RCUK fEC Update

Full Economic Costing From 1 September 2005, research grants awarded by the UK Research Councils will change to reflect the introduction in universities of full economic costing at project level.

Background  Research Councils, rather than funding the additional costs of research (including a contribution to indirect costs set at 46% of staff costs) will pay a fixed proportion of the total – full economic – cost of research projects – initially 80%  The institutions themselves must provide the balance, using their Funding Council money or other resources.

Background  To meet the additional cost of providing this bigger share, the Government has allocated the Research Councils an additional £120M in 2006/07, rising to £200M pa from 2007/08  Universities and other bodies of higher and further education will be required to calculate the full economic cost of research projects, using the “TRAC” (TRansparent Approach to Costing) methodology developed over the last few years.

General implications  Grant proposals will, for the first time, request the cost of the time the Principal Investigator and any Co-Investigators will spend on the project.  Because the Funding Councils and Research Councils will pay for shares of the total costs, grant proposals will include a wider range of requested resources than they do now. The current research grant rules about eligibility of costs will essentially disappear.

General implications  The current formulaic approach to paying indirect costs (46% of staff costs) will be dropped and research organisations will calculate their own overhead rates – comprising Estates and Indirect costs – and add these on to research proposals.

Changes to costing applications  Grant proposals will summarise the resources requested under four “summary fund headings”, with some subsidiary sub- headings.  For each, they will show the total cost (the fEC) of the resources requested, and the portion of that cost charged to the Research Council (80%)

Directly Incurred costs  These are the costs that are specific to the project, will be charged to the project as the amount actually spent and can be supported by an audit record. They will include the familiar direct costs (research assistants, equipment etc) currently seen on Research Council grants

Directly Allocated costs  These are the costs of an institution's research resources that will be charged to the project on the basis of estimated use, rather than actual costs.  There will be three sub-types: a) investigator costs, b) estates costs and c) other directly allocated costs.

a) Investigator Costs  This comprises the cost of the time it is estimated that the Principal Investigator and any Co-Investigators (unless included under the Directly Incurred heading) will spend on the project – to be calculated from the salary rate (not necessarily their actual salary, it could be an average band or pool rate) and the total number of hours to be spent on the project over its duration.  The maximum amount of research time that Councils will fund is 1650 hours a year (equivalent to 37.5 hours a week, 44 weeks a year).  Final report writing-up time (but not proposal preparation time) may be included in the Investigator time claimed on research grants.

b) Estates Costs  These provide a share of the cost of providing the physical infrastructure for research. They will be calculated by each institution using its own cost rates, so will vary between institutions and also between departments within institutions.  The Research Councils will not scrutinise them and will in general accept the values charged by the institution.

c) Other Directly Allocated Costs  This comprises the cost of access to institutional research facilities, such as equipment, IT systems, clean rooms, technical staff etc.  The costs of these elements will depend on the amount of access required and on the cost rates charged (i.e. the unit price).  While institutions are encouraged to show these access charges as a separately identified cost wherever possible, some may, at least initially, include them in their estates costs.

Indirect costs  These are a share of the cost of resources that cannot be directly attributed to particular research projects (e.g. libraries, finance services, personnel and so on).  The 46% overhead currently paid on staff costs will disappear and will be replaced by a combination of the estates and indirect costs.  Institutions will calculate them using their own cost rates, which will vary between institutions.  The Research Councils will not scrutinise them and will in general accept the values charged by the institution.

Exceptions  This will consist of items that would otherwise come under the Directly Incurred heading, but which will be separated out because the Research Councils will fund them at 100% of FEC or because they fall outside FEC.

Guide to Directly Incurred costs  Staff costs dedicated to project  Travel and subsistence  Equipment (capital costs plus maintenance and related costs that are not included as part of estates)  Consumables specific to project  Books specifically purchased for project  Survey fees  Purchase/ hire of vehicles if necessary for project  Publication costs  Recruitment and advertising costs for staff directly employed on project

Guide to Directly Allocated costs  Investigators’ costs  Costs of pooled staff effort  Estates costs (building and premises costs, basic services and utilities, lease/rent/rates, insurance, cleaning/portering/security/safety, staff facilities, any clerical staff and equipment maintenance not included as DI or DA) Usage costs of major research facilities, such as animal and glass houses (may initially form part of estates but should be separately DA from 2007) Central and distributed computing (if not possible to identify as separate cost may form part of estates or Indirect costs)

Guide to Indirect Costs  General office and basic laboratory consumables  Library services / learning resources  Typing/Secretarial  Finance, personnel, public relations and departmental services  Central and distributed computing if not DA  Cost of capital employed (includes redundancy costs)