1. Full Economic Costing and Pricing – Latest developments John Newton - National Co-ordinator for Costing and Pricing JCPSG

2. Joint Costing and Pricing Steering Group What is fEC? TRAC methodology “The full economic cost of a project/activity incorporates all direct and indirect costs, including the cost adjustments, required under TRAC” (a definition) Direct costs Indirect costs Cost adjustments- Infrastructure - COCE

3. JCPSG Joint Costing and Pricing Steering Group Background TR TRAC Investing in Innovation Cross-Cutting Review of Science and Research CSR 2002 Government expectations/commitment JCPSG Strategy - cost/market-based pricing DSR - new funding arrangements OGDs/Treasury letter HEFCE Financial Memorandum Long-term strategy for science/CSR 2004

4. JCPSG Joint Costing and Pricing Steering Group Why is fEC important? Sustainability “ An institution is being managed on a sustainable basis if, taking one year with another, it is recovering its full economic costs across its activities as a whole, and is investing in its infrastructure (physical, human, and intellectual) at a rate adequate to maintain its future productive capacity appropriate to the needs of its strategic plan and students, sponsors and other customer requirements.”(Definition in TRAC Volume III) Issues - fEC, strategic, pricing, project management/cost recovery, investment

5. JCPSG Joint Costing and Pricing Steering Group TRAC requirements Definitions Accounting/costing principles and conventions Time allocation - now every 3 years Sampling Cost drivers T, R,O, S PGRs T, R, O /dept R by research sponsor Library/learning resources and estates robust Testing Internal Audit Audit Committee Approval of figures - to Funding Councils

6. JCPSG Joint Costing and Pricing Steering Group fEC requirements Estates - direct cost (by FTE or sq m) 1650 hours Indirect cost rate calculations - £/FTE RC projects - time estimates, pay bandings, monitoring, check on total RC time, direct costs QA process Default indirect cost rates Dispensations Income reporting (January 2006)

7. JCPSG Joint Costing and Pricing Steering Group fEC research project calculation Directly Incurred costs Researcher salary costs - names, time (hours) PGR salary costs - names, time Technical/clerical salary costs Direct non-staff costs, exc. Estates Directly Allocated costs PI/Co-investigators - names, time (hours) Charges for lab. technicians Directly allocated Estates costs (Inc. infrastructure adjustment) Equipment Indirect costs, inc. COCE adjustment calculated for PI/researcher and PGR FTEs Exceptional items

8. JCPSG Joint Costing and Pricing Steering Group fEC data requirements FTEs Costing schedules for salary costs (note standard time), estates, charge-out rates for equipment, indirect cost rates/FTE Verification of costs Recording of actual costs Recording of estimated costs and matching with other records Comparison No double-charging Indexation

9. JCPSG Joint Costing and Pricing Steering Group Use of fEC Pre-award estimates fEC for cost-based pricing Funding of project Difference – to be subsidised from other income streams Review of processes Post-award reporting

10. JCPSG Joint Costing and Pricing Steering Group Pricing publications Pricing toolkit (JCPSG) Financial strategy in higher education institutions (HEFCE) Developing a pricing strategy in higher education institutions (JCPSG) OST guidance on the pricing of competitive and non-competitive contracts OST guidance on the pricing of non- Research Council projects

11. JCPSG Joint Costing and Pricing Steering Group Pricing tips Don’t disclose costs Have clear pricing policy guidelines Clarify ownership over IPR Target appropriate markets Be aware of market position and competition Beware of Risk Use Lambert Model Agreements Negotiate for win-win

12. JCPSG Joint Costing and Pricing Steering Group Implementation issues Control/systems processes Project management Cultural change Communication Resources Performance measurement Training Planning for Sustainability

13. JCPSG Joint Costing and Pricing Steering Group Future developments Funders Forum – Public Good Funding Principles Public sector acceptance – Treasury letter Cost recovery on Framework Programmes Eligible/ineligible costs - charities, EU, etc HEFCE Review of Teaching Shortfall on Research, European and Public Good projects – use of QR or…?

14. JCPSG Joint Costing and Pricing Steering Group Performance Indicators % of full economic costs recovered/project or activity. This could also be stated by sub-category of activity (e.g. research sponsor, client, customer, etc) and category of activity (e.g. PFT, NPFT, PFR, NPFR, and O) Contribution (being the difference between income and full economic cost) by project or activity, sub-category and category (as above) Total of indirect costs recovered annually (which may be compared annually) Total of estates costs recovered annually (which may be compared annually) % of S time to time spent on T, R, O by department or school annually

15. JCPSG Joint Costing and Pricing Steering Group Performance Indicators Surplus/deficit for major categories of activity (i.e., NPFT, PFR, NPFR, O) annually % of surplus /deficit for major categories of activity to full economic costs annually % of surplus/deficit for major categories of activity to income annually % of surplus/deficit to COCE by category of activity annually Review of backlog in investment in infrastructure annually Success rate of bids to research sponsors and clients annually – to indicate competitiveness

16. JCPSG Joint Costing and Pricing Steering Group Performance Indicators Number of customers/sponsors/clients for R and O Income growth by category of activity annually Comparison of forecast to actual of surplus/deficit by category of activity and surplus/deficit for competitor institutions year on year Quality reviews of performance from customers, clients, students, sponsors – comparing trends

17. JCPSG Joint Costing and Pricing Steering Group Strategic issues Shortfall on Research, European and Public Good projects – use of QR or…? Pricing implications - contribution/project, negotiation. Research strategy - portfolio, mix by sponsor by dept

18. JCPSG Joint Costing and Pricing Steering Group Future JCPSG website - www.jcpsg.ac.ukwww.jcpsg.ac.uk Self-help groups BUFDG group Sector bodies – AURIL,ARMA, etc