Finance Business Systems

Research Support - Costing and Pricing

UWE Pricing Policy

UWE is currently in the process of developing its pricing policy. In the mean time a schedule is provided by following the link Pricing Policy Matrix which provides general guidance in pricing proposals by sponsor type.  In addition the Joint Costing and Pricing Steering Group (JCPSG) have produced the following document which staff can use as a guide to determining an appropriate pricing strategy for their proposals.

Joint Costing and Pricing Steering Group (JCPSG) March 2005

Timetable for the Operation of Pricing based upon Full Economic Cost Methods in Higher Education Institutions.

The table below gives a guide to the timetable for implementation of the new approach to pricing based upon full economic cost (fEC) and TRAC, particularly for contracts with publicly funded bodies. It is based upon the best information available to JCPSG at the present time.

Government policy has made it clear that universities and colleges have responsibility for maintaining their sustainability in the longer term including investment in their infrastructure and in innovation. In part, sustainability can be achieved through getting the pricing of activities right, based upon the full economic costing methods where appropriate. Government has backed its policy commitments through the provision of additional recurrent and capital funding to support activities through the Dual Support system.

Universities and colleges are autonomous institutions and should therefore determine their own strategy and approach to pricing contracts with other bodies, particularly with private sector organisations. Nevertheless, as the implementation of the Full Economic Cost methods based on TRAC proceeds, some co-ordination of approach is desirable.

In making the necessary changes to the pricing framework, it is inevitable that universities and colleges will have to negotiate their position robustly, even with some publicly funded agencies including some government departments. Only in the case of Research Councils and Funding Councils has a full three-way partnership and framework been established. Importantly, however, in support of such negotiations, government has made it clear that funders of activity in HE employing public funds have a clear responsibility not to undermine the policy on achieving sustainability in HEIs.

JCPSG has strongly recommended that each university and college should have a clear and robust pricing policy and strategy, and should put in place mechanisms to support negotiation with funders to ensure that the policy is followed. Guidance on establishing a pricing strategy is available from the JCPSG web site www.jcpsg.ac.uk.

Government has provided considerable support for the change in pricing through policy statements from the Office for Science and Technology and from H. M. Treasury and through guidance to individual spending departments. The Welsh Assembly has endorsed the approach for Wales, and the Scottish Executive is expected to make an announcement soon. The move to a new regime and “ruling price”, however, cannot be expected to be achieved overnight, or to happen without action by the HE institutions themselves.

Timetable for the Operation of Pricing based upon Full Economic Cost Methods

Notes

1. Most universities and colleges have implemented the TRAC based full economic cost (fEC) methods for projects and activities as planned by the end of January 2005. The Quality Assurance project initiated by the Funding Councils and Research Councils by KPMG will report in April 2005. Therefore, by April 2005, funding bodies can have confidence that HEI prices based upon costs are properly and consistently determined. The default rate for the calculation of fEC of projects will also be available in April 2005 for those institutions without an accredited indirect cost rate.
    
2. The Research Councils will have established and implemented their new approach to costing and funding research projects and programmes based on TRAC fEC methods by September 2005.
    
3. The Office for Science and Technology announced in January 2005 that the Research Councils and AHRB would pay 80% of the fEC of projects they commission, and 100% of the cost of equipment above £50k. It is their intention to increase the percentage of fEC paid to 100% over time. The Royal Society, Royal Academy of Engineering and British Academy will pay the same as Research Councils for their OST-funded programmes, and have been provided with additional resources for this purpose by OST. The NHS intends to use the same approach for R & D projects.
    
4. Under direction from H.M. Treasury, other government departments and related bodies in England and Northern Ireland are expected to pay 100% of the full economic costs for the work they commission so as not to under-mine government policy on sustainability. The Welsh Assembly has also confirmed this policy for Wales. The Scottish Executive is currently considering its position and an announcement will be made soon. Although the policy was set out in February 2004, most government departments are unlikely to have changed their systems before September 2005.
    
5. The HEFCE Board will consider its policy for funding HE activities in April 2005. It is likely that the Department for Education and Learning in Northern Ireland will be guided by the decision of the HEFCE Board.
    
6. Discussions are proceeding within the Scottish and Welsh Funding Councils and the TTA to determine their approach.
    
7. Unless otherwise agreed, transactions between HEIs should be priced at 100% of fEC.
    
8. Negotiations are proceeding between UK government, the HE sector and EU bodies to establish the basis for funding in the future. It is hoped that the fEC methods based upon TRAC will be acceptable for at least some of these activities. The negotiations may be protracted.
    
9. Discussions are proceeding between the research charities and the HE sector, and in the Funders’ Forum, overseen by the Office of Science and Technology and the Funding Councils. It is hoped that the TRAC methods will be accepted as the basis for the funding of projects sponsored by charities. The approach has not been determined yet.
    
10. Pricing to industrial and commercial bodies may be cost based, value based or competitive market based, following normal commercial practice. However, in judging appropriate pricing, the full economic cost of projects should be used as a baseline. The requirements of Fair Trading legislation must be respected.