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.
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:
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:
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.