JCPSG | TRAC Guidance

Part IV - Charge-out rates

Section G: Other Charge-out rates

  1. Directly allocated costs, such as estates, are costs of services used by a project, where the services are shared by other activities and projects. The project’s use of the service is estimated (e.g. in terms of units of time), and a standard charge-out rate per unit is applied to arrive at a directly allocated cost for that project.
  2. Two types of cost – laboratory technicians and major research facilities – can remain part of estates costs until 1 August 2007, but should then be directly allocated to projects. Charge-out rates (e.g. expressed as £ per FTE, or £ per hour of facility usage) are used to do this.
  3. Academic staff costs are also directly allocated costs applied to projects using daily charge-out rates – see Part V  Chapter C.3.
  4. Where a cost is allocated directly to research projects, this method should be used for all activities and projects – no part of that cost should be included in the indirect cost rate nor included in another directly allocated cost such as estates.
  5. Directly allocated costs should be recorded against the project during its life. The standard charge-out rate, used to estimate costs of a project pre-award, would give the amount to be recorded.
  6. Records of overall use of each facility should be kept at a level that will provide information for calculating the charge-out rates. However, records of actual usage by project need not be maintained, even though it is good practice for a system to record this as they provide good records to use for estimating future years’ utilisation (and, therefore, increase the robustness of charge-out rate calculations). If actual usage on each project is recorded, then the estimated charge on those projects could be amended to reflect their actual usage. This should only be done where this is considered practical and material, and is not too onerous a task in practice. Subsequent years’ charge-out rates or changes (due to differences between estimated and actual costs or utilisation) need not be recorded under TRAC (updated rates will not form the basis of funding by most sponsors).
  7. This section focuses on charge-out rates used to cost research projects; however, the same principles and techniques could be used for Teaching and Other activities.
  8. The first chapter focuses on laboratory technicians, but could also be applied to clerical staff.

Chapter G.1 Laboratory technicians

  1. Where technical staff work directly with researchers or in support of their rooms or equipment on laboratory projects, costs should be directly charged to projects no later than 1 August 2007. (I.e. estates charges or indirect cost rates based on 2006/07 costs should not include these items, and they should be charged directly to all relevant projects from 1 February 2008.)
  2. The direct charges will be of either of two types:
    1. if the staff are dedicated to a project, and/or project timesheets will be completed, these costs should be charged as they are incurred (on the basis of those timesheets);
    2. if the staff are part of a shared or pooled team, an appropriate part of these staff costs should be directly allocated to all projects.   A charge-out rate, such as £ per academic/research staff, is used for this.
  3. Staff who are shared between projects, or part of a pooled team, (ii) above, might be:
    1. working on several projects. Where it would be inappropriate for them to complete timesheets – if they did, they could be treated as a directly incurred cost – their costs should be directly allocated to projects;
    2. providing services to laboratories including in health and safety, storeroom/supplies, hazardous materials handling, laboratory equipment maintenance, carpentry or in administration. Again this time should be directly allocated to projects.
  4. All of the time of the staff in (a) and (b) should be directly allocated, including an appropriate part of their general duties, administration, supervision, etc. To this should be added any support time of technicians completing timesheets which is then not being charged as a DI cost to projects ((i) in the paragraph above). Staff costs can be grouped for the purposes of making the charge; and types of staff or individuals need not be identified.
  5. The estimated costs of shared, pool, or directly allocated, staff should be recorded as a cost against each appropriate project periodically throughout the project life. The charges applied to each project need not be updated during the project life (except for the annual indexing built into the original estimate), unless there is a substantial change to the programme of work.
  6. It is good practice for these dedicated technician staff to be charged to projects earlier than August 2007.
  7. Actual time spent on supporting each project need not be recorded. However, it is good practice periodically to survey total time spent supporting a group of projects, on a sample basis, to provide data that can be used to establish the standard charge-out rates for pool staff in their support of different types of project (and activity).
  8. It is good practice for institutions to produce costing schedules that provide a simple guide to the levels of costs that might be appropriate to charge for different types of project.
  9. Estates charges and indirect cost rates should not be applied to the time of technician and Support staff, when calculating the estates and indirect cost totals for a project.

Identifying the costs of directly allocated technicians

  1. The total costs of laboratory technicians should be established and directly charged. These costs should therefore be excluded from estates costs, no later than 1 August 2007.
  2. The minimum requirement focuses on types of technician who are in laboratory departments but are not in non-laboratory departments. However, institutions can define technicians in a more inclusive way if that is more useful to them. They can be:
    • specific staff or posts of technicians who are in laboratory departments, but not generally in non-laboratory departments;
    • all technicians in laboratory departments; or
    • all technicians in both laboratory and non-laboratory departments (different charge-out rates would then be required for each type of department) e.g. IT technicians.
  3. Institutions can use their own definitions for the purpose of classifying which technicians are to be directly allocated. However, it is good practice to ensure that the chosen definition minimises complexity and burden in implementation. The same definition should be used across all relevant departments and all projects.
  4. Only technicians in academic departments need be directly allocated, not those in central support departments such as occupational health, estates, etc.
  5. Several institutions are carrying out surveys to establish the number, type, and activities, of ‘technicians’ in order to inform their TRAC allocation and charges. An example of this, provided by a pilot institution, is given in document link Annex 17. This provides an example of emerging good practice, but is more than the minimum required under TRAC.
  6. A simpler method of establishing the technicians’ costs which are to be directly allocated is as follows:

    take the total costs of technicians allocated to Research (excluding DI costs) for non-laboratory departments, and the equivalent figure for laboratory departments.   

    divide each by the relevant Research FTEs (Research time of academics, research staff and PGRs included at the estates weightings of 0.5 and 0.8) to arrive at a cost per FTE.

    resulting in a laboratory cost per FTE which would normally be higher than that of the non-laboratory cost.

    The difference in the cost per FTE would then be multiplied by the Research FTEs in laboratory departments: 

    providing a notional cost of the ‘extra’ technicians in laboratory departments from those in non-laboratory departments. It is this figure that would then be excluded from estates charges and directly allocated, at least from 1 August 2007. It is then good practice (but not a minimum requirement) to identify the types of technicians that fall into this category of ‘laboratory technicians’.

Directly allocating laboratory technicians’ costs to projects

  1. When directly allocating laboratory technicians’ costs to projects, again a number of methods could be used:
    • identification of the respective levels of input required for equipment-intensive (or otherwise defined) projects, compared with other projects, and allocating technicians’ costs in a way that reflects this differential level of use. This could be through:
      • the use of standard £ costs chargeable to each project of a defined type; or
      • identifying a technician cost per technician hour (as described in the laboratory technicians’ example shown in document link Annex 17) and charging different numbers of technicians’ hours to each type of project;
    • a simpler method, where a standard charge expressed as a £ per academic/research staff FTE would be applied. This would have ‘fallen out’ of the simpler method described above as ‘the difference in the cost per FTE’.
  2. Irrespective of the methods used, institutions should ensure that:
    • they can verify the time that is being charged as directly incurred – either technicians (and other staff) are wholly dedicated to a project, or they complete project-level timesheets that are used to charge their time. These should be at least quarterly and it is good practice for them to be countersigned by an appropriate manager;
    • their methods are not so complex that they are in danger of under-recovering their costs;
    • there is no double-charging of technicians in the two categories of directly incurred costs and directly allocated costs;
    • as well as attributing laboratory technicians’ costs of Research to externally funded Research projects, they are also attributed to institution-/own-funded research and PGR activity. If laboratory technicians, for example, are being charged to projects on a £/FTE basis, then the FTEs used to calculate that rate would normally have taken PGR students into account. In that case laboratory technicians’ costs would be allocated to PGR student activity through application of the charge-out rate onto the PGR FTE.

Chapter G.2 Major research facilities

  1. The cost of equipment, including major research facilities, should be directly allocated to research projects. This means that it should not appear in the indirect cost rate. Equipment costs are to be included in the estates costs total, but no later than 1 August 2007 major research facilities should be directly allocated to research projects separately from the estates charge.
  2. It is good practice for other equipment to be directly allocated separately from estates as well, but that is not a minimum requirement. Materiality is an important consideration.
  3. All reference to a research facility in this chapter could also refer to equipment.   A research facility can be a single piece of equipment, or a group of equipment.
  4. Major research facilities include specialist animal facilities, greenhouses, and specialist IT research facilities.
  5. The charge-out rate for a research facility should be established by the following calculation:

    an annual fEC (a)

    total units of use for a year (b);

    a charge-out rate per unit of use: (a) divided by (b).

  6. The charge-out rate should then be applied to projects based on an estimate of the units used by each of those projects.
  7. The calculation of the rate, and the data collected for this purpose, should avoid undue complexity or spurious accuracy. It is not necessary to know either the historical cost or the sponsor of a piece of equipment when charging it directly onto projects. The avoidance of double-charging is covered further on in this chapter.

Annual fEC (a)

  1. The annual fEC should include an estimate of the following costs, where applicable:
    • depreciation (based on an estimate of its replacement cost, written off over the likely useful life of the equipment). This would take into account exceptional procurement costs, installation costs, buildings modification, set-up and testing;
    • technicians;
    • consumables and spares;
    • additional insurance;
    • estates.
  2. The operating costs (consumables, spares etc.) can be based on the actual costs of running that facility or a forecast level of costs.
  3. The costs of technicians and consumables should only be included where they are not being included as a directly incurred cost on any other project, and are excluded from the laboratory technician charge-out rate.
  4. Estates costs need not be included for all facilities – only where material.
  5. Indirect costs should not be included.
  6. The annual fEC (a) should include a depreciated replacement cost for the equipment (a broad estimate would suffice if detailed records are not available) written off over the likely useful life of the equipment. This replacement cost is unlikely to be the same as the historic cost.
  7. This replacement cost should be included irrespective of who funded its original purchase, when, and at what price.

Likely use of the facility (b)

  1. The likely use of the equipment (b) should be estimated. This should take into account its use for all activities (including Teaching) by all projects (including institution-/own-funded work and supervision of PGR students) and by all academics and all departments. This utilisation would commonly be expressed in terms of units of time (e.g. days or hours of use per year).
  2. Utilisation should be calculated on the assumption of at least a ‘reasonably efficient’ basis (in the context of use in the HE sector). If institutions plan higher utilisation than this, then those higher estimates of time should be included. The calculation of utilisation should therefore take into account the likely use (days or hours) of each facility for Teaching, Research (including all of institution-/own-funded, PGR supervision, external projects), and Other activities; but should also include additional days or hours if this likely use is significantly less than a level normally experienced in the sector for this type of facility.
  3. ‘Reasonably efficient utilisation’ which is normal for the sector could be established having considered:
    • utilisation that provides a market charge-out rate for this type of kit;
    • a concept of ‘well-managed equipment’; or
    • the target utilisation for the equipment (as long as it was not too light).

Calculation of the charge-out rate

  1. The annual fEC (a) divided by the units of use (b) provides the charge-out rate for that item of equipment. If equipment has been grouped in this calculation, but each item of equipment can be used separately on projects, then the group charge out rate should be divided by the number of items of equipment to give a rate per item of equipment. (Weightings could be used in this but not if these make the calculation unduly complex.)
  2. Each project’s use of each item of equipment should then be estimated, e.g. in terms of days or hours of use. Again, undue complexity should be avoided:  standards can be developed and applied. The relevant charge-out rate for the items of equipment used should then be applied to that time. This then provides a directly allocated cost for inclusion in the fEC of each project (and into the costs of Teaching, institution-/own-funded Research and PGR supervision when costed).
  3. The charge-out rates should be indexed, along with all other costs, over the life of the project. Rates calculated on 1 February each year should be indexed for two years’ price rises, before they are applied to a research project application.

Animal houses

  1. Animal houses should be considered a major facility:
    • the purchase of animals should be a DI cost (and if the number actually purchased is less than or more than originally estimated, the actual DI costs will change);
    • surgical procedures or other costs that are purchased from external sources specifically for a project should be charged as DI;
    • other costs, in particular housing, maintenance and operating costs, should be DA costs, charged to projects using charge-out rates.
  2. The DA costs should include:
    • estates costs of the defined space housing the facility;
    • facility manager, laboratory technicians, other administrative staff, veterinary services including surgical procedures when not externally purchased;
    • bedding and feed;
    • other operating, maintenance and support costs.

    These costs should not be included in the estates or indirect cost rates, or charged as a DI cost.
  3. A number of charge-out rates should be calculated and applied to projects – these would vary depending upon the type of:
    • animal;
    • condition;
    • care/maintenance provided.

Chapter G.3 Avoiding double-charging

  1. Double-charging should be avoided, and the costs included in facility charge-out rates should be excluded from estates costs or any other cost total in a project’s fEC.  
  2. For directly allocated costs, it is often very difficult to identify the actual costs being incurred that are forming part of the charge-out rates (e.g. depreciation costs on a particular piece of equipment, or a technician who is part of a pool of technicians). This is not a TRAC requirement.
  3. TRAC uses a simple method of resolving this, and of avoiding double-charging for directly allocated costs. This is done by deducting the costs used to calculate the charge-out rates from the estates cost figure used in the calculation of the estates charges:
    • the actual costs held in the accounting records which relate to items that are being directly allocated to research projects (such as major facilities and laboratory technicians), should be included as part of the TRAC estates cost total for Research.

      This would include all pool technicians’ salaries, all equipment depreciation or write-offs being recorded in the accounting records, maintenance costs, and so on.

      It would be unlikely to include all the costs included in the charge-out rate calculation. Depreciation in the charge-out rate, for example, being on a replacement cost basis and covering all relevant assets, is likely to be higher than the depreciation in the TRAC estates costs. The latter might be on a historical cost basis and would exclude any costs or assets that have been written-off.

    • the total annual fEC that has been used to calculate the DA charges for these items should then be deducted from the estates cost total for Research, before the estates charges for Research are calculated.
  4. This deduction can take into account the likely use of the equipment, not any higher ‘efficient use’. The costs deducted from the Research cost total would therefore be calculated as:

    the calculated charge-out rates (e.g. £/day)

    multiplied by

    the likely use by all Research activity – including institution-/own-funded activity and PGR supervision – that had been established during the calculation of the charge-out rate

    giving

    the costs to be deducted from the annual estates total before the estates charges are calculated.

  5. The avoidance of double-charging is covered in more detail in document link Annex 18.