New South Wales' largest vocational education provider is at risk of falling behind its competitors unless it changes its approach to better meet the needs of students and employers, a report has shown.

The Boston Consulting Group report examined the Vocational Education and Training market (VET), and TAFE NSW's position and performance compared to its competitors.

The report showed the VET market was becoming bigger and increasingly competitive, shifting to suit the expectations of students and employers.

However, the report said: "TAFE NSW lags the competition in responding to these market changes".

"The current TAFE NSW model was developed for different market conditions and policy approach to VET in NSW," it stated.

NSW Minister for Skills John Barilaro said it was disappointing that TAFE NSW's operations were outdated compared to other VET providers and TAFEs in other states.

He said TAFE NSW needed to move away from traditional training — what he called a "chalk board approach" — towards the more dynamic and flexible training students and employers were demanding.

"In this very competitive market place, there are many offerings that deliver training in a very different way; in the workplace, online, using technology, offering training for a good part of the day, weekend, seven days a week," Mr Barilaro said.

"That is something TAFE hasn't been able to do."

The report also said TAFE NSW's cost structure was uncompetitive, with low productivity and high costs combining with poor return on assets.

"When 40-60 cents out of every training dollar is spent on overheads and administration, that is clearly a failure within the organisation," he said.

"So, clearly we've got to look at those overhead costs to bring downward pressure."

Mr Barilaro said it was time for TAFE to change the way it delivered training, but acknowledged it would not be easy.

"I'm confident with the reforms ahead, yes there's going to be pain, but with that comes opportunity," Mr Barilaro said.

Report no excuse to cut funding, Labor says

The State Opposition said the report was flawed and it feared the Government would only use it to justify deeper cuts to TAFE.

Labor pointed out that one of the private colleges that the Boston Consulting Group used to make its comparisons, the Australian Careers Network, was raided by the Australian Federal Police last week as part of a fraud investigation.

"This report commissioned by the Baird Government cannot be real in using private colleges that are being investigated for fraud as some sort of benchmark for our public vocational education system," Labor's skills spokeswoman Prue Car said.

"This report has been exposed for what it is — the Government's blueprint for even more cuts to TAFE.

"They've already sacked 4,600 staff, they've cut courses, they've jacked up the fees and the result of what they've done has been that we've lost 80,000 students.

"TAFE can be great again but it needs Mike Baird's attack on it to stop."