Faq- Full Economic Costing

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FAQ

general questions

What is Full Economic Costing (fEC)?

The Full Economic Cost (fEC) of the activity includes direct and indirect costs, space/estates charges including depreciation, and adequate recurring investment in infrastructure.

Why is Full Economic Costing (fEC) important to this University?

The successful implementation of the fEC requirements is crucial if this University is to recover a greater proportion of the true costs of its research. This is essential to provide sustainability, including on-going investment in research infrastructure. Failure to implement these requirements to the satisfaction of the Research Councils will result in the University of Strathclyde being disallowed from submitting research proposals on a fEC basis with a resultant under recovery of our costs.

What is the timetable for implementing Full Economic Costing (fEC) at project level?

The latest date for the submission of pre-fEC proposals to Research Councils was 31 July 2005. From 1st September 2005, all research applications should be costed on a fEC basis. fEC should be fully embedded within institutions by 2008/2009. In the transitional period, while both pre-fEC and fEC costed projects are running, the Government is providing additional support to Universities. This will be distributed in proportion to current research volume.

Does Full Economic Costing (fEC) apply to University Consultancy and Other Services Rendered?

A decision was taken by UMG in Oct 2005 that Full Economic Costing should not be applied to University Consultancy and Other Services Rendered for the time being. This will be reviewed by Senior Officers.

What support is available to assist academics with Full Economic Costing (fEC)?

The University has purchased a software package (pFACT) to support the costing, on fEC principles, of all external projects. This will minimise additional workload for academics and training and support will be provided. Information about pFACT can be found on the University's fEC website: http://www.strath.ac.uk/fec.  From 1st June, all research projects should be costed using pFACT. 

Information about Full Economic Costing, including how to calculate academic time and the corresponding indirect costs and Estates charges, can be found on the University's fEC website: http://www.strath.ac.uk/fec

The staff of Research & Knowledge Exchange Services (RKES) are available to support academics with their research application and costing/pricing queries. Research & Knowledge Exchange Services can be contacted as follows :

ri.office@strath.ac.uk
http://www.strath.ac.uk/rkes
t: 0141 548 3707
f: 0141 552 4409

costing research projects

How is fEC calculated?

Under fEC, the full economic cost of a research project will be calculated. The full economic cost includes Directly Incurred costs, Directly Allocated Costs (including Estates Charges) and Indirect Costs as detailed below :

Directly Incurred Costs
Costs arising as a direct result of the specific piece of research. Directly incurred costs include new Research Assistants, travel and subsistence, consumables and equipment.
Directly Allocated Costs
These are costs that would still be incurred by the University if the proposed research did not go ahead. This includes estimated PI and Co-investigator time on the proposed project, pooled technician and clerical staff time, estates charges (see below) and use of existing research equipment / facilities.
Estates Charges (non-staff direct costs)
The Estates Charge is to cover the facility-related costs of conducting the research. The Estates Charge is based on a calculation of full-time-equivalents (FTEs) working on the project (excluding technicians, clerical support and studentships) multiplied by the relevant rate for the Faculty of the PI.
Indirect Costs
The indirect cost is designed to provide a contribution towards the costs of all other central overheads. It is calculated on the basis of FTEs as per Estates Charges above.

PI and Investigator costs will be estimated when proposals are prepared. In addition to providing information on other staff costs and direct costs, Principal Investigators will include estimates of the time that they, and co-investigators, will spend working on the project. This resource level also contributes to the calculation of the direct estates charges and indirect costs, which is based on staff resource on the project and per FTE rates calculated centrally from an analysis of TAS returns.

Detailed information on how to calculate Principal Investigator time, Investigator time, direct estates charges and indirect costs can be found on the University's Full Economic Costing website.

How is academic time estimated under fEC? Are there any guidelines or recommendations?

The Research Councils base academic research time on 7.5 hours a day, 37.5 hours a week, 44 weeks a year, making a total of 1650 working hours a year. A full explanation of how to estimate academic time is provided on the University's Full Economic Costing website.

It should be noted that time to supervise research students should be excluded from the estimate of academic time.

What rates of pay should be used to estimate academic time under fEC?

In order to ensure confidentiality relating to salary information of members of established academic staff, the University has elected to use averaged rates for four categories of staff: Professors, Readers, Senior Lecturers and Lecturers. The rates to be used for established staff are available on the fEC website. The figures will be updated on an annual basis.

Other members of staff working on the project, such as research assistants and technicians, should be costed using actual salary scales. Spreadsheets showing these scales are available.

SALARY INFLATION - Salary inflation should be included, subject to the terms of the grant scheme or contract funding the project. Generally, include salary inflation for industrially-funded and other price-negotiable projects and exclude it for Research Councils. Individual charities vary in their funding terms, so please consult Research & Knowledge Exchange Services if you are in doubt.

Current estimates of salary inflation are as follows :

  • Aug 06 - Jul 07 : 3.5%*
  • Aug 07 - Jul 08 : 4.75%
  • Aug 08 - Jul 09 : 2.1%
  • Aug 09 - Jul 10 : 3%
  • Aug 10 - Jul 11 : 3%

(including effects of Pay Modernisation)

INCREMENTS - Salary costs should include provision for staff to receive applicable increments during the period of the project, except in cases where the above salary rates are used.

Should non-staff costs be inflated?

In general, non-staff costs should be treated in the same manner as before the introduction of fEC and will be determined by the guidelines of the funder. If you are applying to a Research Council, for example, simply include the cost, over the period of the project, at current value. The Research Council will add an element of inflation when it makes the award. Unless specified by the funder, an annual allowance for inflation should be added to non-staff costs. An annual allowance for inflation of 2.5% is recommended.

How are post-graduate research student (project studentship) costs to be dealt with under fEC?

Research Councils are funding research studentship stipend and fees at 100%. Project studentships should be included in project costings on this basis.

Does fEC apply to Fellowships?

Yes, the costs of fellowships will be calculated on a fEC basis. However, staff whose salary costs are met in full from a Fellowship, should not count towards the FTE total in calculating the Estates and Indirect costs of a subsequent project.

How will different types of activity (eg office-based, laboratory-based or home-based) be costed?

Research should be costed on the same basis, irrespective of whether the work is being carried out in the office, lab or at home. The only difference in costing calculations relates to Estates Charges, where the rate depends on the Faculty of the Principal Investigator. The Estates Charges for Faculties are itemised on the fEC website.

Which Estates and Indirect Charges should be used?

The Estates Charges to be costed to a project will depend on the Faculty of the Principal Investigator. The Indirect Costs will be the same across all Faculties. The Estates and Indirect Charges for Faculties are itemised on the fEC website.

Note that for funders other than the Research Councils, these costs should be indexed for inflation as detailed above. This will calculate automatically when using pFACT.

How are costs calculated for collaborative projects? For example, if we are working with another university that has different estates charges or indirect costs, which ones do we use?

Logically, in any collaboration, each institution would wish to use rates, and hence recover costs, relevant to its own operations. Collaborative proposals should therefore identify each institutions relevant charges including Estates Charges and Indirect Costs. Furthermore it is not clear how individual institutions will be calculating their salary costs on a project. For simplicity and to aid identification of these institution-specific costs, it is suggested that, for Research Council applications, separate linked proposals be made by each institution, enabling them to submit their own specific costs. A joint case for support and other supporting documentation can be used. For some funders, however, it may be appropriate to negotiate different arrangements.

How are equipment costs calculated under fEC?

The purchase, hire or lease of equipment for research projects should be fully costed. Research Councils will pay 80% of the first £50,000 of equipment purchases, and 100% of expenditure above this threshold.

Note that for funders other than the Research Councils, these costs should be indexed for inflation as detailed above (see "inflation").

pricing research projects

How does fEC reflect the price to be charged to the funder?

It is important to emphasise the distinction between pricing and costing. All research projects should be costed on a fEC basis, irrespective of the funder's pricing rules. The price should, however, be calculated as per the funding guidelines of the specific funder. fEC should not be seen, necessarily, as an upper limit on the pricing of commercial contracts.

Some guidance has been provided by the OST on the use of QR funds including a checklist to assist in deciding whether the use of QR is legitimate in meeting the shortfall on research projects (insert a link to this guidance). The basic guideline is whether the research output will be publicly available and whether it is in the public good. All individuals authorising applications for grants and contracts should be aware of these issues as they sign off on them.

Research Funders and fEC

Does fEC only apply to Research Council projects?

In the past, Research Councils did not fund the full cost of research. They funded only the additional direct costs of research including RA and technician staff costs, non-staff direct costs and an overhead calculated at 46% of staff costs, and they did not fund Investigator staff costs. The Research Councils are leading the way with the implementation of research funding based on fEC and will pay 80% of the fEC.

Universities will, however, be expected by Government to apply fEC to all research projects. Therefore all research projects, irrespective of funder, should be costed on a fEC basis.

How will fEC affect research funded by Government Departments?

All government departments have been instructed by the Treasury to pay 100 per cent of fEC unless the Government has determined a different policy for a particular department to allow it to pay at the same rates as the Research Councils. At present this only applies to the NHS (not the Department of Health) where an NHS trust is contributing to the project by making clinical facilities available and the trust is not recharging for the use of these facilities.

NHS bodies have now made explicit statements on web-sites that they expect to meet 80% of fEC from April 2006. Refer to the NHS Health Technology Assessment Programme at www.hta.nhsweb.nhs.uk, under FAQ/Submitting Proposals; and the NHS Service Delivery Organisation Research and Development Programme on www.sdo.lshtm.ac.uk. HEIs will need to negotiate research contracts with local NHS trusts but it is anticipated that the same principles will apply.

The Scottish Executive has confirmed that, along with its agencies and non-departmental public bodies, it now expects to pay for the full economic costs of research bought from UK universities to improve evidence-based policy making.

The DTI has announced that Knowledge Transfer Partnership (KTP) projects should be funded at 100% of fEC from September 2005, being the start of new programmes. The HEI element of Knowledge Transfer Network (KTN), LINK and other DTI Technology Programme projects, often being associated with Research Councils, will be funded at the same percentage as the Research Councils, currently 100% of fEC.

The Proof of Concept Programme Awards will cover 100% of actual direct project costs - the Programme has not met overhead costs and is unlikely to meet the Full Economic Cost. Costs eligible to be claimed are: Personnel - salaries (Note: unless the posts are being backfilled, they do not pay for staff already funded via other government departments e.g. SHEFC); consumables; market assessment; patent costs; equipment essential to the project; subcontracting (justification to be provided); and travel.

The Chief Scientist Office (CSO) has indicated that it will seek to meet 80% of fEC in line with the Research Councils. The CSO may impose a ceiling on funding to accommodate the additional funds required to meet the new research funding methodology.

Applicants should contact Research & Knowledge Exchange Services if they are unsure of a funders position on Full Economic Costing.

How will fEC affect research funded by industry?

Where there is scope for negotiation about price, eg industry contracts, the objective should be to maximise the proportion of fEC recovered (ideally at least 100%) although other factors might be relevant.

How will fEC affect research funded by charities?

Traditionally, charities have been unwilling to pay overheads under current funding arrangements. A definitive position regarding charity funding under fEC has not yet emerged, with discussions at Government level taking place. It is possible that some will pay the direct estates charges, but not the indirect cost. Recognising this issue, SHEFC, in its letter to institutions announcing funding for 2005-2006 has indicated that some of the increased QR funding announced for 2006-2007 will be directed to "adjust our funding for research for subject areas that support research commissioned by charities to ensure that we maintain this important investment in Scottish research". However, in order that the University can identify the true cost of the research, applications to charities should be costed on a fEC basis.

How will fEC affect EU-funded research?

The costing model for EU-funded research is being discussed at a senior level in Government. Meanwhile, EU-funded research should be costed on a Full Economic Costing basis, for the University's purposes, and the price submitted in line with the specific programme requirements.

How will fEC affect University-funded research?

fEC applies only to externally-funded research.

University budgeting and resource allocation

If the fEC shows a loss compared with the funder's proposed funding package, should we not accept the contract?

Not necessarily. This situation is no different from at present. For example, analysis shows that historical Research Council funding of research, on the basis of direct costs +46% overhead, pays a smaller proportion of the fEC than will be provided by the new arrangements, on the basis of 80% of the fEC. The fEC methodology allows a more transparent analysis of the full cost and the funding offered by the funder. Other funding sources, including QR funding via the dual support system must be taken into account.

Overall, the government expects fEC to lead to the long-term sustainability for university research. The fEC approach will support informed decisions in support of research portfolio management.

If Research Councils are only paying 80% of the full costs, where is the other 20% coming from?

It is important to be aware that the Research Councils have never paid the Full Economic Cost of research. Indeed the new arrangements will increase the proportion of the cost of research funded by the RCs. Under fEC, the difference between the fEC and the funding received is more overt than previously. Dual Support from the Funding Councils (SHEFC) and the Research Councils remains. The 20% balance is expected to derive from the QR component of SHEFC funding.

UMG at Strathclyde University has agreed that all (100%) Directly Incurred* costs on a project will be met. The balance to Directly Allocated*, Estates Charges* and Indirect Costs* will be apportioned on a pro-rata basis to keep within the total available income. See the research income distribution model below.

* For an explanation of the terms Directly Incurred, Directly Allocated, Estates Charges and Indirect Costs, see the section on Costing Research Projects.

How will resource allocation arrangements be affected by the move to fEC?

At its meeting on 11 October 2005, UMG approved the following research income distribution model for research projects costed under fEC procedures.

Stage One

  • Directly Incurred Costs - 100%
  • Directly Allocated, Estates Charges and Indirect Costs - reduced pro rata to keep within the total available income

Stage Two

  • Directly Allocated - allocated to faculty/department
  • Estates Charges - allocated to EDF
  • Indirect Costs - split 85 : 15 between the faculty and the Centre

These arrangements will be reviewed after 12 months

For Research Council projects, are individual Research Council accounts going to be uploaded with 80% or 100% of the direct costs?

It is the intention that 100% of Directly Incurred costs (RA staff time, consumables, travel, etc) will be available to Investigators in the normal way. The balance to Directly Allocated, Estates Charges and Indirect Costs will be apportioned on a pro-rata basis to keep within the total available income. See the research income distribution model above.

Is the responsibility for cost recovery going to be devolved to the Faculty?

This is being addressed by the Budget Procedures Group.