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This report is the outcome of a literature review conducted by the IRIC for the Western Australian Department of Training and Employment. The review focused upon the way in which the outputs and outcomes of training are being assessed in other jurisdictions, both Australian and oveseas, including: The establishment of benchmarks; The provision of incentives; The management of under performance (remedial measures); The level at which measures are applied (system, institute, campus, course); Performance measure weightings and how they are determined; and The impact of competition. Conclusions include that: The literature on the linking of performance measures to funding in VET remains largely undeveloped in many areas; and There appears a general consensus that performace based funding in VET is desirable, but that it is also difficult in practice. Also concluded was that the review has been successful in revealing some well accepted fundamentals of best practice in the linking of performance measurement to funding in VET. Considered most important are simplicity and transparency, the need to keep the percentage of funding tied to performance measures low and the need for adequate flexibility to reflect diverse objectives and the individual circumstances of providers. However, policy makers must be very wary of the potential adverse incentives that may be generated from the application of performance measures through the monitoring of service quality and equity outcomes.