The Minister for Education and Science, Ms Hanafin, is seeking support for a new multimillion euro fund that would reward universities for pushing through a reform programme.
Discussions have taken place with the Minister for Finance, Mr Cowen, about a new fund, where universities would be rewarded for implementing change.
However, there is little sign that Mr Cowen will back the proposal in next week's Budget.
One source said yesterday: "This proposal has still to muster real political momentum but it will not go away."
The plan is that universities would compete against each other - as they do for research money - for funding that would be linked to a "change agenda".
Essentially, the universities would be rewarded for being more efficient, more responsive to economic and social needs, and more socially inclusive.
The plan has been floated at a time when three Irish universities - TCD, UCC and UCD - are in the process of controversial reform plans, which have attracted a wave of criticism from some academics.
They complain that the new "pro-business" agenda tramples on cherished academic freedom. But the universities insist radical change is needed if they are to compete internationally.
The university heads hope the proposed new fund would give a fillip to the reform process under way in the colleges.
The recent OECD report on third-level education warned that Irish universities could be marginalised unless there were sweeping internal changes supported by a "quantum leap" in funding.
Yesterday Prof Michael Shattock, the author of the OECD report, said " a managerial revolution" in Irish universities was required if they were going to be able to play their part effectively in a reformed higher-education system.
The universities had grown rapidly on the back of rising student numbers, he said, but this had often reinforced older structures rather than prompted organisational change.
The seven universities, he said,would have to manage themselves more corporately and more strategically than in the past.
"If universities are going to justify the rhetoric of 'world class' they will have to conform to world-class standards which, for example, in research terms, means at least 90 per cent of their academic staff will have to be genuinely research-active."
Dr Shattock also defended the OECD's support for the return of third-level fees, despite declarations by the Government that this was off the agenda.
The social equity arguments in favour of fees were, he said, unanswerable "in a situation where the GDP per head of population figure is one of the highest in Europe and conceals significant economic and social disparities, and where the Government's stated policy is radically to improve social inclusion in higher education.
"I believe it is important that this debate should be widely engaged in to help the Government reconsider the issue when it thinks the time is right to do so."
