JCPSG | TRAC Guidance

Part IV - Charge-out rates

Section E: Estate charges

1. The space used by a project or activity is a specific resource that can be linked to that activity. The costs of this space – estates costs – need to be allocated to that activity. This can be done using a measure of the space used. These measures, called estates charges, can be:
   • quite specific (e.g. square metres used for a certain number of days); or
   • a proxy, such as a £ charge for each FTE using that space.
2. Sometimes a combination is used. In either case, the allocation needs to reflect both the space actually used by that project, and the surrounding space (workshops, secretarial offices, academic offices, etc.).
3. The most common type of estates charges, and perhaps one of the least onerous to calculate and apply, is a £ charge for each FTE using that space. This is acceptable for TRAC. It is the focus of the following paragraphs.   Other methods are discussed in Chapter E.4.
4. This section focuses on the estates charges for Research. Full robustness in the data and calculations should be achieved by the beginning of August 2007 (2006/07 data, applied to research projects from February 2008). It particularly requires:
   • full-time equivalent numbers to be robustly calculated;
   • estates costs which have been attributed between Teaching, Research, and Other activities, and academic departments, on the basis of usage to take account of the levels of cost of different types of space.
5. It is good practice for an institution:
   • to introduce fully robust methods sooner than August 2007;
   • to ensure that the estates charging methods they introduce assist in their internal space management, resource allocation and sustainability processes.
6. The estates charges should be historically based. For example, data from the 2004/05 year (included in the annual TRAC report submitted at 31 January 2006) is used to produce the estates charges applied from 1 February 2006 to 31 January 2007. As with indirect cost rates, estates charges can be used for up to 18 months (until 31 July of the following year) – after that time, until they are re-calculated, non-compliant default rates should be charged.
7. Estates charges should be calculated once a year, and apply from the 1 February of each year for the following 12 months.

Chapter E.1 Estates cost total

1. An estates cost total for Teaching, Research and Other will have been established from the annual TRAC process.
2. The estates cost total for Research should not include any Research cost that:
   • was charged directly to projects in the prior year as a directly incurred cost; or
   • is covered by the indirect cost rate; or
   • is contained in another charge-out rate (e.g. for equipment or laboratory technicians).
3. This means that estates charges based on 2003/04 Research Support costs, applied to research projects from February 2005, should not include any Research cost that was directly charged to Research and grants and contracts in 2003/04 as a DI cost, or is being included in the indirect cost total for 2003/04.
4. Estates costs that were directly allocated (e.g. charged to projects in 2003/04) are not relevant to the calculation of estates charges (e.g. based on 2003/04 costs). The estates cost total for 2003/04 should form the basis of the 2003/04 rates, irrespective of any direct allocation of estates costs made to projects during that year.
5. The estates costs that should be included in the estates charges are derived from the Support costs allocated in the annual TRAC process. The estates cost total is therefore based on premises expenditure (as defined in the HESA FSR – accessible from Annex 1) plus the net TRAC infrastructure adjustment.
6. This covers repairs and maintenance, utilities, rates, estates staff, rents, gross buildings depreciation and the net TRAC infrastructure adjustment, buildings insurance, cleaning, porters, and security. It includes estates costs incurred by academic departments, and costs incurred by a central estates department. It could optionally include a relevant part of central service department costs attributable to the estates department. It includes the costs of all support staff that relate to these areas.
7. Where some elements of estates are currently handled separately in TRAC costing models (e.g. insurance may be part of the Finance Department’s costs; minor works may be included in academic departments’ costs; equipment costs in the Registry) then these should be identified and aggregated with the rest of estates costs. This is subject to materiality, and the complexity involved (it is acceptable to use high-level, reasonable, estimates of the costs to be transferred).
8. Estates costs should not include the COCE or the financing costs of estates. These are in the indirect cost rate.
9. Estates costs in the annual TRAC process are allocated to Teaching, Research, Other activities and central services, on the basis of usage of that space. Estates charges for Research should not include the estates costs attributable to central service departments which are included in the indirect cost rate.
10. By 1 August 2007, this allocation should take into account the relative costs of different types of space.
11. Equipment costs should be included. Laboratory technicians and major research facilities should be included until processes are place for them to be directly allocated. This must happen by 1 August 2007. Estates charges from 1 February 2008 should not include these costs. The following method should be followed to meet this requirement:
    • estates cost totals for a year should initially include all of the costs recorded in the accounting records for that year, for items that are being directly allocated;
    • these should include laboratory technicians and major research facilities, as well as other items of equipment that the institution chooses to allocate directly;
    • however, starting in the year when these costs are being directly allocated, a deduction should be made from the Research estates cost total that is used to calculate the estates charges being applied in that same year. This should represent the estimated total of the charges that will be made on research projects. (So this deduction should be made on the 2006/07 estates cost total prior to calculating the estates charge that will be applied to projects, alongside separate laboratory technicians and major research facilities’ charges, from February 2008). The part of this estimated total that relates to research facilities is likely to be more than the total for that equipment actually recorded in the estates cost total – see Chapter G.3;
    • any subsequent over or under recovery of these costs should not be reflected in the estates cost total used to calculate the estates charges.
12. The costs of other technicians and clerical staff (outside laboratories), and the costs of equipment not being purchased directly for a project, or directly allocated to a project, should remain in the estates cost total and form part of the estates charges.
13. All estates costs, including depreciation, should be included, irrespective of funder. The fEC on research projects will therefore continue to include an appropriate part of the costs of equipment and depreciation funded through capital grants, which have not yet been fully written-off in the books. (Some costs of SRIF and JIF projects are therefore likely to be included in estates costs for many years.)  Their inclusion in the fEC of projects could be considered to be part of the other (Funding Council) side of Dual Support.
14. However, where the initial purchase of a piece of equipment has been included in the fEC of a research grant, it is a directly incurred cost and should be allocated to research grants and contracts in the year of purchase. No part of the depreciation should be included in the estates charges subsequently calculated from the estates costs in that year.
15. Further discussion on how double-charging is avoided is available in Annex 18.
16. Specialist IT research facilities (used specifically for a project or by a Research group) should be directly allocated. This is discussed under major research facilities, below. It is good practice for other IT costs to be allocated as direct costs, for example, where a departmental server measures use by projects. However, some institutions may not have systems to directly measure and charge these costs, or these systems may only cover some of the institutional IT costs, e.g. they may not have a system for charging central institutional IT costs which are generic to all activities (the networks, common systems, support teams, etc). 
17. Where these other IT costs cannot easily be directly allocated, they should be included in either the estates charge or in the indirect cost rate, or charged as a £/FTE and shown as a separate item on the project costing form, as institutions wish.

Chapter E.2 Calculating charges

1. Estates charges for Research can be applied on a £ per FTE basis. This chapter describes the minimum requirements when using this method.
2. Estates cost totals for Research are divided by Research FTEs to produce the estates charges for Research.
3. FTEs – of academic staff, researchers, and PGRs - were defined in full time equivalents. This will not be the same FTE total that is used in the calculation of the indirect cost rate:
   • PGR weightings in the estates charges are different from those used in the indirect cost rates;
   • some FTEs that are included in the calculation of the indirect cost rate may not be in the calculation of the estates charge, in particular where staff are working wholly off-campus;
   • in the estates calculations, FTEs are assigned to either laboratory departments, or to non-laboratory departments, as two different estates charges are calculated.
4. Technical and clerical staff FTEs should not be included in the denominator.
5. Two estates charges should be calculated – one for laboratory departments, and one for non-laboratory departments. It is good practice to review the need for a third charge – a clinical estates charge – where institutions have clinical departments of medicine or dentistry.
6. If an institution does not do any laboratory-based Research, then the non-laboratory estates charge only would be calculated (and vice versa).
7. Institutions may calculate and apply different estates charges for each department or management unit or type of staff, if they wish.
8. Weightings are to be applied to PGR student FTEs when included in the denominator of the estates charges calculations. These are 0.8 for laboratory subjects, and 0.5 for non-laboratory subjects (compared to 1.0 for an academic/research staff FTE).
9. The £/FTE should be converted from/ to £ per day and £ per hour rates, on the basis of 1650 standard working hours in a year (220 standard working days; 7.5 hours in a day).
10. The calculation of the non-laboratory (or generic) estates charge is:

    the estates costs for Research in non-laboratory (e.g. social sciences, mathematics and humanities) departments, including the costs of space used by PGR students in those departments

    divided by

    the number (FTEs) of academic and research staff working on Research in those departments, plus PGR student FTEs in those departments weighted by 0.5

    to give a £/FTE non-laboratory estates charge

11. The calculation of the laboratory estates charge is:

    the estates costs for Research in laboratory departments (excluded from the estates costs used in the non-laboratory estates charge calculation, above)

    divided by

    the number (FTEs) of academic and research staff working on Research in these laboratory departments, plus PGR student FTEs working in these laboratory departments weighted by 0.8

    to give a £/FTE laboratory estates charge

12. ‘Laboratory departments’ can be defined institutionally, but would normally include any department with significant equipment or facilities requiring additional space and servicing, above that of a typical social sciences, mathematics or humanities department.
13. An FTE should either be in the laboratory estates calculation or in the non-laboratory estates calculation, but not both.   The FTEs used in the laboratory calculation, when added to the FTEs used in the non-laboratory calculation, should use the same FTEs data that were used in the indirect cost rate calculation. These should be reconciled.
14. Some staff in laboratory departments may be working on a wholly desk-based (non-laboratory) project. Their FTEs should have been moved from the laboratory department FTE total to the non-laboratory department FTE total, when calculating the estates rates - see FTEs. It is not necessary, however, to move 'their share' of laboratory department costs to the non-laboratory department cost total, when calculating the rates. The above also applies when non-laboratory staff work on laboratory project.

Chapter E.3 Applying the £/FTE rate

1. The non-laboratory estates charge should be applied to the academic and research staff FTEs working in non-laboratory (social sciences, mathematics and humanities) departments and which are estimated for a research project. The laboratory estates charge should be applied to the academic and research staff FTEs working in laboratory departments and which are estimated for a research project.
2. They should also be applied to the FTE of PGR students, where they are formally recognised as part of the research team by the sponsor (the project studentships) if the institution wishes to include their costs in the project cost totals.
3. When an estates charge is applied to a PGR FTE it should be weighted to reflect the PGR weightings built into the calculation above. (So a PGR student in a non-laboratory department would have been weighted at 0.5 in the calculation and academic staff remaining unweighted at 1.0. Therefore, the resulting charge of £x/FTE would then be multiplied by 1.0 for academic staff and 0.5 for PGR students when applied to the FTEs charged against a project or individual studentship.)
4. These estates charges would be applied during the project costing (estimating) process carried out pre-application. They should then be recorded against each project during its life. These costs would be charged to sponsors on cost-based price grants and contracts.
5. No updating for ‘actual’ (estates use, costs or rates) need be recorded during the project life – they would not be recognised for cost-based pricing for PF sponsors.
6. However, when cost-based pricing, estates costs charged to a project should be reviewed and updated (for latest estimates) if there is a substantial change to the programme of work.
7. A record of actual use of space by each project is not required. However, appropriate records of overall usage by activity should be kept to provide a robust audit trail supporting the annual calculation of the estates charges.
8. There may be an over or under-recovery of estates costs in any one year. This should not be taken into account in the calculation of the estates charge or indirect cost rate based on that year’s figures, nor in the calculation of any subsequent year’s estates charges.
9. Initially based on a prior year’s cost totals, estates charges should be indexed to current price levels.   These should be indexed (by two years’ price levels) to provide a reasonable estimate of first year (‘base year’) costs for research projects. Further indexing of these base year costs should then be done throughout the life of the project.
10. When applying an estates charge to academic or research staff time on a project:
    • on any project where a laboratory, major facility or equipment is in use, and their use is significant, then the laboratory estates charge should be applied;
    • if an academic in a laboratory department is working on a desk-based project, then the non-laboratory estates charge, not the laboratory estates charge, should be applied.
    • if all of the work is taking place off-campus, then no estates charge should be applied. (A direct cost may or may not be charged to the institution, and therefore to the project, from the off-campus facilities provider);
    • it is good practice for the charges to reflect the location where each member of staff is working. However, the same laboratory (or non-laboratory) estates charge could be applied to all staff on a project designated as ‘laboratory’ (or not), irrespective of the time each individual actually spent in the laboratory or in their office on that project. Where staff are based in different departments and the institution has calculated different department estates charges for each, then the charge calculated for their department should be applied;
    • on collaborative projects between institutions, the estates rates charged by staff should reflect the costs relevant to the location of the work being done, irrrespective of which institution is the lead institution. However, an estates charge could be used for all staff that represents the location where the majority of the work is being carried out. If the work is taking place equally across the institutions then each institution’s own rate would be applied.
    • on collaborative projects between institutions, or where there is visiting academic on a project, and work is based at the collaborating institution, not the lead institution, estates costs might be charged from the collaborator to the lead institution. If so:
      • the estates rate applied to the collaborator to lead institution‘s FTEs on the project should reflect the costs being recharged, and
      • the visiting staff FTEs should not be included in the denominator when calculating the lead institution‘s estates rates.

      where costs are not being recharged from the collaborating institution to the lead institution, next time the rates are calculated by the lead institution, the FTEs of the visiting staff would be included in the denominator;

    • where a research fellow or RA is working on the project, but their time has already been wholly (100%) included in another single fellowship or research project (from the research councils, charities or OGDs), then no time will have been allocated to the new project. No estates charge will then be applied in respect of that researcher (their ‘share of estates costs’ would have been included on the initial fellowship or research project). This is irrespective of how the initial fellowship or research project was funded;
    • an estates charge should be made for the time of staff working in a laboratory facility owned by the university, irrespective of the funding of that facility.

Chapter E.4 Alternative methods

1. The focus of the above chapters was on a method of allocating estates using two estates charges each expressed as a £ per academic/research staff. This is acceptable for TRAC.
2. Institutions can alternatively use different methods to attribute estates costs to research projects, as long as they are at least as robust as the £ per academic method. Alternatives include the following:

Modifying the £ per academic charges

• calculating and applying a third estates charge for clinical departments. This method may be useful when a clinical department has a different profile of working from that in laboratory departments (with academics perhaps spending more time on Research). Even if the space per academic is the same as in other departments, if the academics are doing more work on Research, the FTE count for Research will be higher and the estates charge that could be calculated will be lower;

  However, institutions should take care that all of the direct Research time in a clinical department is for activity that could potentially appear on project costing forms or is institution-/own-research, or for PGR activity. This may not be the case with all O(CS) recharges;

• weighting the estates charges for different types of staff or grade of staff. This method could be used to distinguish between equipment/technician-heavy projects (which might mean more space is needed) and those with less technical staff or little equipment;
• identifying other management units, or campuses, where either productivity is different, or the estates cost structures are different, and calculating separate charges for these areas. If this is done, institutions should be careful that the calculations are all made in the same way, and the total estates costs and FTE numbers used in the calculations aggregate to institutional totals;
• calculating a separate estates charge for each department. Institutions will anyway have charged all estates costs to departments or management units; and then split these between Teaching, Research and Other. If FTE numbers (staff and students) on Research are sufficiently robust at the level of department, then a separate rate for each department could be calculated and applied;
• identifying a department charge and separately, a Faculty charge, per FTE (e.g. for Faculty space);
• using more than four types of space (e.g. recognising studios, workshops, fieldwork separately) in the original attribution of space costs to T, R and O;
• excluding all IT, or all equipment, and measuring and charging these as a directly allocated cost.

Project-specific methods

• charging projects with the space actually likely to be used or assigned to the project, (including a share of departmental Support space) over the life of the project. A square metre cost would be applied, appropriate for that type of space. The charge-out rate (£ per sq metre per day) would take into account the use of this space by all activities and all projects;
• charging for space on a cost per square metre per day basis (as above), plus a charge per academic/research staff FTE for Support space in academic departments;
• applying a standard charge per square metre for each different size and type of activity or project.

3. Some of these alternative methods mean that estates charges are being set at a lower level than that of the laboratory/non-laboratory groups of departments, e.g. at the level of department, or grade of staff. If this is the case, then institutions should ensure that the annual time allocation processes will provide robust data to inform the FTE counts at this lower level.
4. These methods should recognise the use of space on institution-/own-funded Research, and by PGR students. These should be informed by robust analysis of the space required for each activity and by each type of user. If these project-specific methods lead to the space allocated to a PGR student representing less than 0.8 of that for a Research Assistant in a laboratory department, or less than 0.5 of that for a Research Assistant in a non-laboratory department, then the institution should be prepared to justify this to their PGR funders.
5. Institutions can change their methods over time, but estates charges can only be set once a year (1 February).
6. Institutions should also be prepared to benchmark their estates figures on a common basis, irrespective of the type of estates charge that they actually use. Benchmarking is part of the external quality assurance process.
7. It will be done on the basis of:
   • two estates charges, laboratory and non-laboratory, expressed as a £ per academic/researcher. Clinical charges may be collected as well (if used by institutions). If more estates charges than this are being used by an institution, these should be aggregated into the laboratory and non-laboratory charges;
   • the £ per sq metre for each of the four (or more) categories of space. (This data may not be available until the end of 2007, as it only needs to be implemented by 1 August 2007.)

Chapter E.5 Justification

1. If one of an institution’s estates charges falls above the upper quartile of the sector rate, then they should be prepared to justify this higher charge, or they have to apply the non-compliant default rate, set at zero.
2. This decision should apply for one year, across all projects in that institution. Part of the reason for a higher rate might, for example, include definitional issues where fewer costs are being claimed as direct; part might relate to efficiency or a wide range of historical or other reasons.
3. A method for seeking to justify a higher charge is described under external quality assurance.

Chapter E.6 Application to T and O

1. Estates charges can also be established, using the techniques above, for Teaching and Other activities. The total estates costs for each of these activities by department, would have been calculated as the estates costs for Research were derived.
2. The total estates costs for Teaching could then be described in terms of a £ per student (for all Taught students, or by discipline group, or by department). This would then facilitate the use of an estates charge in course costing, based on the same costing methodology used for Research – as described in chapters E.2, E.3 and E.4.
3. The total estates costs for Other would include those for residences and catering. Excluding these, the estates costs of Other activities in academic departments could also be described in terms of a £ per academic staff FTE.
4. There are no mandatory requirements in this area – see Part VI.