The centre, which supplied materials for courses running at campuses across eastern Australia, has been deemed no longer sustainable, with a business review proposing to cease operations and reduce staff numbers.

"A major factor has been the changes in the VET sector ... that has resulted in a decline of Metal Centre products and services with a significant drop from the commencement of 2015, as the VET sector in NSW moved to a contestable model. The change directly impacted in the profile of courses offered, training practices and delivery methods across NSW," the proposal stated.

Smart and Skilled came into force at the beginning of the year and significantly altered the fee structure of courses, and also put private institutions in competition with TAFE.

Public Service Association regional organiser Tony Heathwood said the state government had turned education into a market and therefore driven students away and forced the sacking of thousands of staff across NSW.

"Smart and Skilled is tearing down a world class vocational education provider. It has doubled, tripled and quadrupled the cost of education to almost everybody ... to allow non-government training providers to move in," he said. "The downside is all of the facilities are now under-utilised because of the cost, because the courses are no longer being run because they're no longer viable."

The institute confirmed in a statement that a business review is being undertaken as demand for products and services had declined over the past six years, while consultation with staff affected was occurring. It noted there has been "considerable investment in TAFE facilities in the southern Illawarra region".

The Minister for Skills and Small Business John Barilaro had not responded by the Mercury's deadline.