The literature on resource allocation principles was reviewed to develop a credible and workable conceptual framework for reviewing the resource allocation mechanisms that are currently used by state vocational education and training (VET) systems in Australia. Two basic approaches to resource allocation were identified: the passive approach, which emphasizes the role of resources in enabling expenditure to implement nonfinancial decisions by allocating resources to fulfill agreements reached through nonfinancial processes, and the active approach, which emphasizes earning or winning resources by demonstrating high standards of past behavior and is therefore based on allocation rules that deliberately incorporate the use of incentives and disincentives to influence the behavior of those seeking to receive the resources. Four models within the scope of the passive approach (demographic, incremental, profile/enrollment-driven formula funding, and specific-purpose funding) and four models within the scope of the active approach (performance funding, vouchers, competitive bidding, and commercialization) were explained. The relative use of the active and passive approaches to resource allocation by state and territory VET systems was examined, and the concurrent organizational, financial, industrial, and informational changes that would be required to make greater use of active approaches to resource allocation were discussed. (Contains 26 references) (MN)