University of Oxford

From FP6 to FP7Additional Cost to Full Cost

Pierre EspinasseDeputy Director, Research Services

University of Oxford

University of Oxford

Take a pill, undergo an operation, have a baby, go to school, receive a benefit, surf the internet, take a journey by plane, train or automobile, play a cd, ‘phone overseas, hear a weather forecast, follow a road sign, give up smoking, study the stars, switch on a lightbulb, …

and you will have benefited from the work of UK universities

UniversitiesUK 2006

University of Oxford

Overview

1. Why move to Full Economic Cost (FEC)

2. What is FEC

3. Additional Cost to Full Cost: how achieve transition

4. Concluding remarks

University of Oxford

From ‘vicious’ circle …

How to achieve and maintain excellence:

• Raise profile/awareness– publications/citations

• Recruit & retain key academic staff– pay and resources

• Develop and maintain facilities & infrastructure– remain competitive

University of Oxford

…to ‘virtuous’ circle

Through proper funding and investment in physical and human infrastructure

But

To do so you need know and recover your full economic costs

University of Oxford

What is fEC?

A price which, if recovered across an institution’s full programme, would recover the total cost (direct and indirect) of the institution, including an adequate recurring investment in the institution’s infrastructure.

University of Oxford

However

•Historically universities have had little or no understanding :– of the cost of different activities,

– of the difference between cost and price,

– that on virtually every research grant awarded the institution would lose money

• Academic staff are motivated to win grants not to worry about financial consequences

University of Oxford

and

• Universities operate in an environment where long term strategic financial planning is challenged by short term ‘easy win’ objectives

• The diverse research funding base and sponsors’ aims are not easily compatible with long term financial planning

University of Oxford

How does this relate to FP7?

FP6 Additional Cost model:

marginal direct costs only• employment costs of temporary staff

• employment costs of non-centrally funded staff

• consumables, equipment, travel

» Directly incurred costs

Easy to identify

University of Oxford

FP7 All Direct Costs:

marginal costs plus• appropriate proportion of permanent/core staff costs

• access charges for main facilities

• use of space

» Directly Incurred plus Directly Allocated

University of Oxford

Key Issue for Universities How to identify costs at Project level

– Academic/research staff time estimation– Know staff costs– Cost of major research facilities/services– Applying estates costs at local level– Costing/Pricing tools

University of Oxford

Cost ModelsAdditional Cost (FP6):

100% of Marginal Costs plus 20% Indirect

eg 100€ plus 20€ = 120€

Flat Rate (FP7)

75% of all Direct costs plus 20% Indirect

eg 75% of (110€ plus 22€) = 99€

75% of all Direct costs plus 60% Indirect

eg 75% of (110€ plus 66€) = 132€

University of Oxford

Concluding Remarks (1)

Key issue under FP7 will therefore be the ability to identify all Direct Costs

This may be a challenge for many universities but the benefits of doing so will be significant

University of Oxford

Concluding Remarks (2)

The funding and long term sustainability of research in universities is crucial to all sponsors of research

This is a partnership between universities and sponsors, both public and private