money outcomes for equipment purchases and RTO services, and manage major suppliers and RTOs on behalf of TTCs.

5.2. Effective governance and managementEffective governance is separate from effective management. Governing bodies concern themselves with setting the strategy, goals and principles of an entity, while management is delegated the task of delivering the strategy and reporting back on progress.

5.2.1. GovernanceDuring the construction phase of the project many TTCs hold a regular meeting of cluster school principals using the Memorandum of Understanding (MoU) or a meeting of the parties to the Joint Use Agreement signed by the cluster school councils (and third parties if applicable) to guide the scope of responsibilities.

It is easy to let these arrangements continue into the operational life of the TTC. However, it is worth considering whether or not the governance arrangement is right for the TTC on an ongoing basis.

TTCs using an Integrated model (see Section 3.1 for description) are unlikely to benefit from separate governance because existing governance arrangements for the cluster schools cover the TTC as well.

Some TTCs developed their application for funding by using existing clusters of schools which already had an operating agreement about delivering VET courses or had formed an alliance for other purposes. If the cluster was pre-existing then the governance arrangements which also pre-existed are very likely to be appropriate.

TTCs that do not use an Integrated model will benefit from separate governance arrangements. The most effective arrangement is to have a governance committee, which meets specifically to govern the TTC. The central idea of a governance committee is to gain benefit from the thinking of several different people.

Features of successful governance committees are:

Stakeholder representation

All key stakeholders of the TTC have someone representing their interests on the governance committee. Depending on the strategy (see below) this might include an industry representative, student/parent representative, trainer representative, etc. A balance must be struck to ensure the committee does not get too big (anything over a dozen people is unusual and can become unproductive).

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Independence

A significant proportion of the membership should be independent of the TTC. Independent members have no conflicts of interest and bring a different and broader perspective when people close to the TTC may be too focussed on single issues.

Diversity

Members should bring different (but relevant) skills and experience to the committee so that all aspects of the TTC can be governed by informed people. Each time a member retires or leaves the committee there will be an opportunity to seek a new member who complements the existing team.

A charter

A charter or terms of reference should be agreed by all members (an example is available in Attachment 2). The charter spells out the role of the committee, the role of management and how the committee works. The charter should be formally reviewed annually and re-submitted to the committee for approval (which also serves to remind the committee of its contents).

Delegation of Authority

The delegation of authority is a formal document that authorises people with roles in the TTC to act on behalf of the signatories to the MoU or Joint Use Agreement. It is a practical way to ensure that day to day activities and decisions do not have to be referred to school councils on every occasion. Limits on delegated authority protect people from over committing the TTC or making inappropriate decisions. An example delegation of authority is included in the charter in Section 8.3. The delegation of authority should be reviewed annually along with the charter.

Reporting

Management should provide a report at each meeting of the Governance Committee with objective information regarding the status of the TTC, progress on the TTC strategy and any issues being encountered. (A checklist of what management should report to the Governance Committee is in Section 8.4.) Where committee approved action is required to resolve specific issues, management should provide the forum with options and a clear recommendation on how to move forward.

An effective Chairperson

Governance committees with a Chairperson who is respected and is focussed on the success of the TTC enjoy a distinct advantage. The Chair should lead recruitment of committee members and management personnel and maintain strong meeting discipline. Whilst the lead school principal is an obvious candidate for this role, but there are risks – see sidebar. Governance theory suggests that an independent Chair can be a very effective choice.

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Wearing two hats

Where one person (e.g. the lead school principal) is both the Chairperson of the governance committee and the manager of the TTC, there is a risk that they have a conflict of interest in approving the strategy that they wrote. Good governance suggests that the manager should at most be a member of the governance committee, not the Chair.

Our Community is a centre for excellence for not-for-profits & schools, providing advice, tools, resources and training. Go to http://www.ourcommunity.com.au/ for a source of independent board members as well as a range of other governance resources.

5.2.2. ManagementOf the many management approaches available one of the most widely accepted is the ‘one employee’ concept, where the governance committee delegates the management of the TTC to a single person, who is authorised to delegate further with the governance committee’s approval. In TTCs the ‘one employee’ is often the lead school principal or a dedicated TTC manager who has been delegated this authority.

The delegation of authority needs to be explicit and exact, to ensure there is no confusion about who has the power to make decisions and act on behalf of the governance committee. The example charter in Attachment 2 includes a simple delegation of authority.

Management ModelAn important consideration for the governance committee is that the management approach matches the model and strategy for the TTC. To illustrate, a Centralised TTC (see definition in Section 3.4) which has a strategy to grow revenue outside the cluster of schools will almost certainly need a dedicated manager with business development experience who reports to a School Council or the Governance Committee.

In contrast, a Hub and Spoke TTC (see Section 3.3) whose central strategy is to spread VET courses over the whole week to maximise use of the new facilities may only need a part-time co-ordinator or senior teacher to manage the TTC.

Managing the StrategyManagement is responsible for submitting a strategy to the governance committee for approval and delivering the strategy once it is approved. The governance committee is normally responsible for approving the strategy and the key personnel to deliver it (i.e. the management team). How to develop strategies and deliver them is covered in the next section.

There is a ‘chicken and egg’ conundrum with strategy and management – the governance committee must appoint a manager before the manager submits a strategy. To resolve this, the Chair of the governance committee should lead a robust discussion to discover the key things that the committee would accept in both a strategy and a manager before interviews for a manager are conducted.

Note: The Project Specific Schedule (PSS) which lays out the obligations of the TTC includes a nominated Project Leader. If this person changes, it is important to notify DET so that the PSS can be updated.

5.3. Creating a viable business strategy and planIt is the manager’s role to develop a strategy for the governance committee’s approval. The strategy normally covers several years and aims to describe how the TTC will look and perform at the end of that period.

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The long-term strategy is normally accompanied by a business plan, which is updated annually. The business plan consists of more detailed initiatives and activities for the year that will progressively achieve the targets in the strategy.

A key factor for a successful strategy is clarity, because clarity increases the probability that people undertaking the running of the TTC share a common view. Without a common view, people can pull in different directions, making it nearly impossible to deliver the strategy.

The more complex a strategy is, the more communication effort is required to ensure all stakeholders share a common view. It follows that a simple strategy is a good strategy. Do not be concerned if the TTC strategy ends up being a brief collection of dot points. The strategy is acceptable as long as it describes how the TTC will look and perform at the end of the set timeframe, includes specific targets and is agreed by all the relevant stakeholders.

5.3.1. Strategy DevelopmentThe common technique for ensuring all stakeholders understand the strategy is to involve them in its development. It follows that the process of creating a strategy is as important as the strategy itself.

There are some principles that should be kept in mind when working on strategy: Clarity

Simplicity

Stakeholder engagement.

The diagram below illustrates an approach to developing a strategy that respects these principles.

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5.3.2. Risk ManagementRisk management is a range of functions and techniques designed to limit or eliminate the negative impacts from predictable events or circumstances without jeopardising the benefits that the TTC is pursuing.

Typical risk management methodologies follow a process:

1. Risk Assessment

Usually an annual workshop of stakeholders where risks to the success of the organisation are identified by discussing topics including the current strategy, competition, legislative/regulatory changes, the business environment, internal risks (e.g. staff turnover) & etc. Risks are then scored and ranked based on their likelihood and impact. The focus is then on the higher ranking risks.

2. Control Assessment

Organisations will already have in place risk mitigation strategies / actions (e.g. flexible working policies that mitigate against the risk of staff turnover). These mitigations are referred to as ‘controls’ and are identified and evaluated for their effectiveness. Where controls are lacking, further mitigations are developed and their implementation becomes part of the business plan.

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3. Audit

Annual financial audits are used to check that financial controls operate effectively. All Victorian government school councils undergo an independent financial audit at least once every three years.

Many organisations also have an internal audit program, consisting of planned reviews of the most important controls that are in place to mitigate risks. ‘Internal Audits’ are used to identify control gaps or where controls are not working and to make recommendations to management to fix the identified issues. Larger organisations often outsource this function to specialist firms.

Risk management can pay major dividends if used effectively. If you are considering implementing a formal risk management process at your TTC, evaluate whether it will help or hinder the organisation by asking these key questions:

Are we in a situation where risks to our success are real and significant?

Is risk management and the value that it brings well understood by both the Governance Committee and the management group?

Can we ensure our management resources are not overwhelmed - do we have access to a methodology and experience that will minimise the administrative burden?

5.4. Building partnerships with industryKey stakeholders for many TTCs will be businesses which provide work placements for students undertaking programs at the TTC and that may employ TTC students in the future. These industry partners are a source of information, support, sponsorship and potentially, revenue. There is also a wider population of business partners who may be in a position to partner with TTCs to fulfil community aspirations or achieve a marketing goal of their own.

Building a partnership with another organisation is a significant investment in time and resources. This investment should not be made lightly. The decision to invest in a partnership should be driven by the value that is available from that partnership. It is imperative to understand what the TTC wants from such a partnership before significant investment is made.

The TTC strategy will include a range of initiatives and activities that deliver a long-term vision. Part of the strategy development should be to consider how industry partners could assist these initiatives and activities. If it seems realistic that an industry partner could provide significant assistance that outweighs the effort to engage them, the investment in developing a partnership is justified.

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Risky business

Risk management can be risky itself:

Risk management processes can be administratively burdensome and it can be a challenge to minimise this overhead.

Very risk averse people can become preoccupied with risk management, which leads to a kind of paralysis, where everything seems so risky that nothing should be done.

Risk management can be open to abuse, allowing people to invent risks in order to curtail activities that they don’t agree with.

Consider the following table which includes ideas on what industry could do for TTCs and what TTCs could do for industry.

Table 1 - TTC and Industry mutual benefits

What could an industry partner do for a TTC?

What could a TTC do for an industry partner?

Placements for students High quality recruitment process

Provide School Based Apprenticeships and Traineeship (SBAT) positions1

Provide School Based Apprenticeships and Traineeship (SBAT) candidates

Student excursions Customised job preparation

Contribute to teacher development Refresher / re-training for existing employees

Attend career days to inform students Overflow facilities

Guest speakers Employee development opportunities

Sponsorship in kind (consumables, materials, equipment, repairs, uniforms)* Community based marketing presence*

Sponsorship in cash (naming rights, scholarships, prizes, events)* Image marketing / branding*

Replacement of equipment Training on up-to-date equipment

*Note: Government schools will need to comply with the DET policy on sponsorship:http://www.education.vic.gov.au/school/principals/spag/community/pages/sponsorship.aspx

5.4.1. Creating partnershipsHere is a three-step process which may help you visualise how to engage an industry partner and estimate the effort involved.

1. How can an industry partner help?

Consider what is in the TTC strategy and how a partner could contribute. Be as specific as possible about what partners could contribute and assign a value to each type of contribution (a $ value is best, but if that is impossible a rating of high, medium or low will help).

If you would like your partner to pay a fee for a service the TTC provides, they are no longer a partner, but a customer. Refer to Section 6 on Revenue below.

1 Details about the SBAT program are available here: http://www.education.vic.gov.au/school/principals/curriculum/Pages/apprentice.aspx

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2. Identify likely targets

Brainstorm with TTC stakeholders (who will have a range of industry connections) to identify organisations that would make ideal partners. Be ambitious – some of the largest corporates in Australia actively look for community partners to fulfil their ‘good corporate citizen’ obligations and aspirations. Make a list and rank them in order of best fit with your TTC’s strategy and the value of their potential contribution. Concentrate your efforts on the partners who represent the best fit and highest value to the TTC.

3. Plan the engagement

Planning how to engage a partner will provide an understanding of the effort required. The table below is an example of how much effort a TTC manager might need to make to develop and manage a partnership. Modify as you see fit and assign realistic hours of effort to each activity. It is easy to convert the hours of effort into a dollar figure by calculating the proportion of the manager’s salary (and any other staff) that will be required.

Table 2 – Example industry partner engagement plan and effort

Activity TTC Manager Effort

Identify likely targets and rank 3hrs

Identify contacts at, for example, 10 target organisations 4hrs

Research 10 target organisations (web search, media search, etc.) 20hrs

Make contact (to ask who to talk to). Follow up with e-mail. 4hrs

Develop material for first meeting. Material should cover; what is the TTC, what we’re looking for from the target organisation and why, what benefits are available to the target organisation.

8hrs

First meeting with five target organisations to understand what the targets want and might consider offering (prep, travel, meet). 10hrs

Detailed proposal for two target organisations. Proposals should be specific to each target, responding to what they want and being clear on what the TTC needs.

24hrs

Second meeting with say, two target organisations to understand if a partnership is possible and what form it should take (prep, travel, meet). 4hrs

Develop partnership agreement for one organisation. For government schools this will involve working with DET Legal Division to draft an agreement.

24hrs

Negotiate agreement with target organisation (may require several meetings). Note that the negotiation process establishes the behaviours in the relationship. Consider building a tour of the TTC into this process.

8hrs

Approve agreement at governance committee and exchange signatures with target organisation. 2hrs

Administer partnership (i.e. ensure obligations of the agreement are met and any issues are raised with the partner and resolved). 24hrs (p.a.)

Maintain partnership (e.g. meet once per month, organise bi-annual function for partners to meet governance committee members & visit the TTC).

24hrs (p.a.)

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Activity TTC Manager Effort

Total effort in first year159 hrs

(approx 21 days)

Total proportion of manager’s salary= 21 x Salary Paid days

per yr

(Add costs for legal advice, proposal development, catering, etc.) $xx

Total $xx

If engaging an industry partner is a pivotal part of your TTC strategy, also consider using some external advice and expertise to reduce costs and improve your chances of success. Major consultancies will often do pro-bono work. Consider contacting the offices of one of the global ‘big 4’ accounting and advisory firms, the local office of global strategy consultants, or other consultancies and even large corporations which have marketing expertise and may help.

DET has Regional Market Facilitation Managers (RMFMs) who can help with understanding the demand for skills in your region and developing partnerships with industry. Contact details for RMFMs are available at this link:

http://www.education.vic.gov.au/training/employers/industry/Pages/rmfm.aspx

5.5. Keeping cluster schools engagedMany TTCs find that cluster schools which do not have a TTC facility on their site become disengaged over time and begin to regard their TTC as a fee for service entity that is not linked with their own success. While this is understandable, it is not ideal for the success of the TTC. Losing the engagement of a cluster school has associated risks of losing their students (and revenue), losing their commitment to deliver the obligations laid out in the Project Specific Schedule and importantly, losing access to the skills and experience that they can bring to the management and governance of the TTC.

There is no single solution for this challenge but, like most problems, the likelihood of overcoming this challenge increases with the number of techniques brought to bear. Here are two areas to consider:

5.5.1. Memorandum of Understanding (MoU)Cluster schools generally sign an MoU or Joint Use Agreement (templates for both of these documents are available from DET) which sets out how the TTC will operate. These agreements usually outline how cluster schools will contribute to the governance and funding of the TTC.

Failure to engage in the TTC’s governance should not be overlooked by the governance committee. If a cluster school persistently fails to attend governance committee meetings the Chairperson can move that the governance committee require an explanation. Even though MoUs are not binding it is appropriate to hold signatories to account and to act if obligations are not being met.

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The MoU is not a static document and can be modified to build in incentives for cluster schools to stay engaged. For example, modifications can be made so that:

Chairing the governance committee is rotated through all schools in the cluster.

Each school commits to a base level of funding plus a fee per student (the fee being less than competing suppliers outside of the cluster).

Cluster schools receive discounts on student fees if they supply teachers or other resources to the TTC.

Cluster schools receive a proportion of the revenue the TTC achieves from other sources as a discount on the per student fee.

5.5.2. Maintaining a relationshipIt is important to avoid a situation where a particular school perceives that it is not included or consulted in the TTC’s operations. The manager of the TTC must invest effort into establishing and maintaining a genuine relationship between the TTC and its cluster schools to keep them engaged.

It is strongly recommended to host an annual TTC strategy workshop, where TTC management shares its strategic ideas and seeks input from cluster schools and other stakeholders.

Ensure all cluster schools are satisfied that they are appropriately represented on the governance committee and their voice is heard on issues. (Note that this does not necessarily mean that each cluster school must have a representative on the governance committee).

If there is no genuine reason for a school to remain in the cluster, the decision should be made by the governance committee to pursue a replacement school which has a compelling reason to join. Asking or permitting a school to leave the cluster should not be seen as an event which carries legal liabilities (noting that MoUs are not binding and it is extremely unlikely that the Joint Use Agreement would be used to sue a school council). Instead it should be seen as an acceptance that the school in question is no longer able to contribute or participate.

Note: The Project Specific Schedule (PSS) which lays out the obligations of the TTC nominates all the entities in a cluster or consortium. If this changes, it is important to notify DET so that the PSS can be updated.

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5.6. Recruiting and retaining specialist teachersSome TTCs report difficulty in recruiting and retaining teachers with the right expertise and skills. There are several potential causes and a range of ideas to address them:

5.6.1. Unattractive positionsThis is a root cause for many of the challenges in recruiting teachers to VET programs in general. With students often having to travel to a different location for specialised VET courses there is a logistics and cost challenge. It has become standard for many clusters of schools to schedule all VET activity on one or two days of the week. Consequently, TTC facilities can have one or two peak loading periods during the week and little other activity. Teachers are therefore engaged on a part-time basis, which is unattractive to industry skilled people who traditionally have access to full-time work, often with overtime.

Here are some ideas to address the problem:

Spreading TTC courses over a wider period

To make TTC teacher positions full-time and therefore more attractive to job seekers, TTC activity would need to be spread over the full week. This option may create a transport challenge, especially if the only transport option is to move all the students at once (e.g. via chartered bus). Transport challenges are discussed in Section 7.1.

Spreading TTC (or VET) activity over a wider part of the week also requires an agreement within the cluster to adjust school timetables to suit. This is a considerable challenge that will require strong commitment from member schools. If transport solutions are suitably flexible, timetabling becomes more achievable. Examples of flexible solutions:

– Yr 11 and 12 students transport themselves via public transport– VET students who attend more than one facility during the day transit during

lunch time.An initiative to spread TTC courses over the week is a significant effort. If it is part of a TTC’s strategy then it should appear in both the TTC strategy and business plan with details explaining how it will be achieved.

Finding productive work for TTC teachers outside the VET program

If the TTC provides services to people other than cluster students, these services can be scheduled to extend teacher’s hours. To achieve this requires the development of revenue streams which leverage the availability of teachers. Revenue stream development is discussed in the next section.

Moving teachers between schools

If transporting students becomes an insurmountable challenge, it may be an option to transport the teachers instead. This option requires that the timetable for TTC (and possibly, VET) courses is staggered across the cluster to achieve full-time usage of teachers. Specialist teachers may be able to provide the theory component of their course to students in their own school and reduce the need for

Strategy 19

transport to just the practical component. The full-time nature of positions may attract teachers with broad enough experience to teach several different trade courses across the cluster.

Share teachers outside the cluster

It may be possible to negotiate with nearby schools or other TTC / VET clusters to share teachers, thereby creating a full-time role. A relationship with other schools and clusters may also provide a source of students for your TTC.

5.6.2. Shortage of suitable teachersSome TTCs have reported a lack of teachers available in the market, often due to the salary gap between trade jobs and teachers. Some schools have responded to this challenge by seeking out injured workers who are looking for ways to return to work. TTCs may be able to adopt industry techniques such as retention and succession strategies to mitigate the risk of losing good employees.

WorksafeWorksafe Victoria’s WISE (WorkSafe Incentive Scheme For Employers) provides a financial incentive of up to $26,000 to employers who offer ongoing employment of at least 15 hours a week to an injured worker unable to return to work with their previous employer.

Visit http://www.worksafe.vic.gov.au/return-to-work/worksafe-incentive-scheme-for-employers-wise to understand the details and register. Some support may be necessary to help the person achieve the qualifications needed to teach.

Retention strategiesMost businesses value their staff and put in place strategies to retain them. The businesses which are most successful at retention consult with their staff to understand what would convince them to stay. Some typical outcomes are:

Investments in individual development

A clear career path

Flexible leave policies

In addition, strategies are often put in place to mitigate the loss of staff. Talent management is a name applied to a suite of human resources approaches that include identifying people with talent, developing plans to improve their skills and creating succession plans for key staff so that replacement staff will be ready in the event of their departure.

20 Trade Training Centres in Schools program

6. RevenueMaintaining and increasing revenue is a common concern of many businesses and revolves around sales and marketing. Appropriate investments in growing revenue will improve the health and viability of a business. TTCs may often face a gap between expenditure and revenue. Managing down costs will be discussed in the following section, but here the focus is on increasing revenue.

The following two revenue challenges were the most common across the TTCs consulted.

6.1. Revenue streams and marketingPeople and resources at TTCs will always be in short supply. It is important to ensure that the significant investment of effort needed to establish new revenue streams is always focussed on the outcome which will make the greatest difference to the TTC. There is little advantage in expending all the available resources on increasing revenue by $5,000 when the revenue required is $50,000. To determine the right focus, the first thing to understand is exactly what the revenue gap is.

It follows that TTC operators must understand the costs of running the TTC. While this seems elementary, it may be difficult to achieve. When a TTC is built the default position is normally to record the costs associated with the TTC in the same way that costs are recorded for the lead school. In De-centralised TTCs the costs for each site might be recorded alongside the costs of the ‘parent’ school. However, this approach will make it impossible to report out TTC costs separately.

Government schools use the CASES21 system. DET recommends that the ‘Initiative’ code is used to flag TTC costs in CASES21 (the initiative code normally defaults to 000 for all costs). See Section 8.1 for a CASES21 contact at DET who can assist. In other finance packages it should be possible to set up a separate cost centre for the TTC. The effort to separate out TTC costs will be significant and should be an initiative in the TTC business plan if being contemplated. The justification for this effort is that the revenue being generated by the TTC can be compared with the cost and the gap quantified.

Once established, the revenue gap should form a target in the TTC strategy along with a vision of how the TTC will close the gap. Specific initiatives to close the gap should be nominated in the annual business plan.

6.1.1. Potential revenue streamsTable 3 below lists the revenue generating ideas being used by the TTCs that were consulted for this exercise (plus one or two extra ideas). If none of these fit your purposes, a call to some fellow TTC operators is likely to reveal other ideas.

There are three key criteria for deciding which revenue streams to develop. A way to rank each idea is provided below with some example scores – you will need to evaluate the scores for your own situation. Ranking will provide a prioritised list of targets for the investment of your marketing efforts.

Strategy 21

Table 3 - Example revenue streams and ranking

Potential revenue stream

Alignment to strategy

(1= low, 2= med, 3=

high)

Potential revenue

(1 = <20% of gap, 2 = 20-50% of gap, 3 = 50-100%

of gap)

Risk

(1 = high, 2 = med, 3 =

low)

Rank

(Add 3 scores)

Securing grants2 1 3 3 7

Attracting students from outside the cluster 2 1 3 6

Attracting adult students 3 2 1 6

Designing and delivering pre-apprenticeship training for third parties (e.g. for AGA)

3 1 2 6

Providing training to industry partner employees 2 3 1 6

Allowing RTOs to use the facility (or delivering courses on their behalf)

1 1 3 5

Allowing GTOs to use the facility (or delivering courses on their behalf)

1 1 3 5

Securing sponsorships 1 1 3 5

Allowing private businesses to use the facility (e.g. hire or licence agreement)

1 1 2 4

Hosting one-off or repeat events for community organisations 1 1 2 4

Selling products produced at the TTC 1 1 1 3

Allowing TAFEs to use the facility (or delivering courses on their behalf)

1 1 1 3

Allowing CAEs to use the facility (or delivering courses on their behalf)

1 1 1 3

Note: All scores are examples only

2 Philanthropy Australia is the national peak body for philanthropy and is a non-profit membership organisation which provides grant-seeking resources. See http://www.philanthropy.org.au/index.html. Grantslink is a Commonwealth Government grant resource at http://www.business.gov.au/grants-and-assistance/grant-finder/Pages/default.aspxA similar resource is at http://www.business.gov.au/Pages/default.aspx. Grantready is a private organisation that provides grant writing services and publishes a free listing of community grants at http://community.grantready.com.au/ . Major corporates also provide grants – contact them via their corporate websites.

22 Trade Training Centres in Schools program

6.1.2. Developing a marketing strategy to win revenue streamsA revenue target should appear in the TTC strategy along with brief descriptions of the initiatives that will contribute to achieving the target. Initiatives to achieve the revenue target may range from increasing enrolments to establishing completely new revenue streams. All these initiatives will require effort and most of them will require a marketing effort. Marketing is a key tool when pursuing new revenue and is based on two central ideas:

Creating a product that the target customer needs or wantsIt is imperative to understand who the target customer is. For example, if the initiative is to find enrolments outside the TTC cluster, then the target customer is not only students, but their parents, teachers and schools as well. It is always a good idea to ask customers what they want, rather than guess. Once the target customer(s) and what they want is known it becomes much easier to design a product that is likely to succeed. Your product is most marketable if it clearly matches a need or desire that your customer research has identified and is different from your competitors’ offerings.

Making the target customer aware of the product and achieving a saleWith a clear idea of the target customer(s) and the product, the next challenge is to design a way for the customer to become aware of your product and an easy way to choose to buy it. Marketing aims to understand when the customer is likely to be contemplating buying a product, what ‘channels’ of information they normally use to help them make their decision, how to get the message about your product into those channels and, should the customer choose your product, how to ensure the buying process is as simple as possible and does not discourage their decision.

Below is an overview of the marketing process:

Strategy 23

Much like developing an industry partnership, it is no small effort to generate new revenue and it can take a long time to bear fruit. To help make the effort sustainable there are several good practices to consider:

TTC stakeholders are a source of information and assistance and can be called upon to contribute.

Keeping the governance committee informed on the marketing process and regularly reporting progress will help set expectations and maintain support.

There is no guarantee of success. If sales targets are not being met and improvement is unlikely, a decision to move the marketing effort to an alternative revenue stream should be made quickly and clearly.

External advice and expertise may improve your chances of success. Major consultancies will often do pro-bono work. Consider contacting the offices of one of the global ‘big 4’ accounting and advisory firms, the local office of global strategy consultants or other consultancies and even large corporations who have marketing expertise and may be able to help.

6.2. Third party use of TTCsMany of the revenue streams being considered by TTCs involve accepting payments from a third party for the use of the TTC facility. A common issue amongst TTCs consulted was uncertainty about the legal and insurance implications of allowing a third party to use the TTC facility.

6.2.1. LegislationPursuant to the Education and Training Reform Act 2006 (Vic) a School Council may allow a third party to use any buildings and grounds located at the School for certain specified purposes. This includes use of a TTC located on a school site.

The purposes are those specified in section 2.3.11(1) of the Act and are the conduct of educational, recreational, sporting or cultural activities for students, the local community or young persons. A School may only permit the TTC to be used for an activity that falls within one of these purposes. Commercial use is permitted provided the TTC is also being used for such an activity. Examples might include running cooking classes for the local community or holding an indoor community market. The School Council may charge fees for the use of the TTC.

Importantly, the School may only permit third parties to use any buildings or grounds at the School if they are not required for ordinary School purposes. It is also important that any use of the TTC by third parties is not inconsistent with its use by school students. This is linked to the School Council’s obligation to provide a safe environment for its students.

If a third party wishes to use the TTC outside the times that it is used by school students on a purely commercial basis, such as a bakery using the commercial kitchen facilities on a Saturday as part of its business operations, then the school will need Ministerial approval of this use as it falls outside the school council’s legislative powers to permit. In such a situation, the school should contact the Department’s

24 Trade Training Centres in Schools program

Infrastructure and Sustainability Division, as there are managers within that Division with delegated authority to make decisions on behalf of the Minister.

Schools do not need planning permits for their educational activities but a third party might need a permit for its activities. For overlapping use which occurs during times that the TTC is also used by school students, schools have obligations under the Working With Children Act 2005 (Vic) which may be relevant.

Duty of CareWhen third parties are permitted to use TTC facilities their employees or clients may come into contact with students and staff. Principals must assess the risks involved, apply school and DET policy and put in place mitigation strategies and if necessary deny or terminate the third party usage.

Schools can consult the Guidelines for assessing requests for community use of school facilities which provide advice to school councils on assessing the use of school facilities by the wider community:

http://www.education.vic.gov.au/school/principals/infrastructure/Pages/facilitiesuse.aspx

http://www.education.vic.gov.au/Documents/school/principals/community/guidelharedfacil.pdf

Are any activities excluded?School councils should not permit their facilities to be used for activities that interfere with student learning or are against the ethos of the school. This includes activities that:

infringe on the delivery of school programs might bring the school into disrepute are likely to cause damage or unmanaged risk to students, school buildings

or property create excessive noise or pose a nuisance to nearby residents may involve the use of firearms are illegal.

In line with their duty of care, school staff should consider:

How the school can control who is accessing the TTC facilities How the school can control / address the behaviour of the third party’s staff

and clients in the presence of their students The proximity that the third party’s staff and clients may come in relation to the

students How the school will prevent the third party’s staff and clients accessing other

parts of the school grounds Whether the presence of other persons on school grounds may cause

distractions for students and disrupt their learning Whether there should be consultation with the school community regarding the

proposed arrangement How the school’s visitor policy would be implemented in relation to the third

party’s staff and clients accessing the TTC

Strategy 25

Whether the measures that the school may need to take to discharge its duty of care to its students are onerous or unfeasible, such that it would be inappropriate for the third party use of the TTC to proceed

Whether it would be preferable for the third party to only access the TTC outside school hours.

6.2.2. InsuranceDET’s insurance program provides property cover for buildings and equipment located on government school sites, including TTC property. DET also insures schools for public liability. More information about the insurance provided by DET can be found here: https://edugate.eduweb.vic.gov.au/Services/Schools/principaltoolkit/technical/Pages/Schol-Insurance.aspx

There are three types of insurance coverage that need to be considered in the context of third party use of TTC facilities:

Property insuranceProperty insurance is designed to protect the policy holder from loss or damage to physical property caused by an insurable event. Coverage applies to defined property in respect of loss events described in the policy. It is also common for policies to detail specific exclusions.

Buildings, fixtures and fittingsBuildings (including their fixtures and fittings) located on school sites are insured under DET’s Industrial Special Risks (property insurance) Policy. If a third party is using the building at the time of the loss, this insurance will still apply (although if the third party’s negligence contributed to the loss, the third party may be held liable for that contribution).

Note: TTC buildings on third party property (e.g. a TAFE) are generally insured by the third party property owner pursuant to the terms of the Joint Use Agreement.

EquipmentSchool equipment is insured by DET under the School Equipment Coverage Scheme (SECS). This policy only covers specified contents in schools when damage is caused by:

fire or explosion;

burglary and vandalism;

storm, lightning, flooding and water damage;

electrical power surge; and

other natural disasters.

Importantly, the SECS does not cover plant, machinery and furniture. Major TTC equipment (eg a CNC Lathe) is likely to be considered ‘machinery’ and therefore would not be covered. TTCs should consider the status of each major item of equipment. Items which are installed at the TTC, such as commercial ovens, are likely to be considered fixtures and therefore covered

26 Trade Training Centres in Schools program

by DET’s property insurance. If a School is in any doubt, the nature of the equipment and its insurance coverage (or lack thereof) should be clarified with DET (see contacting the Department in Section 8.1). It should not be necessary to purchase an insurance policy covering equipment purchased for use at the TTC with the Commonwealth funding provided in respect of that TTC. Damage to equipment caused by a third party will either be covered by the third party’s public liability policy or recoverable from the third party itself.

The SECS also does not cover leased or hired equipment, however the terms of lease agreements will normally require the equipment to be insured under a separate policy. Hire agreements usually include insurance. TTC equipment is required to be owned or leased.

Note: School Councils are not permitted to enter into Hire Purchase arrangements (i.e. agreements which result in the School Council owning the equipment at the end of the hiring period.)

Detailed information about the SECS can be found here: http://www.education.vic.gov.au/school/principals/spag/finance/Pages/equipment.aspx.

Note: The SECS was formerly known as the School Equipment Insurance Scheme (SEIS) or School Equipment Reinstatement Scheme (SERS).

Public liability insurancePublic liability insurance covers the policy holder’s legal liability for personal injury or property damage suffered by a third party as a result of the policy holder’s activities. A school’s public liability insurance will therefore not cover personal injury or property damage caused by third parties who are using a TTC. It is therefore vital for third parties to hold their own public liability insurance of at least $10m. The TTC must request proof (normally a valid certificate of currency) from the third party before permitting the third party to commence using the TTC facility.

DET policy allows Schools to grant an exception to this requirement if the third party is a not-for-profit organisation whose activities do not pose a significant risk. See the public liability section of the Schools Policy and Advisory Guide3.

Worker’s compensation insuranceIn Victoria, worker’s compensation insurance is compulsory for all employers and is generally provided by the state insurer, WorkSafe. Claims are managed by a panel of insurance companies who act as agents for WorkSafe. (CGU is the WorkSafe agent for DET claims.) Third parties who use TTC facilities are not covered by DET’s worker’s compensation insurance and must have their own insurance policy covering their employees.

The DET Schools WorkSafe policy guide is available here: http://www.education.vic.gov.au/school/principals/management/Pages/worksafepolicyguide.aspx.

3 http://www.education.vic.gov.au/school/principals/spag/finance/pages/publicliability.aspx

Strategy 27

6.2.3. Use AgreementsIt is important that all use of TTCs by third parties, whether this is on a commercial basis or for a peppercorn licence fee (such as in the case of a not-for-profit organisation), is regulated by a written agreement. This is to ensure that there is a clear understanding of the proposed arrangement between the parties. Working through such an agreement is also an opportunity to understand how the third party is likely to behave and to set expectations accordingly.

Note that the lead school council will be the legal entity entering into an agreement for use of the TTC. The school council may authorise the school principal or the Chairperson of the TTC governance committee to conduct negotiations with a third party on its behalf, but the school council must approve the final arrangements and sign the agreed documentation.

From a legal perspective, it is important to use DET’s pro forma documents when entering into such arrangements with third parties, be they commercial entities or community groups. The pro forma documents have been specially designed to address a School’s legal obligations and the legal framework within which a school-run TTC operates.

Hire agreementDET has a pro-forma hire agreement which is designed to be used when a third party wishes to use the TTC or a part of it on a one-off basis (such as a youth group hiring a TTC room for its annual presentation night) or a third party wishing to hire a room within the TTC on an ongoing but limited basis (such as a community group looking for a room to hold its monthly meetings). The hire agreement can be used for ad hoc hire or for simple ongoing hire up to a 12 month period. A copy of the pro-forma hire agreement, which has been designed specifically for use with a TTC located on a school site, is attached to this manual. This document should not be amended.

Licence agreementDET has a pro-forma licence agreement which is used when a third party wishes to arrange regular and/or substantial use of the TTC or a part of it, on an on-going basis. For example, a local drama group hiring out the TTC for three 2 hour blocks during term time for a period of 2 years. There may be certain scenarios in which either a hire agreement or a licence agreement could be used. The most important factor is to ensure that the parties use one of these documents. If a third party wishes to negotiate additional clauses or changes to DET’s pro-forma licence agreement the lead school should seek advice from DET’s Legal Division. Schools should not be signing agreements which have been prepared by third parties unless they have approval to do so from Legal Division, and this is strongly discouraged. A copy of the pro-forma licence agreement, which has been designed specifically for use with a TTC located on a school site, is attached to this manual.

Schools are not permitted to enter into Leases

Under the Education and Training Reform Act 2006 (Vic), school councils are not permitted, without the approval of the Minister for Education, to enter into leases or other similar arrangements that provide exclusive use of school or TTC facilities. If a

28 Trade Training Centres in Schools program

school council is contemplating a lease of a TTC, or part of it, then it will need to seek approval from DET’s Infrastructure Division.

6.2.4. ChecklistIt is recommended that any commercial third party use of a TTC facility is presented to the governance committee of the TTC for approval (or the lead school council, if there is no governance committee). The presentation should specifically cover the following:

How the use supports the long term strategy for the TTC.

Projected income from the arrangement and any costs that will be incurred.

Information about the third party.

Details on what the third party will do in the TTC facility.

What the TTC’s obligations will be.

The type of agreement being sought with the third party (i.e. the Hire Agreement, or Licence Agreement), who prepared it and who will sign it.

Risks, for example:

– Duty of care risks and how they will be managed.– Confirmation that the property and equipment insurance policy(s) will apply (i.e.

there are no excluded events that are likely to occur). If there are any gaps (e.g. the equipment is not insured) then the agreement with the third party should include either a ‘user pays’ damage clause, or a fee for the risk faced by the TTC.

– Confirmation that the third party has public liability insurance of $10m or more.– Confirmation that the third party has an existing WorkSafe policy to protect their

employees on TTC property.– Any opportunities that will be forgone by letting the third party use the TTC.

Strategy 29

7. CostsCost challenges are common to all businesses and require constant vigilance to ensure the business is operating as efficiently as possible. However, cost management should not come at the expense of revenue growth.

The viability of a long term strategy and its accompanying business plan is best measured by Cost vs Revenue. If the cost is higher than the revenue, then it is hard to see how the strategy and plan can be viable.

It follows that costs must be understood. A complete picture of the cost of running the TTC provides a clear idea of how much revenue is required to achieve sustainability.

BookkeepingIt is highly recommended for TTCs with a separate strategy, that they also have separate bookkeeping. In most bookkeeping packages this can be achieved by creating a new master entry representing the TTC and keeping all the other charge codes the same.

Government schools use the CASES21 system. DET recommends that the ‘Initiative’ code is used to flag TTC costs in CASES21 (which normally defaults to 000). See Section 8.1 for a CASES21 contact at DET who can assist.

If TTC costs are recorded along with the lead school or the ‘parent’ school on each site, the initial effort to separate out TTC costs will be significant and should be reflected in the TTC business plan.

Accurate bookkeeping provides information which can be extrapolated into a forecast. Forecasts are essential for annual planning. Well designed bookkeeping processes can provide reports which track the financial status of the TTC and progress towards financial goals with very little effort. These reports provide objective information to the governance committee which improves the quality of decision making.

Two potentially significant cost areas for TTCs are transport and equipment replacement.

7.1. Transporting students around the clusterTTCs with multiple sites will almost always have to consider transport arrangements. Many school clusters have been dealing with this for some time, particularly where VET courses have been shared across a cluster or alliance.

DET has a policy which may assist, here: http://www.education.vic.gov.au/school/principals/spag/safety/Pages/transporting.aspx. Note that the Duty of Care applies when transporting students.

30 Trade Training Centres in Schools program

Wherever the TTC has introduced more student movement, or new destinations for students, the cost of transport should be understood and charged to the TTC where necessary (even if that means journaling or transferring a proportion of transport costs to the TTC cost centre in retrospect).

Like most challenges, transport is an issue that is best addressed with multiple strategies. The relationship between transport and timetable flexibility should not be underestimated; easier and more convenient transport opens up the possibility of using more of the TTC’s capacity, but only if timetables are flexible enough to take advantage of this. Conversely, more flexible timetabling allows synchronisation of student movements to take advantage of limited transport opportunities.

The following is a summary of the transport strategies in use or being contemplated by TTCs:

7.1.1. Public transportSome clusters have had success in lobbying to have public transport routes and timetables modified to suit movement between TTC facilities, making the adoption of a ‘user travels’ policy much more practical, especially for more senior students. There is a ‘win-win’ available with cheap transport available to students and much higher usage of public transport during the day for providers.

7.1.2. Transporting teachersMost VET courses delivered in TTCs have a theory and a practical component. Specialist teachers may be able to provide the theory component of their course at the student’s ‘home’ school and reduce the need to transport the student for only the practical component. RTOs may be able to assist with this by re-designing their curriculums around this concept (which may also apply to online learning).

7.1.3. Online learningMost universities in Australia offer comprehensive online services and several online-only universities can deliver entire degree and masters courses with no class contact. There are TTCs working on online education. Contact details are available in Section 8.1.

7.2. Funding the replacement of TTC equipmentMajor equipment in TTCs may have a serviceable life of many years, with maintenance and repair costs spread unevenly over that lifespan. Replacement costs may be very high.

Strategy 31

At the end of the lifespan of any particular piece of equipment there are essentially only four options:

1. Do not replace the equipment.2. Seek a donated replacement.3. Buy or lease a replacement.4. Extend the life of the equipment.

An option must be selected well in advance of the end of the equipment’s life. Some of the options will require activity (e.g. saving for a replacement, or seeking sponsorship well before the end of the equipment’s life, so aim to select an option before the equipment is half way through its lifespan.

Each option will be dealt with in turn but in order to select the right option it is imperative to have information available to make the right choice. Information will change over the life of the equipment, so the selected option should be re-visited at least annually.

7.2.1. Collecting informationInformation is needed to understand the total cost of ownership of equipment and the revenue it generates. Below is a list of appropriate information to collect and how to collect it.

Replacement costReplacement cost will change as technology advances and the preferred equipment used by employers changes. At worst, assume that replacement cost will equal the initial price of the equipment, but annually seek industry or partner advice on the appropriate replacement equipment and a price from suppliers.

Maintenance costsOther owners and the manufacturer can give you an estimate of maintenance costs, however better information is available from your own knowledge and experience of the equipment. Keep a record of maintenance costs (see notes on bookkeeping earlier in this section) and extrapolate the annual cost from them. It is also wise to ask the manufacturer or recognised maintenance suppliers whether a fixed price service contract is available and what the cost would be. A fixed price service contract makes costs predictable and avoids spikes in maintenance costs.

Cost of consumablesKeep accurate records of the cost of consumables (see notes on bookkeeping above). These costs are an important contributor to the total cost of ownership and help to reveal situations where a low purchase price disguises a high overall cost.

Estimated lifespanThe manufacturer will have information about the usual lifespan of their equipment but other owners may have better information.

Breakdown costsAgain, other owners of the equipment can be asked for their experience of breakdown costs until you build up your own knowledge and experience. Generally, breakdown costs will increase as the equipment ages, giving you a way to extrapolate the best time to dispose of the equipment. If you have a fixed price service contract you should have no breakdown costs, nor should you incur any breakdown costs during warranty periods.

32 Trade Training Centres in Schools program

Revenue generatedThis is the most difficult piece of information to determine and will require some judgement to come to a suitable figure. For all the courses that use the equipment add up the revenue (number of student enrolments x fee) to reach a total revenue number. Reduce the number by the cost of teaching (use a proportion of the teacher’s salary if the teacher conducts other classes). Estimate the role the equipment plays in each course and reduce the total number by an appropriate proportion. For example if the equipment is used by every student in every class, then its role is pivotal and there is no need to reduce the total revenue number any further. If it is impossible to deliver the class without the equipment then its contribution is pivotal and there is no need to reduce the total revenue number any further. If the equipment is used for approximately 50% of the time the student is in class and equipment at say another school, a TAFE or a partner organisation could be used, its contribution should be reduced by a notional 50%. This will provide a figure for ‘revenue generated’. For those who prefer a formula:

$Revenue generated = ((enrolments x $fee) – $teaching cost) x %contribution

7.2.2. Total cost of ownershipWith the information above the total cost of ownership can be calculated. This is best done with a table and a chart so that comparisons can be drawn. Below is an example table and corresponding chart based on a $170,000 Computer Controlled Woodworking machine which was purchased as part of the original TTC grant and has an estimated lifespan of 5 years.4

Table 4 - Ownership costs

Year Description Cost Cumulative Cost (annual)

0 Purchase (incl 1 yr warranty) $170,000 $170,000

1 Maintenance $1,590

1 Consumables $2,442 $174,032

2 Maintenance $1,910

2 Consumables $1,857

2 Breakdown $450 $178,249

3 Maintenance $2,155

3 Consumables $2,010

3 Breakdown $2,875 $185,289

Note: All figures are examples only

4 A copy of the spreadsheet used to create the tables and charts in this section is available in Section 8.

Strategy 33

Figure 1 - Total cost of ownership

0 1 2 3 4 5$170 000$175 000$180 000$185 000$190 000$195 000$200 000$205 000$210 000

Equipment costsTrend

Year

You can see that information available at the end of year 3 can be extrapolated to show a rising trend in the total cost of ownership over the five year estimated lifespan of the equipment. This trend was calculated using a function in Microsoft Excel but can just as easily be calculated using estimated figures. Validate your trend curve by checking whether the rising prices for consumables, maintenance and breakdowns are reasonable and rational. Adjust the trend according to your judgement and as any new information comes to hand.

7.2.3. Selecting an optionInformation collected about major pieces of equipment enables objective decision making regarding the end of the equipment’s life. The four options available should be assessed in the following order.

Option 1 - Do not replace the equipmentFrom a purely financial point of view, this is a simple decision to make and should be the first decision in considering the replacement of equipment.

The revenue generated by the equipment should exceed the total cost of ownership by the end of the equipment’s estimated lifespan. If it does not, then serious consideration should be given to forgoing replacement. Calculating the revenue generated and the total cost of ownership is explained above.

Note that a decision to forego replacement does not necessarily mean withdrawing the associated course(s). Consider the possibility of using a partner organisation’s equipment to continue offering the course (partners may include an employer, a TAFE, another TTC, etc). If going down this track, be sure to calculate the costs of transporting students to the equipment, any hire costs and any hidden costs (e.g. consumables) to ensure that the revenue generated exceeds the cost of accessing the partner’s equipment.

34 Trade Training Centres in Schools program

If foregoing replacement means retiring the associated courses, assess the impact this might have on the TTC’s enrolments in other courses. There may be a compelling reason to continue to offer the courses at a loss but accepting such a situation is a decision that cannot be taken lightly.

Note: The Project Specific Schedule (PSS) which lays out the obligations of the TTC includes a nominated set of courses. Retiring courses will require a change to the PSS - contact DET for help with updating the PSS.

If the decision is made to forego replacement, it is advisable to remove the equipment from your premises by selling, scrapping or otherwise disposing of it. If retired equipment stays on site it occupies valuable space and introduces a risk that it will be used, which will incur costs without generating revenue. It may also represent a safety hazard.

Note: Donating equipment that is at the end of its life is an attractive option for disposal but can be problematic; potentially exposing the TTC to liability if the equipment fails or causes injury.

Option 2 - Seek a donated replacementSeeking a partly or wholly donated replacement for your equipment is a major strategic challenge and will require considerable lead time. See ‘Building partnerships with industry’ in Section 5.3.2 above. Keep in mind that donated equipment is never ‘free’. Ensure that the cost of the marketing effort, maintenance, consumables, breakdowns and any obligations attached to the donation are understood. Before accepting the donation, forecast how much revenue will be generated and check that the total cost of ownership does not exceed the revenue generated.

The outcome of this exercise is not within the TTC’s control, so it is advisable to have a back-up plan. The back-up plan is one of the other options outlined in this section.

It is possible that donations will only contribute to the cost of the equipment rather than pay for it outright, effectively reducing the purchase or lease price. If this is the case, factor the donations into the total cost of ownership model and refer to Option 3 below.

Option 3 - Buy or lease a replacementAfter option 1 and 2 have been considered, it may be necessary to determine the most cost effective replacement strategy. The main decision is whether to buy or lease.5

Note: School Councils are not permitted to enter into Hire Purchase arrangements (i.e. agreements which result in the School Council owning the equipment at the end of the hiring period.)

While there are a range of pros and cons to buying and leasing (e.g. leasing reduces the burden on capital, while buying affords opportunities to manage down costs), the buy versus lease decision should be based on these two key questions:

1. Can the funds for purchasing a replacement be saved or raised before the end of the equipment’s life?

5 For the purposes of this section we are using a broad definition of the word ‘lease’ which includes formal lease agreements with banks and financial institutions, rental agreements, vendor finance agreements and any other agreement where there is a regular payment made to possess the equipment.

Strategy 35

2. If so, can the TTC do anything with those funds that will return more than the cost of leasing?

If the answer to question one is ‘yes’ and the answer to question two is ‘no’ then the equipment should be purchased outright.

Otherwise the equipment should be leased. Lease calculators are readily available on the internet. An example is here: http://www.nab.com.au/business/calculators-and-tools/equipment-finance-repayment-calculator. A lease calculator will show the monthly cashflow that will be required to finance the replacement. A lease will increase the total cost of ownership, so ensure the increased costs have been considered in the decision made under Option 1 above.

Note: Leased equipment is not covered by the School Equipment Insurance Scheme. The finance provider generally requires equipment to be insured as part of the lease agreement and may provide insurance itself. If the insurance provided by the financier is too expensive you have the right to shop around for a more cost effective policy. Remember to include the cost of insurance in your total cost of ownership model.

Getting the best dealPurchasing or entering into a lease for a major item is an activity that can be optimised through the use of procurement methods such as tendering. TTCs need to comply with DET’s procurement policy (see the ‘Purchasing’ chapter of the Finance Manual for Victorian Government Schools, here: https://www.eduweb.vic.gov.au/edulibrary/public/schadmin/Management/Finance/Finance_Manual_v5.1.pdf

While public tenders are generally used for larger purchases, it is suggested that TTCs consider using a tender process for smaller amounts to achieve the best possible outcome, especially when there are multiple potential suppliers and the purchase is for both equipment and services (such as maintenance and repair). The approval of the governance committee should be sought before deciding to run a tender for equipment.

Be aware that other TTCs will be facing the same equipment replacement issues and may be in the market for new equipment around the same time as you. Combining purchases from more than one TTC will create more market power and reduce the cost of managing the tender process by spreading it across several TTCs. It will be advantageous to keep in contact with other TTCs with similar courses and equipment to align the timing of purchases.

Tenders will not happen very frequently at a TTC so tender management is a skill that should not be developed in-house. When a tender is required TTCs should look to external resources to manage the tender. Consider hiring a consultant with appropriate experience to manage the tender, seeking the assistance of one of your industry partners or contacting DET for assistance.

Option 4 - Extend the life of the equipmentIt is easy to think that any way to delay the replacement of the equipment is a bonus, but this may be false economy. Typically, maintenance and breakdown costs escalate as equipment nears the end of its life. Extending the lifespan can risk a major breakdown which creates a dilemma around whether to incur significant repair costs or scrap the machine and scramble to acquire a replacement at short notice, with the associated risk of being forced into a poor deal.

36 Trade Training Centres in Schools program

A good way to make the decision to extend the life of the equipment is to compare the total cost of ownership of your current equipment with the planned replacement. An example table and chart is supplied below, showing a comparison of the current equipment (at the 3rd year of a 5 year estimated lifespan) against a planned replacement with a maintenance contract.

Table 5 - Comparison of ownership costs

Current Equipment Replacement equipment

Year Description CostCumulative

Cost (annual)

Cost Cumulative cost (annual)

0 Purchase $170,000 $170 000 $170 000 $170 000

1 Maintenance $1,590 $4 500

1 Consumables $2,442 $174 032 $2 250 $176 750

2 Maintenance $1,910 $4 500

2 Consumables $1,857 $2 400

2 Breakdown $450 $178 249 $ 0 $183 650

3 Maintenance $2,155 $4 500

3 Consumables $2,010 $2 550

3 Breakdown $2,875 $185 289 $ 0 $190 700

4 Maintenance $4 500

4 Consumables $2 375

4 Breakdown $ 0 $197 575

5 Maintenance $4 500

5 Consumables $2 500

Note: All figures are examples only

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Figure 2 - Comparison of total cost of ownership

0 1 2 3 4 5$170 000

$175 000

$180 000

$185 000

$190 000

$195 000

$200 000

$205 000

$210 000Current equipment

Trend

Replacement equipment

Year

If the trend line is considered reasonable, it is clear that the total cost of ownership for the current equipment will exceed the planned replacement after about four years of operation. Where the lines cross is roughly where you should set the lifespan of the original equipment and plan to acquire the replacement.6

If the situation were reversed (i.e. the curves crossed later than the 5 year lifespan of the current equipment) then it is valid to extend the life of the equipment accordingly.

As time goes by, figures in the table can be updated and the resulting changes in the curves will provide more and more accuracy closer to the end of life for the equipment.

7.3. Getting value for money from an RTORTO fees can be significant and poor service can create an administrative burden for the TTC. Getting value for money from an RTO begins with engaging the right provider. It makes sense to conduct a competitive tender for RTO services (see ‘Selecting an option’ in Section 7.2.3 above).

The key to successful contract management is creating a working relationship with the RTO. The relationship must be at more than one level to create a way to escalate problems. For example, there should be a relationship between the TTC manager and the RTO account manager as well as a relationship between the School Principal and the RTO CEO/Managing Director. It should be clear to all parties how these relationships work. Consider the following diagram:

6 Strictly speaking, the replacement time should be a little later than this because the life and cost of the new equipment is being brought forward a little. This is offset by the discount effect of inflation on future costs. In either case existing errors in the trend make this kind of fine tuning academic.

38 Trade Training Centres in Schools program

Figure 3 - TTC / RTO Relationship

TTC Manager RTO Account Manager

Lead School Principal

RTO CEO/Managing Director

RTOTTC

Workingrelationship

Workingrelationship

Line

of

esca

latio

n

Line

of

esca

latio

n

The day to day business between the TTC and the RTO is managed at the bottom level of the diagram. The TTC Manager and RTO Account Manager (or equivalent roles) need to be able to work together to get things done. This relationship must function smoothly. If there is an issue that they do not agree on (e.g. the RTO Account Manager wants the TTC to do all the preparatory work for auspicing, but the TTC Manager feels that should be the RTO’s role) then they can simply escalate the issue to their respective bosses to resolve. This technique preserves the working relationship while dealing with difficult issues.

Where there is frustration with the level of service from an RTO, TTCs should put these relationships in place by agreeing a simple relationship (like the one above) with the RTO.

If an exit from the current relationship is possible and warranted, conduct a competitive tender for RTO services (see ‘Selecting an option’ in Section 7.2.3 above).

Consider banding together with other TTCs to bulk purchase services, as discussed in Section 5.1 above. As previously mentioned, tender management is a skill which will be rarely used by a TTC. Securing the services of a tender manager will produce a better outcome and the cost of doing so can be shared amongst several TTCs if bulk purchasing is pursued.

Strategy 39

When tendering for a new RTO, ensure that:

1. The conditions for the tender include a requirement that respondents supply contact details from other customers of the RTO and permission to contact those customers

2. The evaluation process includes a formal interview with customers to investigate the RTO’s quality of service and a score for quality of service based on these customer interviews.

The contract you sign with the successful RTO tender respondent should include service delivery clauses, which may include (for example):

Monthly, quarterly or end-of-term reporting on turnaround times and responsiveness

A compulsory monthly service delivery meeting

A process to escalate issues with the RTO’s management for quick resolution

Built in review points, with the opportunity for contract exit or pricing adjustments based on performance

An agreed set of relationships (see Figure 3 above).

Contract documentationThe following contracts have been developed by DET to support government schools to negotiate the purchasing and auspicing of quality VETiS programs:

Standard VETiS Purchasing Contract Standard VETiS Auspicing Contract School to School VETiS Access Agreement Purchasing Guidelines for the delivery of VETiS

These contracts are available on the DET website at : http://www.education.vic.gov.au/school/principals/finance/pages/purchasing.aspx

40 Trade Training Centres in Schools program

8. Further Information

8.1. Contacting the DepartmentBelow is the DET Contact List for the Trade Training Centres in Schools Program. When printed this list may become out of date.

Sally-Anne MelkeTTC Project ManagerCareers and Pathways UnitSecondary Reform, Transitions and Priority Cohorts DivisionPh: (03) 9637 2660E: melke.sally.a@edumail.vic.gov.au

CASES21 AssistanceRob CravenManager - School Workforce Analysis and Support UnitSchools Resource Allocation BranchFinancial Services DivisionPh: (03) 9637 3259E: craven.robert.g@edumail.vic.gov.au

Infrastructure & Sustainability DivisionMathew JacobProgram DirectorTrade Training Centres in Schools ProgramPh: (03) 9651 4638E: jacob.mathew.m@edumail.vic.gov.au

School Equipment Coverage Scheme (SECS)Contracts and Procurenet UnitInfrastructure and Sustainability DivisionDepartment of Education and TrainingPh: 9637 3054

Echelon Claims ServicesPh: 9860 3461campc@echelonaustralia.com.au

Strategy 41

8.1.1. Online educationWest Gippsland TTC is working on online education in TTCs. Further information is available from:

Rob JuratowichPrincipalWarragul Regional CollegeLead SchoolWest Gippsland TTCPh: (03) 5623 9900E: Juratowich.robert.f@edumail.vic.gov.au

8.1.2. Industry ParticipationRegional Market Facilitation Managers (RMFMs) can help with understanding the demand for skills in your region and developing partnerships with industry and other parts of government.

Contact details for RFMSs are available at http://www.education.vic.gov.au/training/employers/industry/Pages/rmfm.aspx.

8.2. Business planning toolkitA companion Business Strategy and Business Plan template has been developed which aligns with the concepts in this guide. (Attachment 1).

8.3. Governance committee charterA companion Governance Committee Terms of Reference / Charter has been developed which aligns with the concepts in this guide. (Attachment 2).

42 Trade Training Centres in Schools program

8.4. Governance reporting checklistReporting is a key element of successful governance. In the table below is a checklist of what TTC management should bring to governance committee meetings.

Table 6 - Governance Committee Reporting

When Item Action required Details

Every meeting Status report For noting

Must include: Progress

Comparing dates for the achievement of initiatives outlined in the business plan against updated actual and forecast dates

PerformanceCurrent performance against all targets set in the business plan (e.g. student numbers, staff turnover, revenue generated, etc.). Any shortfalls need an explanation and a recommendation for addressing the shortfall.

BudgetComparing budget in the current business plan with actual costs to date and an updated forecast of costs to the end of the current year

Risks and issuesAn update on any risks and issues previously reported and any new risks and issues discovered or being experienced. This should include proposed mitigation actions.

Upcoming eventsEnsure there are no ‘surprises’ for the Governance Committee by forecasting key events (e.g expecting to ask them to review and approve a new formal agreement next month, reminding them that the annual strategy review is coming up, etc.)

Other itemsIt is wise for management to report significant events that are within the delegated authority for management, but are still of interest to the Governance Committee (e.g. significant purchases within the TTC Manager’s delegated authority, employment of new staff, etc.)

Annually

CharterFor review and approval

Management’s review of the Governance Committee Charter/Terms of Reference with any suggested changes highlighted, including a rationale for the changes.

Delegation of authority

For review and approval

Management’s review of the Delegation of Authority with any suggested changes highlighted, including a rationale for the changes.

PoliciesFor review and approval

If the TTC has any policies separate from the lead school (e.g. a Safety Policy, an Access Policy, etc.) these should be reviewed by management and presented to the committee with any suggested changes highlighted, including a rationale for the changes.

Strategy and business plan

For review and approval

The culmination of the annual review of the TTC Strategy (see Section 5.3) will be an updated Strategy and a business plan for the coming year. Both should be formally presented to the Governance Committee for approval.

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When Item Action required Details

As required

Changes to plan

For review and approval

Any significant changes to the business plan (e.g. a new initiative, changes to the sequence of initiatives, significant actions to address issues that have arisen or to mitigate new risks, etc.) should be presented to the Governance Committee. Presentations should include:- Reason for change

- Alternatives considered

- Recommended option

- Cost and time implications of change

- Impacts of the change on the business plan and long term strategy

- Updated business plan incorporating the change (if necessary)

Major procurements

For review and approval

Whenever procurements beyond the TTC Manager’s delegated authority are necessary, the procurement must be presented to the Governance Committee, including:- What the purchased item will be used for and how the

purchase supports the long term strategy for the TTC

- Alternatives considered (see Section 7.2.3)

- How the supplier was selected (if by tender, the evaluation committee recommendation should be included)

- How much the purchase will cost (including any ongoing costs)

- Any risks associated with the purchase and how they will be managed

44 Trade Training Centres in Schools program

When Item Action required Details

New relationships

For review and approval

Whenever management intends to enter into a new relationship (using one of the formal agreements in Section 6.2.3) a presentation should be made to the Governance Committee before signing, covering:- How the use supports the long term strategy for the

TTC.

- Projected income from the arrangement and any costs that will be incurred

- Information about the third party.

- Details on what the third party will do in the TTC facility.

- What the TTC’s obligations will be.

- The type of agreement being sought with the third party (i.e. Letter of Agreement or Contract), who prepared it and who will sign it.

- Risks introduced by the relationship and how they will be managed

Strategy 45

8.5. Total cost of ownership modelThis tool provides a simple way to compare the total cost of ownership for different scenarios when replacing, purchasing or committing to a lease for new equipment.

Note that the model below is an embedded Excel spreadsheet which can be opened from an electronic copy of this document (by right clicking and selecting Worksheet Object > Open). If you are using a paper copy of this document, please contact DET to receive an electronic copy.

Figure 4 - Total cost of ownership model

Year Description0 $170,000 $170 000 $170 000 $170 000 $ 0 $ 01 Lease $41 5561 Maintenance $1,590 $4 500 $4 5001 Consumables $2,442 $174 032 $2 250 $176 750 $2 250 $48 3062 Lease $41 5562 Maintenance $1,910 $4 500 $4 5002 Consumables $1,857 $2 400 $2 4002 Breakdown $450 $178 249 $ 0 $183 650 $ 0 $96 7623 Lease $41 5563 Maintenance $2,155 $4 500 $4 5003 Consumables $2,010 $2 550 $2 5503 Breakdown $2,875 $185 289 $ 0 $190 700 $ 0 $145 3684 Lease $41 5564 Maintenance $4 500 $4 5004 Consumables $2 375 $2 3754 Breakdown $ 0 $197 575 $ 0 $193 7995 Lease $41 5565 Maintenance $4 500 $4 5005 Consumables $2 500 $2 5005 Breakdown $ 0 $204 575 $ 0 $242 355

Current equipment

Annual cost (cumulative)

With maint. contract

Annual cost (cumulative)

Leased @ 8.5%

Annual cost (cumulative

)Purchase (incl 1 yr warranty)

0 1 2 3 4 5$170 000

$175 000

$180 000

$185 000

$190 000

$195 000

$200 000

$205 000

$210 000

Equipment costsTrend

Year0 1 2 3 4 5

$170 000

$175 000

$180 000

$185 000

$190 000

$195 000

$200 000

$205 000

$210 000

With maint. contractCurrent equipmentTrend

Year

0 1 2 3 4 5$ 0

$50 000

$100 000

$150 000

$200 000

$250 000

With maint. contractLeased @ 8.5%Current equipmentTrend

Year

46 Trade Training Centres in Schools program

8.6. Third party usage agreements8.6.1 Hire Agreement (Attachment 3)

8.6.2 Licence Agreement (Attachment 4)

Strategy 47