Nothing. However you meet prerequisite skills works.
I teach technical diving. Students come to me with a variety of skills and knowledge. Sometimes I know them before the class, and sometimes they have qualifications that clearly show they should be ready. If not, I get to know them a little and we do some diving. In many cases, I can see immediately that the student will have no trouble completing the course in a minimum amount of time. In other cases, I will see it will take some work, but they should be able to finish in a reasonable amount of time. On the other hand, in some cases I see that a lot needs to be done to get ready, and I let them know they should so some work before starting (and paying for) a class with me.
So what is a reasonable amount of time? The course standards identify a number of dives that must be completed, but that is a minimum. The real factor is the student's ability to meet the standards regardless of the number of dives it takes to meet them. In the early tech classes, for example, it is common for divers to take more than the minimum number of dives just to teach a satisfactory level with the valve shutdown drill. I anticipate that for most students, it will take a few extra dives and maybe a little extra practice on their own to get done, and I build that expectation into the class structure. I will not accept a student who is going to take too long to reach the class objectives.
The idea of "failing" a class left the vocabulary of almost all scuba instruction decades ago when almost all agencies adopted the philosophy of "mastery learning" that was originally conceived by Dr. Benjamin Bloom. I used to teach a variation of this concept in my role of training teachers, and I used it myself in the classroom for a many years. In traditional education, the teacher teaches students for a specific amount of time and then measures the student's performance against a course standard. In mastery education, the teacher teaches the student for however long it takes to meet the course standards. In traditional education, time is the standard, and performance is the variable. In mastery learning, performance is the standard, and time is the variable. In scuba, nearly all agencies now use a variation of mastery learning for their instructional approach, so the word "failure" has no real meaning; a student who has not met standards is simply still taking the course.
Fair enough. However, when you teach technical diving, that certification card allows for certain dives to be performed: decon, trimix, etc.. The problem I have with "mastery" is how most, with the exception of NASE and RAID, have subjective interpretations, which vary widely. Without objective specifications in concrete terms, the result is a wide variety of results. This is one thing that fundies addresses, in my opinion.
Fundies just allows T1 to be taken (which I am told is even better than fundies, skills wise).
I have never spoken to AG about the details of creating fundies (or essentials). However, the course, as I understand it, is to prepare students for technical diving, or get them as close to possible to that skillset. Was it that there were too many students requiring an "unreasonable" (which will be defined differently by different people) amount of time to be able to achieve the required proficiency to learn about decompression diving, handling emergencies that are only encountered in that environment, etc. etc.
Curious about your evaluation dives. Are those free?