Full Economic Costing
It is University policy that all externally funded research and service projects will be costed on a FEC basis, except for travel grants, equipment grants and studentships.
Full Economic Costing (FEC) was introduced to the HEI sector as part of the Government's 2003 White Paper 'The Future of Higher Education'. FEC aims to improve the sustainability of University finances and to ensure that research projects in particular are accurately costed and a suitable price charged. Thus requiring every HEI to take responsibility for their own strategic and financial future and bringing transparency to the cost of research.
FEC was developed on the basis of Transparent Approach to Costing (TRAC). TRAC is the standard method now used for costing in higher education in the UK and was developed out of work performed by the Joint Costing and Price Steering Group (JCPSG). This work, the Transparency Costing Review, identified that research was under-funded when the total costs were applied at an institutional level and highlighted significant problems of investment in the HE infrastructure. J. M. Consulting produced a Briefing Note on TRAC which provides further information.
In a FEC environment, we must carry out a four-step process for all projects:
1. Identify all of the resources required
2. Use resources identified to calculate the FEC
3. Determine the price
4. Internal authorisation within Glasgow
When calculating FEC costs are allocated into four main categories:
1. Directly Incurred (DI) Costs
Directly incurred (DI) costs are items, salaries or services incurred or purchased specifically for a project. As well as Research Assistants this includes consumables, travel and subsistence, equipment purchase and dedicated technicians or other support staff. A key feature of this group of costs is that there is a direct auditable link to the project through purchase invoices or employment contracts (hence investigator time cannot be considered as DI). Costs are charged to projects on actual.
Examples include:
• Staff costs dedicated to project
• Consumables specific to project
• Equipment
• Travel and subsistence
• Publication costs
• Statistical services
2. Directly Allocated (DA) Costs
Directly allocated (DA) costs are costs of services on a project, where the services are shared by other activities and projects. Investigator’s time, laboratory technicians, major research facilities and estates should be directly allocated.
Examples include:
• Investigator costs (PI and CoI)
• Costs of pooled staff effort eg. Pooled technicians time
• Access to existing equipment
• Usage costs of major research facilities
3. Indirect Costs
Indirect costs are not directly related to any one project, but are a necessary part of the costs of undertaking a research project. They are designed to provide a contribution towards the costs of all other central university running costs. These costs are attributed to projects based on a calculated rate of £/FTE (Full time equivalent of staff time involved in the project). Indirect costs are charged to projects on a standard estimate made pre-award and do not change during the project life.
Examples include:
• Finance, HR and departmental services
• Central and distributed computing
• Library services/learning resources
• Cost of capital employed (includes redundancy costs)
• Typing/secretarial
4. Estates
The FEC of a project should include Estates costs to cover building and premises costs, basic services and utilities, lease/rent/rates, insurance and cleaning/portering/security/safety. The Estates costs (similar to Indirects) are attributed to projects based on a calculated rate of £/FTE. Costs are charged to projects on a standard estimate made pre-award and do not change during the project life.
It is important to recognise that the implementation of FEC allows us to calculate the full COST to the University of undertaking the research. This is distinct from the PRICE that is charged for the research. Price may be determined by the funding arrangements of the research funder, as in the case of the Research Councils, or by negotiation, as in the case of industrial funders.
The key point for the individual researcher gaining external funding is the following. In the case of all externally funded research projects, PIs will be allocated an expenditure budget that will equate to 100% of the directly incurred costs as identified at the award stage ie, all actual direct costs required to undertake research. Typically directly incurred costs include Research Assistant salary costs, travel, consumables and equipment. This reflects the requirement for the PI to manage within the resources he or she identified as needed to undertake the activity. This is the case even for research council grants where 80% of each category of costs is covered. The additional funding required to make up the costs to 100% is charged from the indirect funding provided by the Research Council.
