Background

A common Full Economic Costing process was developed in response to the Transparent Approach to Costing (TRAC) Initiative. It is the standard way for costing throughout Higher Education in the UK.

It accurately identifies all potential costs such as salaries and on-costs, non-staff costs such as travel, equipment and consumables and overhead costs such as premises, non-academic support and so on.

Directly Incurred Costs (DI)

These are the costs that would not be needed if the project did not go ahead. These might be consumable or the costs of research assistants who have not yet been appointed.

Directly Allocated Costs (DA)

These are cost of resources which are allocated to the project for its duration. Usually this just means the cost of permanently employed academic staff.

Estates Costs

This is a directly allocated overhead cost. Each year, every university totals the costs of its premises (in 2 categories – lab-based and non-lab-based). It then divides these by the number of academics within each of those categories. The resulting figures are the annual cost of premises for one academic in each category. These figures can then be scaled according to the amount of time for an academic being allocated to the project. These are applied from the 1st of February each year. The current rates are:

Lab-based   £6,669
Non-Lab      £4,918

Indirect Costs

Similarly each year, every university totals the costs of all the other costs of running the university. For instance, this might include the cost of the library or insurance costs. There is then a yearly indirect cost for one academic which can be scaled according to the amount of time they are allocated to the project. The current rate is:

Indirect     £59,486

What do funders pay?

Totalling all these costs gives an accurate picture of what a project will cost. Generally Research Councils pay 80% of the fEC. Charities generally pay 100% of DI and DA costs but will not pay Estates or Indirect costs (E and I).

Of course, your school may accrue more benefits from external funding – especially if the research was something you were planning anyway.

Where an industry funder is asking for a service from which they will receive 100% of the benefit, you would expect them to pay at least 100% of the full economic costs. However, there may be benefits for the University which you will need to discuss with your Dean.

When you secure external funding, you may be asked to contribute to University Research Fund via a topslice. The mechanism was revised by the University Research Council in November 2014. The system is based on the ability of the project to draw down overheads (estates/ indirects) towards project costs.

On this basis, each project will be allocated to a category from A to F, as follows:

Category A –  Exempt

• Any research, enterprise and teaching and learning funding where no estates/ indirects/ overheads can be charged/ bid for, including stand-alone applications for studentships, capital build/equipment grants and travel grants
• This includes any research grant applications to charitable trusts and foundations that do not fund estates/indirects/overheads, including, for example, the Leverhulme Trust, the Wellcome Trust, the Royal Society and the British Academy, etc.
• This category also includes academic conferences hosted and convened by the University and also University Press dissemination publications (such as Babel, GRIST, etc).
• No topslice will be applied

Category B

• Any research, enterprise and teaching and learning funding where the full economic cost (fEC) methodology is not used by the funder– allowing only limited levels of overheads to be recouped – e.g. EU Horizon 2020, ERDF.
• Bids for grant funding must include an allowance for overheads where these are an eligible cost
• Topslice will be applied at 20% of the allowed overheads grant income

Category C

• All other funding (for research, enterprise and teaching and learning enterprise) where estates and indirect costs are eligible and the grant is calculated on the basis of 80% of fEC – including the majority of Research Council grants.
• Bids for grant funding must include estates and indirect costs where these are eligible costs
• Topslice will be applied at 30% of estates/ indirects grant income

Category D

• Knowledge Transfer Partnerships (KTPs): although these are funded at 100% of fEC, the level of estates/indirect costs that can be bid for is limited as these costs are only applied to the academic/research staff supervision hours.
• Contract research (within the Frascati definition) – it is assumed that all such work will be charged at a minimum of 100% of fEC. Costing and pricing strategies within Schools and Services should be market driven to reflect this
• Topslice will be applied at 15% of total income

Category E

• All commercial/consultancy or other enterprise/teaching and learning enterprise activity where the price is controlled and set by the University and can be at fEC+. It is assumed that all such work will be charged at a minimum of 100% of fEC. Costing and pricing strategies within Schools and Services should be market driven to reflect this
• Topslice will be applied at 25% of total income

Category F

• Strategic projects within the University where the University makes a contribution to the expenditure from Strategic Provision
• No topslice will be applied

NB – funding for partners (NOT subcontractors) within a project is excluded from the above calculations