The ACT Government has settled on a compromise to create a University of Canberra Institute of Technology rather than merge the UC and CIT.
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The new joint venture will take students for one and two-year professional diploma courses from 2013 with the headquarters based at the UC campus in Bruce.
New ACT Education Minister Chris Bourke said it was apparent, after extensive community consultation, that there was resistance to a full merger.
''Instead we are creating something new and unique to Canberra and the nation,'' he said.
The institution falls far short of the recommendation by Emeritus Professor Denise Bradley, who was commissioned by the ACT Government to review the UC and CIT in line with the broader national reform agenda she laid out for the Federal Government in 2009.
Professor Bradley recommended a full merger of the UC and CIT, warning then a single, larger, independent, diverse institution would be the only way to ensure their survival when student places were uncapped across universities next year and competition for enrolments intensifies.
Professor Bradley said yesterday it would be inappropriate for her to comment on the Government's proposal.
University of Canberra Vice-Chancellor Stephen Parker said the UCIT model was not one Professor Bradley had even considered and throughout the consultation the UC had never ruled out further collaboration with the CIT.
''We have decided to do something completely new which will give us the critical mass to offer a range of new courses neither UC nor CIT could offer on its own,'' Professor Parker said.
Existing students would not be affected and both institutions would maintain their own identities and brand, independence and financial autonomy.
UC had previously voiced concern over a merger if it had to underwrite any CIT debt.
CIT executive director Adrian Marron said that while there was still a mountain of work to do in setting the new institution up - with a new independent UCIT principal to be the subject of an international headhunt - he was relieved the Government had decided against Professor Bradley's strong recommendation to merge.
''The higher education landscape has changed even in the time since the report went to Government,'' he said.
''I think bringing independence and difference to a new collaborative model is much better than attempting to bolt things together which have different gauges.''
But the ACT branch secretary of the National Tertiary Education Union, Stephen Darwin, questioned the move.
''A key logic for this recommendation was that neither UC or CIT were not well positioned for the future challenges of emerging tertiary environments,'' Mr Darwin said.
''How creating a third institution, straddling both existing institutions, represents a useful response to these challenges is not entirely clear.
''It would appear this outcome may be a forced compromise more than one designed to respond to the fundamental issues raised in the Bradley Review.''
The union did, however, welcome UC's move away from its proposed polytechnic, which threatened to ''dramatically lower the working conditions of UC academic staff transferred into it, and others employed by it'.
Both Professor Parker and Mr Marron believed the UCIT could draw substantial international interest.
International students are keen to earn Australian technical qualifications but they face tougher visa restrictions for TAFE than for university.
''The idea at the centre of all our discussions on the way forward has been how to attract more students,'' Mr Marron said.
Dr Bourke said the UCIT would appeal to people currently in the workforce and to those just completing their schooling.