1. University of Oxford From FP6 to FP7 Additional Cost to Full Cost Pierre Espinasse Deputy Director, Research Services University of Oxford

2. Take a pill, undergo an operation, have a baby, go to school, receive a benefit, surf the internet, take a journey by plane, train or automobile, play a cd, phone overseas, hear a weather forecast, follow a road sign, give up smoking, study the stars, switch on a lightbulb, … and you will have benefited from the work of UK universities UniversitiesUK 2006

3. University of Oxford Overview 1.Why move to Full Economic Cost (FEC) 2.What is FEC 3.Additional Cost to Full Cost: how achieve transition 4.Concluding remarks

4. University of Oxford From vicious circle … How to achieve and maintain excellence: Raise profile/awareness –publications/citations Recruit & retain key academic staff –pay and resources Develop and maintain facilities & infrastructure –remain competitive

5. University of Oxford …to virtuous circle Through proper funding and investment in physical and human infrastructure But To do so you need know and recover your full economic costs

6. University of Oxford What is fEC? A price which, if recovered across an institutions full programme, would recover the total cost (direct and indirect) of the institution, including an adequate recurring investment in the institutions infrastructure.

7. University of Oxford However Historically universities have had little or no understanding : –of the cost of different activities, –of the difference between cost and price, –that on virtually every research grant awarded the institution would lose money Academic staff are motivated to win grants not to worry about financial consequences

8. University of Oxford and Universities operate in an environment where long term strategic financial planning is challenged by short term easy win objectives The diverse research funding base and sponsors aims are not easily compatible with long term financial planning

9. University of Oxford How does this relate to FP7? FP6 Additional Cost model: marginal direct costs only employment costs of temporary staff employment costs of non-centrally funded staff consumables, equipment, travel »Directly incurred costs Easy to identify

10. University of Oxford FP7 All Direct Costs: marginal costs plus appropriate proportion of permanent/core staff costs access charges for main facilities use of space »Directly Incurred plus Directly Allocated

11. University of Oxford Key Issue for Universities How to identify costs at Project level –Academic/research staff time estimation –Know staff costs –Cost of major research facilities/services –Applying estates costs at local level –Costing/Pricing tools

12. University of Oxford Cost Models Additional Cost (FP6): 100% of Marginal Costs plus 20% Indirect eg 100 plus 20 = 120 Flat Rate (FP7) 75% of all Direct costs plus 20% Indirect eg 75% of (110 plus 22) = 99 75% of all Direct costs plus 60% Indirect eg 75% of (110 plus 66) = 132

13. University of Oxford Concluding Remarks (1) Key issue under FP7 will therefore be the ability to identify all Direct Costs This may be a challenge for many universities but the benefits of doing so will be significant

14. University of Oxford Concluding Remarks (2) The funding and long term sustainability of research in universities is crucial to all sponsors of research This is a partnership between universities and sponsors, both public and private