costing and pricing workshop

Costing and Pricing workshop - SPRING 2011 1

Costing and Pricing Workshop

Organised by Finance and GRE for University of

Greenwich staff

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Research Team, Greenwich Research & EnterpriseOur aim is to....‘assist with the delivery of an efficient, pro-active and customer-focused pre-award service’FinanceOur aim is to.... ‘assist with the delivery of an efficient, pro-active and customer-focused post-award service’

UoG Central Services

Contact DetailsResearch Support Team

Wendy CurranResearch Finance Manager

Extn: 8283 w.curran@gre.ac.uk

Caroline EdneyResearch & Consultancy

Administrator Extn: 7626

c.j.edney@gre.ac.uk

Jane AdamsonResearch & Consultancy

Administrator Extn: 9858

j.adamson@gre.ac.uk

Finance, Research & Enterprise

Tracy Banton Research Support Manager

Extn: 8406 T.Banton@gre.ac.uk    

Melanie Hackett

Funding Administrator & Adviser  

Extn: 7920m.hackett@gre.ac.uk

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Full Economic Cost(FEC) :

Costing Bids Guidance

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BackgroundTransparent Approach to Costing (TRAC),

which HEFCE created in 1999.

The process went further creating Full Economic Costing (FEC) for all UK universities in Sept 2005, with first Research Council FEC grants awarded April 2006.

Academic time allocation schedules are used for TRAC and also to calculate the amounts for Estates and Indirect Costs.

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All projects are to be costed at FEC

• This enables Schools to make an informed decision.

• Loss-making projects can be taken on: foot in the door, new markets, charities.

• It is the portfolio of total institution projects that is important.

• The HEFCE requirement is that HEIs are sustainable.

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FEC Template Directly Incurred (DI): Costs that are explicitly identifiable as arising from the conduct of a project

• 1 Person for a year• Piece of kit• Travel Exps

Directly Allocated (DA):Costs of resources used by a project that are shared by other activities.

• PI one day a week • Space used (Estates Rates)

Indirect CostsCurrent FEC indirect cost rate

• Overheads

Total FEC

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Space & OverheadsEstates rates for space includes:

Space, utilities, maintenance, insurance, investment adjustment, depreciation.

Indirect rate includes: Central costs like HR, Finance,

Personnel & your department’s own administration

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Estates & Indirect Rates1st February 2011 rates are:

Estates rates - Lab based projects - £10,908 fte pa - Office based - £7,755 fte pa

Indirect rates - £33,143 fte pa

These rates only apply to PIs, Co-Is, RAs when calculating a bid; does not apply to admin support or students.

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Calculating an FTE4 Examples for a 3 year project:1) 50% of your time = 0.5fte

2) 1000 hrs during the whole project = 0.2fte

(1000hrs / (1650hrs x 3 years))

3) 264 days during the whole project = 0.4fte

(264 days / (220 days x 3 years))

4) 66 weeks during the whole project = 0.5fte

(66 weeks / (44 weeks x 3 years))

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Calculating your charge out rate

Find out your salary including on costs (NI, Pension).

You can get this from GRE or your Director of Resources.

Add current Indirect cost rate, and typical estates rate.

The total can be divided by 1650 to give your hourly rate.

The total can be divided by 220 to give your daily rate.

The total can be divided by 44 to give your weekly rate.

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Price is different to Cost• Once FEC is calculated a price can then be

decided upon by the applicant in agreement with the School.

• Some prices particularly in the public sector are restricted (e.g. 80% of FEC for RCs).

• In the commercial sector the School can choose the price – can be above FEC: should price at a premium where we have a market advantage or where the market can stand it. e.g. For accounting, audit, tax & legal services: Senior £2,000 a day ,Specialist ££££££

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Commercial Consultancy Contract (Table 1)

DI: 2 part time people for 2 years(1.25ftes pa) 79,027Kit

8,000Travel 2,000Other 25,000

114,027

DA: PI & Co-I half day a week for 21,2402 years (0.2ftes pa) Estates 1.45fte x £7,755 x 2years 22,490

43,730

Indirect Costs 1.45 x £33,143 x 2years 96,115

FEC = 253,872

PRICE = ??

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Research Council Contract (Table 2)

DI: 2 part time people for 2 year (1.25ftes pa) 79,027

Kit 8,000

Travel 2,000Other 25,000

114,027

DA: PI & Co-I half day a week for 21,2402 years (0.2ftes pa) Estates 1.45fte x £7,755 x 2years 22,490

43,730

Indirect Costs 1.45 x £33,143 x 2years 96,115

FEC = 253,872

PRICE = 80% 203,098

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UoG R&E Portfolio 2010

£M• Public R

7.2• Non Public R

4.0• Consultancy

4.2

15.4

PFR

NPFR

Consultancy

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Refreshment Break After the break

even sunnnier subjects:

• FP7• VAT • Internal Procedures

• Q&A

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Extra Information• Inflation is relevant for all staff costs

and estates and indirect rates• If over a year include a 2% inflation year

on year.• For RCs they calculate the inflation for

you.• Remember to build in annual pay

increments where applicable.• Admin and technical support staff are to

be included in a project costing but their fte are not to be included in the estates and indirect cost calculations

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Project Costing and Reimbursement Rates for

FP7• Budgets should be costed using the

same principles of full economic cost (fEC)

• EC/FP7 indirect cost rates applied accordingly.

• Claim value will be determined by the type of activity within each work package.– Research and Technological

Development– Training– Management– Other.

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REMEMBER

GRE ARE HERE TO HELP YOU

WITH ALL THIS

YOU HAVE A SAFETY NET!

VAT• Universities are not exempt from being

charged VAT. Exceptions are:- Advertising costs- Some medical research

costs(Both have to have a signed certificate

sent to the supplier).• Thus VAT is a further cost to be included

in your RESEARCH costs.Costing and Pricing workshop -

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VAT on Overseas Purchases

• To ensure goods & services are not bought from abroad to escape paying vat on UK goods & services, Customs decree that we should self charge vat.

• Thus the vat guidance applies to goods & services whether bought in UK or Overseas.

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VAT Guidance

Consultancy: All routed through GUE Ltd so fully vatable activity and any vat we are charged are recovered from Customs.

Research: If Publicly funded, we cannot recover the vat from Customs so include any vat on goods/services bought in your costings.

VAT Examples• BBSRC research grant needs £100k of

equipment + vat = £120,000 full cost.(This is publicly funded and so HMRC will not

pay the vat element £20k, so will have to include in proposal as irrecoverable vat).

• Barclays PLC needs £100k of overseas market research + vat self charge = £120,000 cost.

(Not publicly funded can reclaim vat so don’t need to include in proposal).

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VAT Pitfalls• Beware when subcontracting others!

• If another University does research for us, they will not charge vat and vice versa: it will be an exempt supply.

• BUT if a company works for us they WILL charge vat and if the original contract is publicly funded it CANNOT be claimed from HMRC. Agree a price inc vat. Costing and Pricing workshop -

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Who’s Public?Publicly Funded Clients are:

– UK Research Councils– UK Govt Departments– UK Govt Agencies– UK Charities– Other UK Universities– European Commission (Except FP6)Research services to these will be outside

the scope of vat or exempt.Costing and Pricing workshop -

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UoG Internal ProceduresForms 1 & 2: To be filled out so that the

University knows what is happening.

Why? 1) Track success & opportunities 2) Ability to share research

expertise 3) Minimising wasted time &

resources on unrealistic expectations

4) Data for Government returns

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Q & A