Calculating the grant/contract price
When to calculate the price
The Chief Investigator should calculate the price to be charged to the sponsor during the application process, prior to agreeing (even in principle) to any financial arrangements. Once negotiations have commenced the University is not in a strong position to revise budgets upwards in the event that, for example, overheads have not been incorporated into the final price.
University costing and pricing policy
Indirect costs (overheads) represent the true cost to the University of providing the infrastructure necessary to support research activity. The University Costing and Pricing Policy mandates a minimum indirect cost recovery factor of 35% to be applied to research project budgets (see exemptions below), with 45% - 60% charged where possible (particularly research with commercial partners). In simple terms, you should charge the sponsor a minimum of 1.35 times the sum of all direct costs (modified to include GST), and preferably 1.45-1.6 times. Cost recovery funding is distributed between the faculty and department.
Exemptions or exceptions to policy
Chief Investigators should always seek to include full indirect costs in the price of research work, as under-pricing diminishes the resource base of the University, and results in reduced income to faculties/departments. Other than those cases listed below requests to reduce or waive the minimum indirect cost recovery factor must be authorised by the Dean upon written request from the Chief Investigator, and should be supported by a compelling business case.
However, the University acknowledges that some schemes regulate how prices are set, and has prepared a list of exemptions from minimum indirect cost charging:
| Exemption |
Note |
|---|---|
| ARC grant |
Advice on ARC schemes provided separately |
| NHMRC grant |
Advice on NHMRC schemes provided separately |
| Australian Competitive Grants |
Do not include any amount for indirect costs |
| Schemes limiting indirect costs | Request maximum amount possible |
| Equipment over $100,000 |
Do not include any amount for indirect costs |
| Postgraduate Scholarships | Do not include any amount for indirect costs |
| Charitable Trusts & Foundations |
Often schemes do not provide for indirect costs. Request maximum amount possible |
How to calculate the price
External bodies will provide guidance on how they want a budget presented. This can range from a simple description of how you will spend the direct costs to a full project cost which shows the contributions from the sponsor, the University and any other contributors (both direct and indirect costs). Most will be happy with a total budget (rather than a breakdown) at this stage, with the University’s indirect cost recovery (35% minimum) presented as a lump sum.
The best way to work out the price to charge the sponsor is to use the UoM Budget Form which contains embedded calculations for the recovery of indirect costs and GST. Even where costs cannot be recovered the calculation of indirect costs is recommended as good practice. In these circumstances the form should only be used as preliminary budget preparation tool, and must not be submitted to the external body as part of the application.