fEC week on the Blog! Introduction to full economic costing

Next week is fEC week on the Blog! Each day we will be explaining a different element of fEC as a quick reference guide to help you prepare the budgets for your research proposals.

What is fEC? – Full Economic Costing (fEC) is a standardised method of calculating the actual costs of an activity which was developed in response to the funding councils’ ‘Transparent Approach to Costing (TRAC)’ methodology with the aim of increasing funding whilst making HEIs responsible for their own financial stability. TRAC data indicated that publicly-funded research in particular was significantly under-funded as the true costs of running the activity were not being adequately identifed or subsequently reimbursed. fEC was introduced for all UK HEIs in September 2005, with the first fEC grants being awarded from April 2006.

In essence, fEC is a national, standardised costing method that provides a forecast of the full cost of undertaking a research project.

How do I calculate the fEC? – All bids at BU must be costed in accordance with the principles of fEC by the CRE Operations team using BU’s costing software. Everything must be costed and cross-checked against the funding body’s guidelines. You must ensure all costs are included at this stage as funders will not make up a shortfall after money has been awarded, but ensure costings are realistic and offer good value for money as most funders require a full justification of the requested resources.

How do I price the work? – After completing your costing you will need to establish what funding is available, i.e. the price, and consider how this compares to the cost (fEC recovery). The majority of research funders have set guidelines stating how much of the Full Economic Cost (fEC) they will fund or whch elements of the costing they will fund. However, where the funder/client does not have guidelines on this then a decision needs to be made of how to price the work to be undertaken. Pricing should be considered carefully and discussions should take place after the fEC has been calculated. Pricing decisions should always be discussed with your Deputy Dean (Research & Enterprise ), Dean and/or Director of Operations prior to quoting a price to the client. Pricing for contract research and enterprise should be carefully considered to ensure that ‘pricing precedents’ are not established with a particular funder.

  • Research Councils and NHS 80%
  • Charities averaging around 50%
  • EU around 75%
  • Industry 100%

The rate for commercial work varies but BU aims to recover 110% fEC across the whole Research & Enterprise portfolio. Therefore surpluses must be achieved where possible (i.e. over 110% fEC) to cover the deficit made by research (typically 80% fEC and lower).