Costing and pricing
The Government introduced Full Economic Costing (FEC) as part of its commitment to long term financial sustainability in Higher Education Institutions (HEIs). FEC methodology is used by HEIs across the UK to calculate the cost of research projects, and takes account of all direct costs and associated indirect and estates costs.
It is LSHTM’s policy to calculate the FEC for all research applications regardless of the funder type, but the price is set according to the funder’s terms and conditions. This might be at a level equal to, higher or lower than FEC. All proposals for external research funding at LSHTM are prepared using the pFACT system.
Some of the terms used to describe FEC are unfamiliar. Please click here to download a Glossary of Terms for reference.
Full Economic Costing (FEC)
All research projects are costed using the method of Full Economic Costing (FEC).
FEC represents the cost of all resources needed to undertake a research project: The FEC is not dependent upon 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.
All proposals for external research funding at LSHTM are developed and internally approved using the pFACT system.
The Research Operations Office holds regular pFACT training sessions. Please contact email@example.com for details of these.
Access to pFACT
Staff who are on the LSHTM payroll and have undertaken pFACT training can access pFACT through the pFACT icon in the Novell-delivered applications window, in the MIS folder. Staff can also access pFACT remotely or via the School’s intranet:.
pFACT help page
For detailed information on using pFACT see the pFACT help page (intranet - staff only)
All proposals for external research funding at LSHTM are costed and priced using the pFACT system.
Costing policy is dictated to institutions through the FEC methodology, whereas LSHTM’s pricing policy takes account of LSHTM’s strategic and financial objectives. Increasing the pricing of research grants is essential for the future financial sustainability of LSHTM’s research.
Translating FEC into price
The FEC represents the cost of all resources necessary to undertake an individual project. The price represents what the funder is willing to pay and what the institution is willing to accept, i.e. it can be equal to, lower or higher than the FEC. The pricing of a research project should be informed by the FEC.
Pricing of a research project is not entirely within an institution’s control. In some cases the price is set and/or restricted by the funder. This means the FEC must be 'translated' into a price in accordance with the funder's terms and conditions.
- Will pay a proportion of FEC. This is currently set at 80% of the FEC with exceptions for project studentship stipend and fees (which will be awarded at 100%) and equipment (which will be awarded at variable rates). There are special rules for covering the costs of overseas collaborators.
Other UK Government Departments
- Should generally pay 100% of FEC on non-competitive research contracts.
- NIHR, which allocates research funds on behalf of the NHS, generally pays 80% of the FEC to UK universities.
- Will pay direct costs only, but may occasionally agree to pay some charges and indirect costs for certain projects.
- Will not fund the costs of Framework Programme 7 (FP7) at 100% FEC. The reimbursement (recovery) rate applicable will depend on the type of activity (eg. training, R&D, management), for which there are varying recovery rates (50%, 75%, 100%).
Open pricing policy
For commercial funders (UK and overseas) and Other Government Departments that competitively tender, there is flexibility to set a price that takes account of the market value of the research and the level of competition etc. Negotiations with funders should focus on the resources necessary to support the project and on what will be delivered. Costs should not be needlessly disclosed (especially to commercial funders).
The proposed project price should not be submitted to the funder without prior approval through the pFACT system. Research Operations Office should be contacted as early as possible (ie. Letter of Intent stage or even earlier) to advise on how best to manage price negotiations.