Part V - TRAC fEC

Section E: The fEC total

Project cost form

17. The fEC for each project should be summarised on a project costing form. These should show:
    • the fEC of the project;
    • the funding being proposed (calculated according to the pricing methods applied by each sponsor);
    • the difference between fEC and funding - this will show either a surplus, or a balance of costs to be covered by institutional funds from other sources.
18. Two examples of project costing forms are given in Annex 19.

Use in pricing

19. The fEC calculated under TRAC should be used as the basis for cost-based pricing for public sponsors such as the Research Councils and OGDs. Refer, for example, to the OST and Research Councils websites, and the H M Treasury letter accessible at Annex 1.
20. The fEC as calculated under TRAC should not be either over costed or argued down. Institutions should not build discounts or subsidies into any of the costs shown on a project when calculating prices on a fEC-basis, with the sole exception of differences that might arise from different profiling and indexing assumptions (see indexing, above).
21. Negotiations with funders who are funding on a fEC-basis should take place only on the:
    • time input of academic and research staff
    • grade of academic and research staff, and the named individuals
    • levels of technical and secretarial (and other non-academic) FTE input recorded as a DI cost
    • levels of directly incurred non-staff costs
    • use of major research facilities.
22. For these items, negotiation would form part of the estimating process, with the relevant Research Council panel members considering what resource is, in the case of the Research Councils, needed to achieve the desired outcomes. They would refer to the case for support, justifying the costs, that was submitted along with the research costing form. The result of this negotiation would impact on the budget and the fEC for these items. It is good practice for all negotiations to involve representatives of their institutional finance department (or research services unit) and be signed off by an appropriate administrative authority.
23. However, negotiations with funders who are funding on a fEC-basis should not take place on pay bandings, estates charges and costs, DA laboratory technicians’ costs, charge-out rates for major research facilities, and indirect cost rates and costs.
24. Once agreed, amended levels of resource inputs should be used to recalculate the fEC.
25. When estates charges are being applied to projects on a £/FTE basis, then this basis should be used consistently through any pre-award adjustments. If the estimates of RA or PI time on the bid change during pre-award discussions, then the estates costs charged to the project should reflect this. Indirect costs should also reflect this.
26. If another charging basis is used for estates costs (e.g. square metres used by a project) then the level of these costs should be reviewed if the time estimates alter, pre-award. They may, or may not, then require adjustment, depending on the needs of the project.
27. Some sponsors require different costing and verification methods on a project, for example the EU, ESF and the US Government. It is good practice for institutions to use common costing methods, in accordance with TRAC, on all projects irrespective of funder. However, instructions and calculations used to determine the price of a project will differ by sponsor.
28. The breakdown of the fEC, by type of cost, will normally be required for funders paying on a fEC-based method. If other market-based pricing approaches are used, then it would generally be inappropriate for a full breakdown of the cost to be provided. The calculated costs will provide useful information about acceptable minimum pricing levels. Negotiations, however, should be in terms of inputs and outputs, and costs should not be disclosed.
29. When negotiating, institutions should remember that the fEC is not (yet) a comprehensive economic cost:
    • buildings costs in the fEC may be understated (as the useful life assumed in the calculations, based on institutions’ accounting policies, may not fully take into account the major restructuring costs required during that life);
    • the full costs of equipment are not included (replacement costs are not currently being included in the fEC, neither are costs for equipment initially purchased through a research grant or otherwise fully written-off in the books);
    • the costs will not include time of staff provided to the institution at no–cost (visiting fellows, retired academics, equipment donated by industry, etc.).
30. Prices that are not fEC-based should generally be based on the market value of the work. This will usually result in prices that are greater than the fEC, unless the institution makes a conscious decision to cross-subsidise such commercial projects. Guidance on pricing is available in two JCPSG publications – see Annex 1.
    

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