University of Minnesota
Internal / External Sales
Rate Development Process
Introduction to Staff
Keith Jansen –
Manager of Internal / External Sales
kkjansen@umn.edu (612) 624-5540
Mary Kosowski – Compliance Officer - Internal Sales
kosowski@umn.edu (612) 624-7892
Jeff Kurland
E-mail address:
– Compliance Officer - External Sales
kurl0001@umn.edu (612) 625-5605
extsales @umn.edu
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Internal Sales Rate Development
Procedure and Website
Located at :
Internal Sales EFS website:
http://www.finsys.umn.edu/sales/int.html
Administrative Procedure Establishing Internal Rates:
http://policy.umn.edu/Policies/Finance/Accounting/INTE
RNALSALES_PROC03.html
Internal Sales Training Module:
http://www.finsys.umn.edu/sales/iso.html
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Principles for Internal Sales
• Billing rates should be reviewed and updated each year.
• Rates charged to internal University customers must be set to
break even.
• Rates must be consistent for all internal customers.
• The University is subject to periodic audit by the federal
government to assure the federal government receives the lowest
University, or internal rate for similar goods and services
purchased at the University.
• Document subsidizes.
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Internal Sales Rate Development
Steps to developing an Internal Sales rate:
• Determine the measurable unit for goods and services
• Determine annual output or expected level of activity
• Determine annual estimated costs
• Determine the breakeven
• Exclude unallowable costs
• Determine the appropriate classification and include or
exclude overhead costs (Recharge or Specialized Service)
• Determine the activity per-unit rate
• Rates should be reviewed, updated and submitted to Internal
Sales each year
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Internal Sales Rate Template
SAMPLE RATE SHEET - CONSULTING PER HOUR - Internal Sale
To use this spredsheet, please fill in the fields that are highlighted in
Civil
Service
-
+ Salaries
Civil Service Consultant (per hour)
P&A Supervisor (per hour)
Grad Assistant (per hour)
P&A
Supervisor
Grad
Assistant
What is the annual salary for
consultant 1 (Civil Service)?
$
-
What is the annual salary for
consultant 2 (Faculty / P&A)?
$
-
What is the annual salary for
consultant 3 (Grad Assistant)?
$
-
-
+ Fringe
Civil Service Consultant (per hour)
P&A Supervisor (per hour)
Grad Assistant (per hour)
Use appropriate fringe rate for each job class
See website at: www.umn.edu/ohr/payroll
40.1% * salary from above
(2010 Rates)
33.3% * salary from above
25% * salary from above
-
+ Supplies (estimated per hour)
-
-
-
= Total Service Costs
-
-
-
+ Equipment Use Costs (estimated)
Per hour depreciation, maintenance, etc
allocated based on total usage
-
-
-
= Total Costs
-
-
-
Estimated volume of work
= Total Price Charged to Customer
YELLOW
0
$
-
0
$
-
0
$
-
(Per hour)
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External Sales Rate Procedure and
Website
Located at :
External Sales EFS website:
http://www.finsys.umn.edu/sales/ext.html
Administrative Procedure Establishing Internal Rates:
http://policy.umn.edu/Policies/Finance/Accounting/ExternalSAL
ES_PROC03.html
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Principles for External Sales
• Billing rates should be reviewed and updated each fiscal year.
• Rates charged to external non-University customers should
include overhead costs.
• Rates charged to external customers should be greater than rates
charged to internal customers for the same good and services.
• Rates charged to external customers should be greater than rates
charged to the government.
• Rates should not compete unfairly will businesses.
• All rates are reviewed by External Sales.
• Document subsidies.
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External Sales Rate Development
Steps to setting an External Sales price:
• If you have an ISO, start with Internal Sales rate.
– Add unallowable costs for internal sales
• If no ISO activity, determine actual cost of external sales activity.
• Add the University’s actual overhead rate (currently 63%).
• Add profit to bring the price in line with the same or similar good or service in
the public market.
• Determine the market rate using one of the methods in the market driven
pricing model.
• Submit rate with initial application form and with every subsequent contract.
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External Sales Rate Template
SAMPLE RATE SHEET - CONSULTING PER HOUR
To use this spredsheet, please fill in the fields that are highlighted in
Civil
Service
-
+ Salaries
Civil Service Consultant (per hour)
P&A Supervisor (per hour)
Grad Assistant (per hour)
P&A
Supervisor
Grad
Assistant
-
-
-
= Total Service Costs
(Subject to overhead charges)
-
-
-
+ Overhead
(T otal service costs * Overhead rate)
-
-
-
+ Equipment Use Costs (estimated)
Per hour depreciation, maintenance, etc
allocated based on total usage
-
-
-
-
-
-
-
-
-
= Total Costs (per hour)
+ Profit (to bring price to market rate)
$
-
$
-
$
-
$
-
$
-
$
-
(Per hour)
Source of Market Rate Comparison
(ie, bls.gov, competitor's quote, etc.)
$
-
What is the annual salary for
consultant 2 (Faculty / P&A)?
$
-
What is the annual salary for
consultant 3 (Grad Assistant)?
$
-
-
+ Supplies (estimated per hour)
Market Rate Comparison
What is the annual salary for
consultant 1 (Civil Service)?
-
+ Fringe
Civil Service Consultant (per hour)
P&A Supervisor (per hour)
Grad Assistant (per hour)
= Total Price Charged to Customer
YELLOW
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Use appropriate fringe rate for each job class
See website at: www.umn.edu/ohr/payroll
40.1% * salary from above
(2010 Rates)
33.3% * salary from above
25% * salary from above
Actual University overhead rate is 63%
Market Driven Pricing
The following methods should be used to price based on
market:
• Compare price to a similar good or service from an outside vendor used by
your department or another department at the University.
• Call and request a quote from an outside vendor.
• If activity is not available outside of the University, determine a similar effort
with similar skill levels and request quote from an outside vendor.
• Request information about pricing from the University of Minnesota
Purchasing Department.
• Incorporate industry standards into pricing model (i.e.,bls.gov)
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