Officials last year warned the government not to merge the 16 polytechnics into a single institute, briefing papers show.
The papers show the Education Ministry advised that creating a single mega-polytechnic offered the greatest potential savings, but the risks outweighed the benefits.
"A 'one ITP' model offers the greatest potential economies of scale, and the ability to move resources and capabilities around the network. However, we think these additional benefits are relatively modest compared to the central entity model, and are outweighed by the additional risks and costs," the November paper said.
It listed the main risks as loss of agility and local responsiveness, a much larger and more costly change exercise, maximum likelihood of the greatest resistance from the sector, its stakeholders and potentially the university sector.
The ministry also warned that a single institution would create a single point of failure.
"There might be only one governance and executive function, but if that function gets things wrong, they are wrong for the whole of the ITP sector," it said.
The ministry and the Tertiary Education Commission preferred an option that stopped just short of a full merger but still centralised many jobs and functions.
"The central entity model, the ministry's and the TEC's preferred approach, seeks to centralise where there is the greatest value and where it can act as a platform for changes within individual institutions. It offers government some central control while, from a regional institution perspective, it means more support," the paper said.
"In short, we believe it captures the majority of the benefits on offer from centralisation, with relatively few of the risks and costs."
The paper said whichever of the options was followed, the greatest savings would come from centralising core teaching and learning systems and activities including course design.
It also said that standard-setting bodies would set standards and design qualifications that polytechnics and other institutions "must use".
A paper from the Tertiary Education Commission advised that Unitec and Manukau Institute of Technology in Auckland were discussing a possible merger, as were Weltec and Whitireia in Wellington and Porirua. It suggested formal business cases be made for both mergers and said other merger options were in early discussion.
A summary of feedback from stakeholders noted complaints about both polytechnics and industry training organisations (ITOs).
"Most employers appeared comfortable with the quality of workplace training provided. However, we were told that certain ITPs and ITOs were not easy to deal with and did not provide qualifications relevant to work," the document said.
ITOs said some polytechnic and private training establishment qualifications did not prepare students to be work-ready, and polytechnics said some ITO training did not provide enough supervision and direct training of learners.
The document said polytechnic staff criticised the quality of the on-job assessment organised by some ITOs, and ITO staff said polytechnics' qualifications were no longer as standardised as they used to be so they were less transferrable nationally.
Students have their say
Polytech students who support the plan for a mega-merger of institutions have said some courses around the country were inconsistent.
Wairarapa local Riki Corley made the decision to leave his sales and marketing role and start a building apprenticeship.
He looked at what each training course involved and picked one that allowed him to finish faster.
"I've heard of other industry providers. There's quite a stringent list of things you have to do to obtain your qualifications, whereas the ones I'm involved in are a bit more relaxed," Mr Corley said.
"That's good for me, because I get through my qualification and time quicker, but I'm not getting the same level of training as the other ones are providing."
Mr Corley does not think it should be an option to take an easier or shorter course, and said bringing all polytechnics together could raise standards.
"I believe some ITOs lack the skills or qualifications that other ITOs provide, so if they condense it into one, hopefully they can raise the standards, as opposed to lower them."
Another former student, who studied carpentry in Waikato, is pleased that the sector is getting a revamp.
He said his course seemed to have been plucked out of the early 1990s.
"You have to bite the bullet sooner or later and make the changes."