Introduction to Costing and Pricing

It is College policy to calculate the Full Economic Costing (FEC) of all research proposals regardless of the type of funder, but the Price is set depending on a funder’s terms and conditions. Therefore, the price can be set at a level equal to, higher or lower than the FEC. The difference between the FEC and the Price is the Institutional Contribution or Institutional Surplus.

All proposals for external research funding are developed and internally approved using the Worktribe system. It is important to understand the principles of FEC before using Worktribe. Please see the Costing and Pricing Policy ROP-01 [pdf].

Full Economic Costing

Background to FEC

In 1998 the UK government launched the Transparency Review to demonstrate the full costs of research and other publicly funded activities in higher education. This led to the creation of a costing methodology called Transparent Approach to Costing (TRAC), which is used by Higher Education Institutions (HEIs) to determine the costs of three activities at an institutional level – Teaching, Research and Other – using a range of appropriate drivers. ‘Other’ includes non-academic activities such as residences and catering.

Full Economic Costing (FEC) is a development of TRAC methodology which allows the full economic costs of research activity to be calculated. The rates defined by TRAC are applied at project level.  FEC methodology was introduced in September 2005 and is used by HEIs across the UK to establish the true cost of research and inform decision making. The cost of each individual research project is calculated by taking account of all direct costs and associated indirect and estates costs.

More information about TRAC and how it is used can be found on the dedicated TRAC webpage.

FEC principles

Definition of FEC

Full Economic Costing (FEC) is:

  • A standardised costing methodology for research
  • Applied at project level
  • Used by all UK Higher Education Institutions
  • Mandatory for external research funding

FEC represents the cost of all resources needed to undertake a research project. It is not dependent on what the funder will pay. The amount the funder is willing to pay (and what the institution is willing to accept) is the Price of the research. Project costs must not be excluded from the FEC in order to anticipate a pricing decision.

Cost Categories

FEC uses three cost categories:

  • Directly Incurred Costs – costs that are explicitly identifiable as arising from the conduct of a project, and are charged as the cash value actually spent and supported by an audit record, e.g. staff costs, consumables, travel, equipment. Directly Incurred budget categories are available to the PI to spend on the delivery of the research project.
  • Directly Allocated Costs – costs of resources used by a project that are shared by other activities and are charged on the basis of estimates rather than actual costs on a project-by-project basis. Directly Allocated costs are retained and managed by the grant holding department(s) and contribute towards price recovery; the only exception is Directly Allocated research facilities budgets which are available to the PI to spend on the delivery of the research project.
  • Indirect Costs – non-specific costs charged across all projects based on estimates that are not otherwise included as Directly Allocated Costs. Indirect costs are retained and managed by the grant holding department(s) and contribute towards price recovery.

Inflation (Indexation)

The Full Economic Cost (FEC) of a project includes a provision for future inflation (also referred to as indexation) which applies to all cost categories. This is calculated based on indexation rates which are approved by Imperial College’s TRAC Committee.

TRAC Standard Working Year

For calculation purposes only, estimates of time must be based on the default TRAC standard working year which is 1650 hours per year (or 220 days a year; 44 weeks a year; 37.5 hours per week; 7.5 hours/day). This must be used even when staff are formally contracted to work different hours. It excludes weekends, statutory/institutional holidays and annual leave entitlement.

Project full time equivalent (FTE)

  • The full time equivalent (FTE) is the amount of time an employee works on a project as a proportion of full time, e.g. an employee appointed for twelve months on a project for exactly half of their working time would equate to an FTE of 0.5 (50%) for that period.
  • The Project FTE is the sum of the researchers’ FTE for a specific project (both academic and research staff), e.g. a researcher working full time (100%) for 3 years will result in a Project FTE of 3 (i.e. 1 FTE x 3 year project duration)
  • The time of postgraduate research (PGR) students also count towards the project FTE and is weighted for different costs (indirect costs (0.2), laboratory estates rate and infrastructure technicians rate (0.8) and non-laboratory estates rate (0.5)).
  • Although some researchers may not incur a salary cost (e.g. honorary NHS staff; visiting academics), their time will still count towards the project FTE – therefore they should be included in the costing

Estates costs, infrastructure technicians and indirect costs are calculated by multiplying the relevant institutional rate by the sum of project FTE. Only those staff that undertake research are counted within the Project FTE. Support staff are not included.

Staff groups that can count towards the project FTE:

  • Principal Investigator and Co-Investigators
  • Directly incurred research staff
    • Researchers, research nurses, clinical research fellows etc.
  • Postgraduate research (PGR) students
    • Appropriate weighting will be applied
  • Emeritus professors
  • Visiting staff from industry
  • Honorary staff
  • Visiting academics

Staff groups that cannot count towards the project FTE:

  • Technical staff undertaking support
  • Administrative and clerical support staff
  • Researchers named on the project, but with no associated time or cost
    • e.g. a researcher whose time has been wholly (100%) included in another fellowship or research project

Definition of a researcher

TRAC guidance states that a researcher is “anyone who will make a significant intellectual contribution to a research project. Typically, such a person would be qualified to carry out independent or supervised research, might provide an academic lead for research, or could provide expert advice to a research project. A researcher has a thorough understanding of what they are doing, can interpret results and devise appropriate ways forward (rather than, for example, carrying out a set of routine operations under carefully supervised conditions).”

Researchers will normally be staff on academic or research grades although they may include staff on other grades where the individual is acting as a researcher, e.g. research nurses, high grade technical staff who act in the capacity of a researcher and data managers who have a major role in structuring the data analysis.

Staff who provide support to those carrying out research are unlikely to be categorised as researchers, e.g. trial managers acting purely in an administrative role. In cases where staff are not on academic or research grades, the Principal Investigator must make a judgement on whether to count an individual as a researcher. The person would then need to be recognised as a researcher by the funder (or, for example, by a Peer Review Panel) considering the application.

Directly Incurred (DI) costs

Staff costs

Directly incurred staff will work on a specific research project (in a full-time or part-time capacity) and their payroll costs are charged directly to the project via the College’s financial accounting system. All costs must be justified in the case for support when applying for external research funding. There are several types of directly incurred staff.

Some funders require directly incurred staff to complete timesheets. Details of funder timesheet policies can be found on the Timesheets webpage.

Research staff (researchers, clinical research fellows and research nurses)

  • TRAC defines a researcher in a project as: “anyone who will make a significant intellectual contribution to a research project. Typically, such a person would be qualified to carry out independent or supervised research, might provide an academic lead for research, or could provide expert advice to a research project. A researcher has a thorough understanding of what they are doing, can interpret results and devise appropriate ways forward (rather than, for example, carrying out a set of routine operations under carefully supervised conditions).”

Fellows and fellowships

  • When costing a new fellowship, the time and salary cost of the fellow must be based on actual costs and categorised as directly incurred, not directly allocated, because the latter is an estimated cost. See the “Preparing a staff costing” section below for further guidance.
  • The time and salary of a fellow must not be included in the FEC of a new research project if 100% of the fellow’s time is already included in the FEC of their current fellowship and this is funded by a Research Council, Other Government Department or charity. This is irrespective of the amount of their salary being funded. If no time can be attributed to the project, then no associated indirect costs or estates costs can be included.
  • The time spent on a new project (and a proportion of the fellow’s salary cost) can be included if:
    • The other project will have expired by the time the new project commences; OR
    • The other project was charged with less than 100% of the fellow’s time
  • If you are thinking of applying for a Fellowship, further information can be found on the Fellowship FAQs webpage.

Non-research staff

Directly incurred non-research staff include the following:

  • Technicians (if project specific)
  • Clerical staff (if project specific)

Preparing a staff costing

The following factors should be considered when preparing a staff costing:

  • Salary scale - staff costings should be based on the appropriate current salary scale (based on College criteria for qualifications) and should reflect the category of staff, type of work to be undertaken and proportion of effort required for the specific project.
  • College employees - existing staff should be costed based on their current grade and spine point. If discretionary points or a promotion are likely to be awarded (e.g. upon award of a PhD), such salary increases should be considered within the costing (i.e. select the appropriate grade and spine point).
  • New employees (TBA - to be appointed) - costings for new employees should normally be based on the bottom spine point of the appropriate grade. Funders will usually require a specific justification if a higher starting spine point is requested.
  • New employees (named staff) - costings for named staff who are not currently College employees (e.g. research fellows) should be based on the appropriate Imperial pay scale and spine point agreed with the host Department, in line with College criteria for qualifications, and should reflect the category of staff, type of work to be undertaken and proportion of effort required for the specific project.
  • Inflation (Indexation) -  Inflation on Directly Incurred staff salaries is calculated based on the effective pay date applicable to each staff member’s salary scale. 
  • Redundancy and severance pay – these costs should NOT be included as part of the FEC (this is included within Indirect Costs). If redundancy costs are allowed as an eligible direct cost, this should be detailed in the price to the funder (not the FEC).

Pension Costs

Superannuation (pension) costs should be included in costings for all Directly Incurred posts. The appropriate pension scheme should be based on the type and grade of the post. This includes for named staff who are not currently enrolled in a pension scheme as staffing requirements may change or the employee could join a pension scheme at a later date.

Apprenticeship Levy

The Government’s Apprenticeship Levy  is a levy on UK employers to fund new apprenticeships. It is calculated based on 0.5% of the Basic Salary and London Allowance for all College employees. This change is purely to do with the employer’s contributions. Individual employees will not see any reduction in their salary.

The costs of the Apprenticeship Levy must be included in the FEC of all projects regardless of whether the funder will meet these costs. Further information about including or removing the Levy costs from the Price can be found on the Pricing webpage.

Postgraduate research students (PGR)

The research work undertaken by postgraduate research (PGR) students is recognised as integral to research projects by many funders.

For project costing purposes, supervising and training a PGR student is a distinctly separate activity from that of managing and carrying out a research project. In order to understand the true costs of a project, the costs of academic supervision and training should be estimated. However, many funders will not meet these costs, so they must be kept distinct from other costs associated with Principal Investigator and Co-Investigator time. Whether this is included in the price is dependent on a funder’s terms and conditions.

The following elements should be considered when costing a PGR student:

PGR stipend

  • The stipend (bursary) payable to a student by their host institution is part of the project studentship. It should be included in the FEC and met by the funder.
  • The stipend rate payable to a PGR student will vary and is dependent on the terms and conditions of the funder.
  • When costing a proposal, the stipend rate may be specified by the funder or subject to negotiation (e.g. industrial studentships).
  • It is important to ensure that the stipend rate used is competitive and in line with the College’s main funders. As a general rule, the stipend rate should at least match the Research Councils stipend rate. Although there is no maximum financial limit for stipend payments, payment of a higher rate is likely to be closely scrutinised by HM Revenue and Customs to ensure it is a genuine studentship and not an employment contract.

PGR tuition fees

Academic supervision/training time

  • Time spent on training and supervising PGR students on research projects is identified separately from other project management and research activity.
  • It is included in the FEC but will not be met by some funders.

Running costs and training courses

  • Consumables, travel etc should be included as directly incurred costs. External courses attended by a PGR student on a project studentship should be included as directly incurred costs.
  • External courses attended by a PGR student on a project studentship should be included as directly incurred costs.

PGR time

  • Indirect costs and Estates costs associated with the time spent by the PGR student and their supervisor on the research project are included in the FEC but will not be met by some funders. Indirect costs and estates costs associated with the PGR student are weighted (i.e. indirect costs (0.2), laboratory estates charges (0.8) and non-laboratory estates charges (0.5).

Doctoral Training Partnerships (DTPs) and Centres for Doctoral Training (CDTs)

  • The College's doctoral training awards are managed by the Finance Division in close liaison with departments and divisions. They are not administered in the same way as other externally funded research projects because they are not classified as research income. For more information, please contact your Faculty Finance Officer or Ewa Szynkowska.
  • Additional information about Research Council postgraduate training grants (including a JeS user guide on submitting studentship data) can be found on the Finance Knowledge Bank.

CASE awards (collaborative awards in science and engineering) 

  • CASE awards are industrially focused studentships allocated by a Research Council to companies in collaboration with an academic partner. Time is spent by the student working in the company. The company provides a financial top-up to the core Research Council award.
  • Funding from the industrial partner is usually governed by a legal agreement. It is the responsibility of Research Services to negotiate and finalise the terms of the agreement.
  • Industrial top-ups can be classified as research income provided they meet the requirements specified in the Classification and Management of Research Funding [pdf]. They are usually managed through N Codes by Departments.

Non-staff costs

Directly incurred non-staff costs are project specific running costs. They should be charged as actual expenditure incurred and must be auditable. All costs must be justified in the case for support when applying for external research funding. Whether this is included in the price is dependent on a funder’s terms and conditions. The most common types of directly incurred non-staff costs are listed below:

Consumables

Examples include:

  • Laboratory supplies and materials
  • Computing costs if specific to the project, e.g. software licences
  • Fieldwork fees, patient fees
  • Specialist publications (not expected in institutional libraries)

General office consumables (e.g. photocopying, printing, stationery, computing sundries, telephone, postage) should only be Directly Incurred when usage is exceptional and justified accordingly, e.g. survey based projects, otherwise they should be considered within the indirect costs.

Equipment purchases and associated costs

See ‘Equipment’ section below.

Travel and subsistence

Travel and subsistence costs may be requested where these are required by the nature of the work. Travel costs should be based on the most suitable and economical form of travel. Attendance at conferences should be of direct benefit to the research and fully justified. Subsistence rates, mileage rates etc should comply with the funder’s terms and conditions and the College’s Expenses Policy. Where there is a discrepancy, the more restrictive policy will apply.

Recruitment and advertising of staff

Recruitment and advertising costs must be considered for each staff post directly employed on a project. The cost of the advertisement will vary depending on where the advert is placed and its duration. Some funders will not meet these costs, so always refer to the terms and conditions.

More information can be found on the Recruitment webpage.

Central Biomedical Services (CBS) purchases

The purchase of animals specific to a project is categorised as a Directly Incurred Cost. Associated costs include facility/equipment hire, specialist surgical procedures and project specific fees (e.g. personal licences, project licence, training modules).

Animal Maintenance is considered a Directly Allocated Cost within Imperial.

It is important that investigators liaise directly with the relevant CBS site manager regarding their requirements. It is the site manager’s responsibility to approve the CBS Costing Tool.

More information can be found on the Central Biomedical Services webpage.

Research partner costs

Where research is to be undertaken by more than one institution, in most cases a nominated ‘lead’ institution will be responsible for submitting a single joint application to the funder. The lead institution must obtain the costs directly from the Research Partner. The costs should be authorised by the appropriate institutional authority and provided in the format and at the level of detail required by the funder.

Further information on the classification of research partners can be found in the Research Partner and Professional Fees Guidance.

Professional fees

For some research projects, a third party may charge Professional Fees for the provision of discrete services specified and directed by the College investigator, e.g. NHS costs; analysis of samples/data; use of external research equipment and facilities; transcribing/translation services. It is expected that VAT will be charged unless there is a clear reason for VAT not to apply.

Further information on the classification of professional fees and VAT considerations can be found in the Research Partner and Professional Fees Guidance

Equipment

All new equipment purchases required for a project should be requested as Directly Incurred and must be justified in the case for support when applying for external research funding. A Departmental contribution to the cost may be required by some fundersWhere possible, supplier quotations should state the price applicable at the proposed purchase date rather than the current price.

In addition to the cost of purchasing new equipment, other associated costs may be included in the price, dependent on a funder’s terms and conditions. For example:

  • Installation, set-up and testing
  • Delivery and import duty
  • Maintenance/service contracts (for the project duration)
  • Spare parts
  • Software
  • Exceptional procurement costs
  • Insurance costs
  • Building modification works

New equipment should be costed inclusive of VAT at the appropriate rate if this is chargeable. Contact the Tax department for further information and advice, e.g. VAT exemption for medical equipment.

Purchases must also comply with the College’s Procurement and Tendering Regulations.

NOTE: Instead of purchasing new items, it may be possible to utilise existing equipment by referring to the College’s Facility Directory. However, the cost of access charges relating to equipment already owned by the College can only be charged to funders in certain circumstances. For further information about existing equipment and facilities, see ‘Directly Allocated - Research facilities’ section below.

Directly Allocated (DA) costs

Directly allocated academic staff time (PI/Co-I time)

The Principal Investigator and Co-Investigator(s) are required to estimate the time they contribute to each project, irrespective of how they are funded. This is part of the FEC calculation of a research project. Academic time is also included in the Project FTE and must be considered regardless of whether a salary cost is incurred or not (e.g. honorary staff, visiting academics, emeritus professors).

TRAC guidance states that directly allocated salaries can be estimated by using either pay banding or actual salaries, or a combination. At Imperial, directly allocated academic staff costs are calculated using pay bands, i.e. an average cost is calculated for several pay ranges.

NOTE: Some funders require academic staff time to be costed as a directly incurred cost based on actual salary costs. This usually applies where a funder does not pay FEC but will reimburse academic staff costs (e.g. European Commission, US Federal Agencies) or where the award is for a senior fellowship or professorship.

Calculation of academic staff time

To calculate the costs of academic staff (Principal and Co-Investigators) on research projects, all the direct time required to undertake the work (both intellectual and practical input), manage the project and supervise the research must be estimated. Investigators should also consider the time required to set up the project and write up the final report and how this will be attributed amongst the PI and Co-Is. This will be influenced by the project duration; nature and complexity of the research (e.g. clinical studies; multi-partner collaborations); number of Co-Is and their time commitment; and the number and type of staff/students to be managed/supervised.

To simplify the costing process, it is acceptable for academic time (and associated salary costs if applicable) to be spread evenly across the project period. However, if significant peaks and troughs in activity are likely, it is also possible to reflect this variability by including more time/effort over specific periods of the project.

Exclusions

Investigator time should NOT include any activity undertaken in support of:

  • Teaching (e.g. timetabling, admissions work and exam boards)
  • Other research-related activities (e.g. drafting research project proposals, refereeing papers, editing journals, communicating results after the project has ended)
  • Staff recruitment (this forms part of the Indirect Costs)
  • Professional development to maintain and advance personal knowledge
  • College management or administrative activities (e.g. committee membership)

Estates costs

How are Estates costs calculated?

This is an institutionally calculated rate which reflects the College’s buildings and premises-related research costs, including buildings maintenance, utilities, rent, rates, insurance, capital (depreciation), cleaning, security and safety.

The estates charge for a research project is calculated by applying an institutional rate and multiplying it by the total Project FTE. The estates rate is based on the Project FTE and is applied irrespective of whether or not a salary cost is incurred, e.g. honorary NHS staff, visiting academics.

Estates rates associated with Postgraduate research students (PGRs) are weighted depending on the estates type, i.e. by a factor of 0.5 for Non-Laboratory rate and by a factor of 0.8 for Laboratory rate.

Types of Estates rate

The College maintains two estates rates which are dependent on the location of the research.

  • Laboratory – applies to all academic departments except for two non-laboratory departments
  • Non-laboratory - applies to Business School and Mathematics only

The estates rate applied to an academic or researcher is determined by the default rate assigned to their department. It must not be changed unless the project is to be undertaken off-site (see ‘Off-site research’ section below). Whilst it is good practice for estates costs to reflect the location where each member of staff is working, it is acceptable to use the same estates rate for all staff that represents where the majority of the research is being carried out.

If the research is being carried out in an NHS facility that is part of one of the College’s associated NHS trusts, then the appropriate Imperial estates rate should be applied.

Off-site research

If all of the work is taking place off-site, then no estates charge (zero) should be applied unless the off-site facilities provider intends to invoice Imperial, in which case their costs should be included.

Collaborative projects between institutions

The estates rate should reflect the costs relevant to the location of the research, i.e. where the staff are working. Each institution should provide details of their own Estates costs.

Research facilities

Under FEC, the costs of most items of equipment and facilities already owned by the institution will have been automatically included in the calculation of the estates rate and are therefore included in the FEC of a research project within the estates charge.

Imperial has adopted usage-based charge out rates for a limited number of facilities and equipment whose annual FEC cost is deducted from the College’s estates calculation. These facilities meet defined criteria for accessibility by users and recoverability and must be approved by the College’s TRAC Committee on an annual basis.

There are three types of internal research facility:

FEC charge-out facilities (deducted from Estates Costs)

  • These facilities are selected and approved on an annual basis by the College’s TRAC Committee and rates are published in a central FEC Charge Out List.
  • Only facilities on the FEC Charge Out List can be included in the FEC of a project.
  • The charge out rates of these facilities can potentially be included on research proposals submitted to all funders (including Research Councils) because the costs have already been deducted from the Estates rate calculation, but the costs must still be justifiable and eligible.
  • The appropriate charge out rate should be selected based on whether the funder pays on a Full-FEC or Partial-FEC basis.
  • Rates for each facility are calculated by the College’s Finance Department as a running cost per unit using an auditable FEC compliant methodologye.g. per hour, per day, per service, per sample. Rates are inclusive of facility staff costs, maintenance, consumables etc, but exclude a provision for facility replacement.
  • The College’s FEC charge-out facilities are categorised as Directly Allocated costs under FEC, which means it is acceptable to charge on the basis of estimates. However, FEC facility charging is usually based on actual usage because most funders expect costs to be fully auditable.

Multi-user facilities and PI-led facilities (included within Estates Costs)

  • These are existing equipment and facilities which are not included in the central FEC Charge Out List.
  • Multi-User facilities are generally accessible to any user, subject to the terms and conditions of usage set by the particular facility.
  • PI-led facilities are managed and run by a single Principal Investigator.
  • The costs of these existing equipment and facilities are automatically included in the annual Estates rate calculation and therefore cannot be included again in the FEC of a project.
  • However, it may be possible to include associated access charges on a proposal depending on whether the funder pays Estates costs or not
  • Funders who pay Estates costs (e.g. Research Councils, UK Government departments): facility access charges cannot be included in the Price charged to the funder. The funder already pays Estates, so this is considered double counting.
  • Funders who do not pay Estates costs (e.g. UK charities): facility access charges may potentially be included in the Price charged to the funder depending on their terms and conditions. The funder does not pay Estates, so this is not considered double counting.
  • Facility access charges for existing Multi-user facilities and PI-led facilities should be derived using an auditable calculation method and be supported by auditable usage records.
  • Details of many existing research facilities and equipment across College can be found in the Research Facilities Directory

Note: When preparing costings, facilities should be categorised as either Directly Allocated or Directly Incurred depending on the basis on which the costs will be reimbursed by the funder, i.e. FEC charge-out facilities charged to FEC funders are Directly Allocated; all other facilities will be Directly Incurred.

New equipment and facilities

New equipment and facilities to be purchased for a specific project are not categorised as Directly Allocated (see “Directly Incurred - Equipment” section above).

External equipment and facilities

Access charges for external equipment and facilities managed outside the College are not categorised as Directly Allocated. These costs should be included as Directly Incurred Professional Fees (see “Directly Incurred – Non-staff costs” section above).

Technicians

There are three categories of technician:

  • Directly Incurred Technician
    • Dedicated to a specific research project(s) - whether in a full-time or part-time capacity (named or unnamed post)
    • Salary costs are directly charged to research projects based on actual costs
  • Directly Allocated - Infrastructure Technician
    • Provides infrastructure support including health and safety, stores, laboratory management and administration, equipment maintenance etc
    • Infrastructure technician costs for a research project are calculated by applying an institutional rate and multiplying it by the total Project FTE, similar to the calculation of Estates costs and Indirect Costs
    • Inclusion of infrastructure technician costs is mandatory for all academic departments assigned a Laboratory Estates rate (see ‘Directly Allocated – Estates’ section above)
    • There are two infrastructure technician rates:
    • Clinical - applies to all departments in Faculty of Medicine
    • Non-Clinical - applies to all departments in Faculty of Engineering and Faculty of Natural Sciences (except Department of Mathematics)
    • No infrastructure technician rate is applied to Business School and Mathematics, i.e. Non-Laboratory Estates Departments
  • Directly Allocated - Pool Technician
    • Provides support for more than one research project
    • Pool technician costs can be charged to research projects by applying an institutional hourly rate (based on an average rate per hour depending on the grade of the technician) and multiplying it by the number of hours required
    • The number of hours is estimated and must be justified
    • Pool technicians may need to be costed as a directly incurred technician cost if a funder does not accept an average hourly rate.

Indirect costs

Indirect costs

Indirect costs are non-specific costs charged across all projects, based on estimates, that are not otherwise included as Directly Allocated costs. They include institutional costs such as finance, human resources, ICT, library and some departmental services, and general office and laboratory consumables.

The indirect costs charge for a research project is calculated by applying an institutional rate and multiplying it by the total Project FTE, similar to the calculation of Estates costs. It is applied irrespective of whether or not a salary cost is incurred, e.g. honorary NHS staff, visiting academics.

A single default Indirect Costs rate is assigned to all academic Departments. Indirect costs associated with Postgraduate Research Students (PGRs) are weighted by a factor of 0.2.