Preparing an IDC Projection Model NACCA - Leading Excellence in Research Costing Practices 10/3/2017

Topics Projection Models Definition and Determination to Submit Source Documentation and Gathering Data Building, Interest, O&M, Equipment Impact to Space Survey and Base Submission Requirements Summary

Projections- Defined Provides an opportunity to recover costs that the university will incur during the Rate Agreement Period but were not reflected in the Base Year Period rate calculation Government will not allow those increases during the rate negotiations if you don’t provide adequate documentation for the projection

Projections- Should I Submit? If you answer “Yes” to all these questions: Is the University building, purchasing, or significantly renovating facilities? Will the costs be incurred (or capitalization completed) after the base year? Will the new facilities be on-line for a substantial portion of the rate period? Will inclusion of the projected new facilities costs have substantial impact on your F&A rate(s)?

Projections- Should I Submit? If you can isolate specific projects to include: New facilities Massive renovations for existing facilities Completion dates in early year/s of proposed rate period. Can you trust the expected completion timeline? Facility projects where substantial research work will be conducted and will result in an increase to the research rate

Projections – Source Documentation How do you find out about new buildings and renovations? Monthly/Annual Capital reports University’s Financing reports Board of Regents reports Facilities Administrators Upper Administration of the University (i.e. University Planner or Architect) Website, news sources, etc.

Projections – Source Documentation Who should you contact for information? Facilities upper management - Depreciation, Utilities, EH&S, Custodial Financial Services - Interest Data Warehouse, Annual Reports - Award and Base growth information Department/College Contacts - Space data, award data, base growth, equipment purchases

Projections – Gathering Data Get the information you need Costs Building cost/general depreciation schedule Financing information (Interest) and rates Operations and maintenance costs (Utilities, Custodial, EH&S) Allocation data Projected use of the facility Occupant information Awards/Proposals for the occupants to verify research activity Other issues Base growth Decompression vs. New researchers

Projections – Gathering Data Caution – Don’t project without solid data or for buildings that won’t be completed and occupied for a substantial portion of the rate period Check all your information sources, if possible A lot of the information you gather will be estimates, or even an educated guess Start with the most reliable sources and go from there. Cost schedules, budgets and construction documents help limit the risk

Projections – Building Depreciation Determine amount for each year of rate period Make sure any costs included in base year are not double-counted Get the most up-to-date information possible. Cost estimates change drastically from project approval to completion Useful life Componentized average or straight line (longest useful live)

Projections - Interest Be sure you understand treatment at your institution regarding capitalized and non capitalized interest. Capitalized interest may be included in the total project cost and therefore as part of the building depreciation projection Projected interest rates (contact your financial services office) For public universities: Capital contributions from state may be bond financed and included via a Statewide Cost Allocation Plan

Projections –O&M O&M Comparable building Average O&M costs per square foot from current proposal Utilities Cost estimates per month/year New power plant or Chiller costs associated with new building Custodial Cost per month or year Environmental Health and Safety More staff needed to support new buildings? CAS says it will not consider O&M in projections

Projections – Equipment Usually not a substantial component because: In new buildings, watch for fixed and other equipment that will be capitalized into the building costs Be careful for existing equipment that is moved to the new building to avoid duplication with base year costs Check with department or college to see if there are budgeted amounts for significant expansion of the equipment in the new building, e.g. expensive research equipment

Projections – Administrative Pools and Library Difficult to identify the amount and justify in a projections model CAS says it will not consider in projections ONR would not expect to see in projections

Projections – Impact to Space Survey Space Data – Mini Survey Use construction document floor plans to work with projected departmental occupants to assign space usage by room if possible WHO will be in the space - Assignable square footage per PI (or department) WHEN they will occupy the space - may take years to fill a building to capacity WHAT activity takes place - if research, are they already funded? Anticipating growth in research funds (i.e. Base growth) HOW will the vacated space be used? Back filled with current researchers? Vacant? New researchers?

Projections – Impact to Space Survey Space Data – Mini Survey Use data from current space survey at most detailed level possible – by department or PI Be wary of inflated projections of OR usage- try to validate with grants /projected awards Mini survey needed for vacated space For low facilities costs in vacated space, consider assigned to OIA- limit effect If significant facilities costs, espec O&M, do a more detailed survey with more validation

Projections – Impact to Space Survey First year on-line, research space may not be fully up-to-speed New awards may not have come in yet New PIs may not arrive until the following semester or summer Construction may not be 100% complete - especially on specialized facilities - Animal Care, NMR room, BSL-3 labs Be conservative with OR % in your space for the first and second years

Projections – Impact to Base Base growth: Historical trend may be the best indicator CAS Best Practices Manual requires average MTDC base increase over past 5 years OR reported on Financial Statements NSF Survey data Any deviation should be explained

Projections – Impact to Base Base growth: Additional growth Check what the university’s goals are: Focused on growing research? How much? Any documentation of new PI positions being added? Know the trends of your sponsors - are the sources drying up? Which sources are growing and how quickly? Research growth due to new facilities

Projections – Factors to Consider Government atmosphere Are they being very critical in your region? Does your institution have a good relationship with your cognizant agency? Confidence in your proposal information Your base year proposal rate – Do you really need to project or are you satisfied with base year rate calculated? Your Administration’s expectations - how big an increase are they pushing for? Your projections may create future issues if not sound. CAS has compared prior projections to current proposal

Projections – Submission DHHS CAS (formerly DCA) Facilities components only “Simple” Projection Concise analysis of the impact of a significant change new research space New space must be significantly under construction or completed by negotiations Submit as a separate enclosure with the base year proposal, or soon after CAS Best Practices Manual (BPM) includes a sample facilities projection (Sec J- new BPM 2017) Follow format required by your region At a minimum, the format you use must provide the same information as shown in the CAS BPM example

Projections – Submission workpaper CAS BPM Example

Summary of Allocation chgs

Projections – Submission ONR Early communication with Cognizant Officer that a projection will be submitted and a discussion of any submission expectations Normally Facilities components only Concise analysis of the impact of a significant change for new research space New space must be significantly under construction or completed by negotiations Submit as a separate enclosure with the base year proposal, or soon after Format is not provided but should include sufficient detail of base, space and cost projections for DCAA/ONR cost impact determination Summary schedule showing projected rates for all projection years and requested rates for rate period. Will be reviewed as part of DCAA review

Projections – Submission Backup Supporting documentation to have available upon CAS or DCAA request Project documents submitted to regents or trustees (e.g., “Program Planning Guides”) Floor plans, mini-space survey of new buildings Information on occupancy and use of vacated space Equipment lists, or documentation of budgets for new equipment Justification for pool and base growth numbers Cost schedules for construction of the buildings, Interest, and O&M

Projections – Summary Do the best you can. Projections are based on solid evidence of your institution’s investment in research. Your job is to show the proof of cost and impact to the rate for the rate period. Keep it simple, but projections must include sufficient detail and supporting documentation to allow the cognizant agency to determine: Allowability of projected costs Reasonableness of projected costs Adequacy of the documentation

Projections – Summary (con’t) Negotiation of projections are usually at a very high level for DHHS CAS. For ONR schools, the base rate costs will still be audited by DCAA as will the projection data so that ONR has the best information available for negotiation It all comes down to your institution’s position for maximizing the F&A rate What is realistic? How aggressive do you want to be? What number will you feel comfortable defending? Do you want DHHS CAS to make a site visit? Do you have strong support documentation for ONR/DCAA?

Projections – Survey Results Seven questions sent to schools with prior projections to determine facilities and base information submitted, negotiation results and analysis of effect on rates. Responses: Average of two construction projects/school were included Base changes were included in all cases O&M was only included in 1/3 of the schools Amount of additional points proposed for projections varied greatly Points negotiated for projections not always easy to separate from CAS negotiated rates but CAS doesn’t always value Overly optimistic projections don’t always come to fruition due to slow construction and unoccupied space

Questions and Comments Caroline Beeman- Senior Manager MAXIMUS Higher Education Practice carolinembeeman@maximus.com Mira L. Levine- Manager mirallevine@maximus.com