University of Minnesota Internal / External Sales Rate Development Process

2 Introduction to Staff Keith Jansen – Manager of Internal / External Sales (612) Mary Kosowski – Compliance Officer - Internal Sales (612) Jeff Kurland – Compliance Officer - External Sales (612) address:

Located at : Internal Sales EFS website: Administrative Procedure Establishing Internal Rates: RNALSALES_PROC03.html Internal Sales Training Module: 3 Internal Sales Rate Development Procedure and Website

4 Principles for Internal Sales Billing rates should be reviewed and updated each year. Rates charged to internal University customers must be set to break even. Rates must be consistent for all internal customers. The University is subject to periodic audit by the federal government to assure the federal government receives the lowest University, or internal rate for similar goods and services purchased at the University. Document subsidizes.

Steps to developing an Internal Sales rate: Determine the measurable unit for goods and services Determine annual output or expected level of activity Determine annual estimated costs Determine the breakeven Exclude unallowable costs Determine the appropriate classification and include or exclude overhead costs (Recharge or Specialized Service) Determine the activity per-unit rate Rates should be reviewed, updated and submitted to Internal Sales each year 5 Internal Sales Rate Development

6 Internal Sales Rate Template

Located at : External Sales EFS website: Administrative Procedure Establishing Internal Rates: ES_PROC03.html 7 External Sales Rate Procedure and Website

8 Principles for External Sales Billing rates should be reviewed and updated each fiscal year. Rates charged to external non-University customers should include overhead costs. Rates charged to external customers should be greater than rates charged to internal customers for the same good and services. Rates charged to external customers should be greater than rates charged to the government. Rates should not compete unfairly will businesses. All rates are reviewed by External Sales. Document subsidies.

Steps to setting an External Sales price: If you have an ISO, start with Internal Sales rate. –Add unallowable costs for internal sales If no ISO activity, determine actual cost of external sales activity. Add the University’s actual overhead rate (currently 63%). Add profit to bring the price in line with the same or similar good or service in the public market. Determine the market rate using one of the methods in the market driven pricing model. Submit rate with initial application form and with every subsequent contract. 9 External Sales Rate Development

10 External Sales Rate Template

The following methods should be used to price based on market: Compare price to a similar good or service from an outside vendor used by your department or another department at the University. Call and request a quote from an outside vendor. If activity is not available outside of the University, determine a similar effort with similar skill levels and request quote from an outside vendor. Request information about pricing from the University of Minnesota Purchasing Department. Incorporate industry standards into pricing model (i.e.,bls.gov) 11 Market Driven Pricing

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