Finance Business Systems

 

Research Support - Costing and Pricing

 

An Introduction to Full Economic Costing (fEC)

The Government has become increasingly concerned that all activities in higher education institutes are sustainable in the long term. Transparency returns clearly demonstrate that research and other related activities would not be sustainable because their costs substantially exceed the income that could be attributed to them.

As part of the way forward the Office of Science and Technology (OST) and the Funding Councils have agreed a joint approach to identifying the full economic cost(fEC) of research projects and related activities. This is a fundamental shift in the way in which research projects and associated activities have been costed to date.

As from September 2005 all research bids have to be prepared using the fEC methodology.

The fEC methodology consist of three distinct elements:-

 

Directly Incurred Costs

Directly incurred costs are costs that are explicitly identifiable and arising from the conduct of the project and are charged as the cash value actually spent.  This includes familiar direct cost headings i.e. research assistants, equipment, travel and subsistence, consumables etc. which are incurred and charged directly against the project code.

 

Directly Allocated Costs

This is the new cost area covering the cost of resources used by a project that are shared with other activities.  They are charged to projects on the basis of estimates rather than actual costs.  Directly allocated costs consist of four subgroups:

  • Investigators (PIs and Co-investigators)
     
  • Estates Charge
     
  • Other Directly Allocated Costs (Major Facilities and Equipment)
  • Pooled Technicians
     

 

Indirect Costs

Indirect costs relate to non-specific costs charged across all projects based on estimates that are not otherwise included as Directly Allocated Costs.  They include the costs of administration such as Personnel, Finance, Library and some departmental services.  Historically Indirect costs have been calculated as, for example, a % of direct staff costs. Research Councils paid a contribution towards indirect costs calculated at 46% of the staff directly employed on the research grant. Under fEC indirect costs will be costed on a £ per eligible FTE basis. This is explained in more detail under the specific link for ‘Indirect Costs’ .