Information on the Costing of Research Projects
Some issues to consider when preparing your application
Some principles
- ACU projects (i.e. Grants, commercial research or
research consultancy) should be fully costed.
- Grants: For grants, full costs will not necessarily be
sought in a grant application.The majority of competitive grant
schemes do not fund indirect costs and most will have rules
about ineligible budget items (e.g. Investigator salaries).
Remember that the costs not funded by a grant will need to be
borne by the University or by other sources, and by approving a
grant application the University may be certifying that it will
cover those costs.
Commercial research and research consultancies: You must
endeavour to seek full cost recovery for projects funded by
commercial research and research consultancies, as well as
pricing of tenders for commercial research and consultancies
that includes a profit margin.
It is a myth that the cheapest project wins the research grant
or tender.
I often see grant applications that have been under-costed.
Applicants are often very anxious about increasing budgets,
believing that a smaller budget makes their application or
commercial research more competitive. For the latter category
there is a “price point” that the sponsor is willing to fund and
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we do need to have regard to not-for-profit agencies that are
sometimes cash poor.
Having said that, ACU does receive sub-contracts through notfor-profit agencies that have been funded by the Federal
Government for a few million dollars to complete multi-state
longitudinal studies. In such cases, it is reasonable to ensure
full cost recovery on our sub-contracts.
Quality of your application is one of the most important
assessment criteria (if not the most important criterion) and
costing/pricing is infrequently an assessment concern (unless
you have applied for more than the maximum grant in the
scheme).
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Costing of Research Projects
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Some basic terminology
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Direct costs
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Fixed or variable costs
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Indirect costs/overheads/infrastructure costs
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Salary on-costs
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Indexation of grants
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Competitive neutrality
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Cost substitution
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Budget justification
Basic Terminology
Direct Costs of a research project are all costs (from all sources: not just the items you are
seeking funding for in an application or commercial research but also items funded from
other sources, including ACU contributions) that can be directly attributed to a specific
research project.
Fixed and variable costs Fixed costs do not change, irrespective of how much or how
many activities are undertaken. A fixed cost would be the development of a survey
instrument that is used multiple times with different subject groups. The number of hours you
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engage a research assistant to apply the survey instrument to subject groups is a variable
cost.
Indirect costs/overheads/infrastructure costs
Indirect costs (often called overheads or infrastructure costs) are costs for items that are
essential to a research project but cannot be accounted as a direct cost. E.G.
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University facilities such as libraries and IT networks
University services such as finance and accounting, research management, HR, etc.
Provision of space and general infrastructure (e.g. office and laboratory furniture and
equipment such as phones, faxes, desktop computers)
Major research equipment and facilities that are not devoted to one specific research
project.
In most cases, for research grants indirect costs are calculated at 125% of academic
salaries plus on-costs for laboratory based projects and 92% of academic salaries plus oncosts for non-laboratory based projects (this is a long standing policy of Universities
Australia, previously known as the Australian Vice-Chancellors’ Committee).
The University’s policy on “Commercial Research Conducted by Academic Staff” stipulates
the apportionment of “levies” (page 6 of the policy) as –
University – 10% if the funding is greater than $10,000 or 7.5% if the funding is less than
$10,000 or for charitable (that is, not for profit) organisations
Faculty – same as for the University distribution. (Clause 6.2.4 states, “The Faculty will
determine the distribution of these funds”)
Full-costing of research projects means exactly that. In practice, full project costs are
calculated by adding direct and indirect costs of the research project.
Pricing of research projects for commercial research or research consultancies –
Unless there are good reasons not to, tenders for commercial research and research
consultancies are priced by adding a profit margin to the full-cost of the research project.
The profit margin is usually calculated as a percentage of academic salaries but other
factors need to be taken into account, such as the market value of the services and what you
are “giving up” by accepting a contract (e.g. restriction on publication).
Salary on-costs should not be confused with indirect costs/overheads.They are a direct
cost and comprise superannuation, workers’ compensation, payroll tax, recreation leave
loading, and long-service and maternity leave provision. For research applications, tenders
and commercial research, 28% is a commonly accepted level (being used by the Australian
Research Council).
Indexation of grants. Some government funding organisations (e.g. ARC) index successful
grants. This means that grant allocations are adjusted annually to take account of increased
costs. Indexation is usually less than the inflation rate. Normally, where grants are indexed
the scheme guidelines will say so and may also include a rule that you are not allowed to
include any contingency to account for increased costs.
Competitive Neutrality is about ensuring that the business activities of publicly owned
entities (including universities) compete fairly in the market when it is in the public interest for
them to do so. If ACU’s commercial research is not fully costed and appropriately priced in
instances where we may be competing for business with a private entity, the University may
be in breach of Commonwealth Competitive Neutrality Guidelines/Legislation.
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Cost substitution means to use grant funds to pay for budget items that, if not funded from
the grant, would nonetheless be covered by ACU. E.g.
You have an allocation from your Faculty of half a research assistant. You use your grant
budget to reimburse the Faculty for the cost of the research assistant, as you will be using
the RA for the project.
Budget justification is about demonstrating in a grant application why a particular budget
item is either essential or not essential but would add value. Secondly, it is about justifying
the cost of the budget item.
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Recommend including at least 20% to 30% of non-essential justification to a research
grant budget request. Most successful grant budgets are cut (especially by large
agencies such as the ARC and NHMRC) and if cuts are targeted at non-essential
items there will be less impact on your ability to complete the project.
Commercial research is not usually associated with funding cuts but the price is
negotiated to match the deliverable. Accurately pricing the cost of a deliverable is
essential as you and the University can be held accountable for failure to “deliver”
within the terms of the agreement.
When justifying a budget item, be careful to be consistent with the described
research program. For example, if you are seeking funds for a research assistant, in
your justification you should describe the tasks in the research plan that the person
will be responsible for performing to demonstrate that the position is indeed essential
and demonstrate that the level and fraction of appointment is appropriate to the tasks
to be undertaken.
When grant assessors are considering whether the cost of an item is justified, they
are typically drawing on their own experiences of what is reasonable. If your costing
appears reasonable then little attention will be given to your cost justification. You
need to pay more attention to justifying cost if you are requesting an item that is
“unusual” but you can justify why the cost is unusually high (or maybe low, if a
supplier is providing the item below cost).
General research budget costing guide –
1.
Determine and cost what ACU already has that will be
essential to the project
2.
Determine and cost what will be essential to the project
that ACU does not have
3.
Determine and cost what would add value to the project,
but is not essential, that ACU does not have
4.
Determine the project’s indirect costs
5.
If you are applying for a grant, determine which items
above are eligible budget items for the scheme your are applying to. Your grant
application should seek all eligible budget items, unless you have a valid reason to
seek a reduced budget (e.g. scheme limit on amount that can be requested).
6.
If you are tendering for commercial research, all of items
1,2 and 4 must be included as costs to be borne by the client. You may include items
from point 3. In addition, a price including a profit margin needs to be identified,
taking account of your discipline/profession and what is charged by private
consultants. Don’t under sell yourself.
Costing of some commonly requested “direct” budget items
Salaries and salary on-costs
When costing salaries you must take account of the following:
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1. Existing staff: the salary and on-cost value of the time they will spend on the project
2. Staff to be appointed with external funds: the level and fraction of personnel you will
need, taking into account the role of the person in the project and ACU’s
classification descriptors (outlined in the relevant Enterprise Bargaining Agreement).
If you are applying for a research grant, be aware that the majority of successful
grant applicants will have their budgets cut: if you can make a case for requesting a
higher-level of staff and/or a higher fraction do so (if you do not request a higher-level
you may end up with insufficient funds to employ the level and/or fraction of staff you
need for the project).
3. Salary on-costs: calculate at the rate of 28% regardless of the type of appointment.
4. Appointment expenses: your Faculty or Institute Administration Office should be able
to advise you about how much you should budget for appointment expenses. HR
may also be in a position to provide advice as they have an institutional perspective
and deal with new staff appointments and transfers on a regular basis. Appointment
expenses can vary depending on where you wish to advertise, what relocation
expenses if any should be offered to successful candidates, and whether you require
shortlisted applicants based outside of your city/town to be interviewed in person or
by phone. For grant application budgets, check funding rules carefully as many
schemes will not fund this expense (in which case the Faculty or Institute would need
to cover the expense).
5. Use salary rates that will be current for the proposed period of employment. Take into
account Enterprise Bargaining increases. If the project runs beyond the current
Enterprise Bargaining Agreement, use 4% per year for years not covered by an
Agreement (this is an indicative amount).
6. Take salary increments into account and accrued leave of new staff . If you appoint
someone from within ACU, the appointee could be at the top of their scale and may
also have accrued long service and recreation leave that is due. You don’t want to
inherit someone else’s financial liabilities!
7. If your project is collaborative and involves the appointment of staff by collaborating
organisations, their own salary scales (not ACU’s) should be used for those staff.
8. If you are applying for a salary for a named “research fellow”, check the scheme
funding rules carefully. Salary levels and on-costs may be prescribed by the Scheme.
If they are prescribed and the equivalent ACU salary is higher, then if successful the
appointment would have to be made at the higher salary level with ACU paying the
difference (normally the Faculty or Institute). A Faculty or Institute may also choose
to “top-up” a fellowship salary to entice an attractive candidate.
9. Your Faculty or Institute Administration Office may be able to check your draft salaries
budget for correctness or seek advice from a colleague who is experienced in developing
project budgets, specific to your disciplinary interests.
Research Scholarships
1. If you are costing a research scholarship for a grant, check the scheme funding rules
carefully. Many schemes prescribe scholarship rates as well as additional costs such as
appointment expenses, relocation and thesis allowances. Some may fund 6 month
extensions for PhD scholarships and others won’t. Usually where a rate is prescribed the
scholarship amount will be indexed and you cannot budget a contingency amount to
cover increases.
2. If the scheme does not prescribe the scholarship rate, the prevailing APA rate can be
used or the current University scholarship rate. In these cases build indexation and other
costs into your budget.
3. Research scholarships as part of contract research or consultancies are rare because of
IP and publishing conditions. However, if you are costing one follow advice from point 2
above.
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4. Consider whether a top-up to a requested scholarship is appropriate to give you a better
chance of making an appointment if your proposal is successful. Check the scheme
funding rules to determine whether top-up requests are allowed, or must be funded from
another source.
5. You may also consider, where you already have a scholarship secured, seeking solely a
top-up scholarship. Follow advice from point 4 above.
Teaching relief/relief from other duties
1. If you are seeking teaching relief or relief from other duties from a grant scheme to allow
a person to dedicate time to research, check the scheme funding rules carefully, as the
scheme may prescribe limits and salary rates to be used.
2. Where limits and salary rates are not prescribed use the salary-rate and salary on-costs
of the staff member to be relieved proportioned to the hours of relief being sought.
Equipment
1. Equipment to be used specifically for a grant-funded project. Before costing, check
the scheme funding rules carefully. In particular look out for:
a. Limits (upper and lower) to funding that can be requested for equipment.
b. Requirements for quotes to be either discussed or attached.
c. Requirement that equipment sought from a particular scheme be required solely to
support a particular project (i.e. will not be used more widely), or alternatively that
funding only be sought equivalent to the fraction of use of the equipment for the
project.
d. Requirements for contributions towards the cost of equipment.
e. Restrictions on requests for general maintenance and installation costs.
2. Grant-funded equipment to be built in-house. Many grant schemes will fund hardware
required to build research equipment but will not fund workshop costs involved in
building it (because workshop time is usually considered to be an indirect cost). In
these cases you should cost hardware and building costs and in the grant budget just
request “the equipment” without mention of it being built in-house.
3. Grant-funded expensive research infrastructure. Again, check the funding rules
carefully to determine what can be sought from the scheme and what needs to be
covered from other sources. Schemes funding expensive equipment often require
contributions towards the cost from other sources. They also may or may not fund the
costs of installation and maintenance and running costs, and if maintenance and/or
running costs are funded it may only be for a specified period. Maintenance and running
costs of major research infrastructure can be very expensive: if these costs will not be
met (or will only be partially met) by the scheme then your Faculty or Institute may need
a viable plan for these costs to be recovered (e.g. by charging users, but note the grant
scheme may also place restrictions on cost recovery).
4. Equipment funded from contract research and consultancies. This is simply a matter of
costing the equipment, installation costs, and maintenance and running costs for the
duration of the contract (proportioned if the equipment will not be dedicated to contract
project use).
5. Very important. You must let your Faculty or Institute know as early as possible if
equipment to be requested will have space implications (particularly building of new or
renovation of existing facilities), as approval and costing involvement from other areas of the
University may be required and there are likely to be costs involved that you hadn’t
envisaged.
Travel
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1. ACU’s Division of Finance website should be reviewed to ensure conformity with
University travel policy - http://www.acu.edu.au/staff/services/finance/travel/
2. Travel costs should be broken down into the following components:
a. Airfares: international and local
b. Accommodation
c. Per-diem
d. Other modes of travel (e.g. train or coach, car hire, private vehicle mileage allowance,
etc.)
e. Other (e.g. visa expenses)
3. If you are applying for a grant, check the scheme funding rules for any restrictions or
requirements relating to travel requests. Also check general budgeting rules as there
may be a requirement to use “current costs”: if there is be careful to cost full, not
discounted rates, so that costs increase after award your grant may still be sufficient
to purchase travel at a discount. If there is no requirement to use “current costs” you
should still cost full rates but also build in a contingency line to account for cost
increases (particularly given the current oil pricing climate).
4. Airfares. ACU travel policy requires nearly all staff to fly economy class (and grant
schemes generally only fund economy class fares). Cost economy airfares and when
seeking a quote ensure the provider has estimated travel dates (at minimum they will
need to know what season (peak, shoulder, low) and year you intend to travel). Do
not cost discounted airfares because (a) you will not know at time of submission of
application or tender if the discount will still be available, and (b) if you are applying
for a grant and you are successful your budget is likely to be cut.
5. Accommodation. Once again, do not cost discounted accommodation rates (for the
same reasons mentioned above). If you intend to stay with family or friends still cost and
seek funds for accommodation as the additional funds may be able to be used to offset
other cost increases. Funding organisations and clients do not expect you to “rough it”,
so you do not need to cost for sub-standard accommodation. On the other hand, be
reasonable and don’t cost five star hotels unless you can justify the need (e.g. in some
cities that might be the only “safe” accommodation).
6. Incidental travel expenses, including meals, local travel such as train, bus, taxi. ACU
travel policy is to reimburse costs on production of receipts (see link to travel advice at
point 1 above). It is difficult to determine what will be the cost of incidental expenses in a
project less than 12 months let alone one that is over a three year period. In order to
provide some benchmark for researchers to calculate incidental travel costs, including
accommodation at Australian capital cities, the Australian Tax Office per diem rates for
2009/2010 should be used as a widely accepted standard. The complete URL for the
2009/2010 per diem rates is http://law.ato.gov.au/atolaw/view.htm?rank=find&criteria=OR~TXD%2FTD200721~make
sref~exact:::OR~TXD%2FTD200721(%3F~makesref~exact:::OR~TXD%2FTD200721%
2FNAT%2FATO%2F00001~makesref~exact:::OR~TXD%2FTD200721%2FNAT%2FAT
O%2F00001(%3F~makesref~exact:::OR~TXD%2FTD200721%2FNAT%2FATO~makesr
ef~exact:::OR~TXD%2FTD200721%2FNAT%2FATO(%3F~makesref~exact&target=FA
&style=java&sdocid=TXD/TD200915/NAT/ATO/00001&recStart=1&PiT=9999123123595
8&lookupdocument=TXD%2FTD200721%2FNAT%2FATO%2F00001&lookupquery=ran
k%3Dfind%26style%3Dhtml%26sdocid%3DTXD%2FTD200721%2FNAT%2FATO%2F0
0001%26recStart%3D1%26PiT%3D99991231235958&lookuptitles=Determinations%20(
Including%20GST%20Bulletins)~Taxation~TD%202007%2F21~Income%20tax%3A%20
what%20are%20the%20reasonable%20travel%20and%20meal%20allowance%20expen
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se%20amounts%20for%2020072008%3F%20(As%20at%2025%20July%202007)&recnum=2&tot=2&pn=ALL:::ALL
This URL is ridiculously lengthy but provides access to the per diem rates current as at
June 2009. An alternative is to go to the ATO legal database and search for per diem
expenses (short URL - http://law.ato.gov.au/atolaw/ ). Go to the top right hand corner of
the ATO legal database page and select “all of the legal database” and then the current
financial year per diem rates.
7. Travel justification issues for grants. When applying for grants there are specific travel
related issues you need to consider:
a. If travel budgets on grant applications are very large it can help to demonstrate that
you have tried to economise (e.g. by combining trips with round-the-world tickets).
However, do not try to economise through use of discounted rates or you may end up
with insufficient funds to cover essential travel.
b. If more than one person is travelling to a destination you will need to justify why that is
essential.
c. Justification of lengthy and multiple/frequent trips is normally looked at closely by grant
assessors
Maintenance and Other
1. The kinds of things that are costed as Maintenance and Other vary significantly between
discipline areas and the type of project being proposed.
2. Please take advantage of advice available from your Faculty or Institute Administration
Office and more experienced peers and always ask yourself if you might have missed
something. Also, check that things you think will be available to you actually will be,
when you need them (for example, the Department’s digital video recorders might be
needed for student projects at the time you were hoping to use them, so you may need
to request dedicated equipment in a grant application).
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