The Dark Art of Costing

Professor Massoura-McGonagall instructing colleagues in the dark arts

Sometimes costing a grant application can seem like a dark art, full of unfamiliar terms, complex algorithms, and strange exclusions.

The latest Grants Factory session sought to demystify the process, clearly setting out what you can and cannot apply for, how the calculations are made, and how Research Services can help.

It was led by Dr Andrew Massoura and Dr Jane Benstead. Between them they have an encyclopedic wealth of knowledge about how costing works. Based on this, here are my eleven key points for understanding the dark art of costing research proposals.

1.    Cost and Price Aren’t the Same Thing

To anyone like me who isn’t particularly business-savvy, these two can seem like synonyms. The cost of something is the price you pay for it, right? Well, no. The cost is how much money it takes to build, supply or run something; the price is how much you charge the end user for it.

The same holds true in research funding. The cost is how much the research infrastructure and project take to run; the price is how much you charge the funder for undertaking it.

In the UK, the government introduced ‘full economic costing’ (fEC) a decade ago to help universities calculate the true cost of doing research. There was a sense that they were underpricing their research in order to seem more attractive to the funders. Via an algorithm that gets updated annually, universities now have to work out the cost of doing all of its research.

This figure is a lodestone that helps the University decide what price it should charge for its work. Sometimes the price might not cover the cost, but there are other factors that still make it worth doing. 

2.     Each Funder is Different…

Whilst all funders broadly cover the cost of doing research, this means different things to different funders, and there are four basic models.

Model 1: Percentage of fEC

The Research Councils (RCUK) take the fEC algorithm as its starting point, and broadly pays 80% of it. This will include:

-       Directly Incurred Costs: the costs generated solely because the project is taking place;

-       Directly Allocated Costs: costs that exist already (eg academic time), but for which an allocation is being given towards the project.

-       Estates Rates & Indirect Costs: the underlying costs of keeping the university infrastructure going - but we’ll get on to that in a minute. 

Thus, in the RCUK model, you can get funding for an element of your time, and most non-staff costs (such as travel and subsistence), and indirect costs. That’s, essentially, all of your costs covered, but there are some quirks: for instance, PhD students aren’t allowed (funding from them comes through doctoral training centres), and equipment is only part covered.

Model 2: Direct Costs Only

Most charities, such as Wellcome and Leverhulme, only pay directly incurred costs. No directly allocated, and no indirect costs. However, they do offer 100% funding for these, and do usually allow PhD students. And, recently, they’ve become sticklers for not moving money between budget headings (without prior agreement) once an award has been made, which RCUK allows more flexibility on.

Model 3: Direct Costs + a Percentage of Overheads

This used to be the model that RCUK used before moving to fEC. Essentially, they offer 100% of direct costs, and a percentage of the direct costs as an overhead (also called Facilities & Administrative (F&A) or Indirect costs). This varies between funders. Thus, the European Commission (EC) offers 25% of direct costs for overheads, and the National Institutes for Health (NIH) generally 8%.

Model 4: The Mongrel

A specialism of the Learned Societies, for whom each scheme seems to be different. Thus, some of the British Academy and Royal Society schemes provide a percentage of fEC, others are direct cost only. With all research funding you should read the scheme guidance notes carefully, but here it’s crucial.

3.     ...But Sometimes They Mean the Same Thing

Remember what I said about Indirect Costs? And Estates Rates? Well, some funders call these ‘overheads’ instead, but essentially it means the same thing. They are all those ‘hidden’ costs that you wouldn’t necessarily think about. However, they are crucial for the running of the school, faculty or university, and sometimes make the difference between a project breaking even, making a profit or making a loss. If given a choice, always choose a funder or scheme that provides for these costs.

4.     You Get Funding in Arrears, not in Advance

It’s a common misconception that, once you get the award letter, the chest of gold will be couriered over the next day. But generally it doesn’t work like that. You have been allocated funding, but you have to spend first, and then invoice the funder for your actual costs. Which leads on to the next point...

5.     You Can Only Claim for Actual Costs

Okay: so you’ve said you’re going to spend £500 on hotels, £3,500 on travel, £1,000 on teaching replacement. You’ve been allocated the award - great - but as I said above, you don’t get the Reader’s Digest-style cheque to spend at will. The funder wants to see what you actually spent the money on, and will only pay out for that. Thus, if your hotel only cost £320, they’ll only pay for that. And for teaching replacement, your stand in will have to complete timesheets - as well as presenting their CV to the funder for its approval.

6.     We’ll Help with Staff Costs...

Staff costs are complex, but don’t worry: we can help with this. Funders are often specific about the salary grade you can appoint any research assistant at. For a postgraduate, this is generally the lowest point on Grade 6; for a postdoc, it’s Grade 7. Exceptions will only be made if you justify the need for someone with more experience, or for a named person who has the necessary skills set to undertake your research. More on justifying your costs in a minute.

Thus, just let us know what type of research assistance you want, at what full time equivalent (FTE), and for how long. We’ll do the rest. Think also about other staff such as technicians or administrators, for example. If you’re applying for a complex collaborative project, consider including the cost of a project officer. They will save you time in the long run, and will help to ensure a successful outcome.

7.     ...But You Have to Work Out your Non-Staff Costs Yourself

I’m sorry. Whilst Research Services can help with calculating staff costs, and working out your fEC, it’s up to you to estimate your non-staff costs. This is because you are far better placed to know what you need to undertake your research, from surveys to conference attendance, research assistance to ad hoc fieldworkers. However, there is a wide range of help out there. Some schools have dedicated research officers who can help, and the Faculty Funding Officers can talk about some of the generic costs you should think about. As well as these, you should consult the following:

-       UK subsistence: use the University’s rates (pdf)

-       UK travel: use National Rail

-       International subsistence: use HMRC rates

-       International travel: use sites such as Expedia

8.     Always Remember VAT

VAT is often overlooked. When you’re getting the price for an item to include in your proposal, suppliers often quote without VAT. Make sure you add 20%. If you’re unsure whether they’ve already included it, add it just in case. It can always be claimed back by the funder if not needed. Not including VAT is the most common reason for a shortfall in funding for project.

9.     It’s Value for Money, not Cheapness, that Matters

It’s easy to assume that pricing a proposal cheaply is an easy way to guarantee success, but it doesn’t follow. Not only do funders know when a project is unrealistically costed, but you don’t want to put yourself in a position where you aren’t able to complete your research for a lack of resources. However, you shouldn’t be wildly excessive either. Aim to offer value for money, and not be unrealistic in either direction.

Make sure you include all of your costs, and think through every step of the process. For instance, if you’re doing a postal survey as part of your project, make sure you factor in the cost of the postage.

On a related point, where a justification of resources is required, the funder doesn’t want you to ‘show your workings’ as to how a particular figure was arrived at, but rather wants an explanation of why you need that particular item, or that particular member of staff, in the first place.

10.  Talk to your School…

This is crucial. Many of the costs you seek will have a knock on effect on the school, so make sure you’ve got their buy in. For instance, if you’re seeking replacement teaching costs, are you being realistic in what you are asking for - or even whether you can be replaced at all for the period in question. If the funder is only offering part funding (such as RCUK for equipment), will the school be willing to pick up the other part? If they don’t pay for a specific element (such as the EC and tuition fees) can the school cover this?

11.  ...And to Research Services as Early as You Can

We can only help if you get in touch with us early. We say that you should give us a final draft application at least three days before the deadline, but the sooner you get it to us, the more help, advice and input we can give. If possible, make sure your application details have been put on KRIMSON, as this will help us administer your project, add your costs, and record your project. And, where you can, give us editing rights on the funders’ submission systems, as this allows us to add costs without you having to do so.

Thanks to Jane and Andrew for sharing their knowledge. If there is enough interest, we may rerun the session later in the year, but we definitely hope to run it annually. In the meantime the next Grants Factory session will take place on 16 November and will focus on applying for a Leverhulme Fellowship.