Research Indirect (Overheads) Costs

Research Indirect (Overheads) Costs

SUMMARY

The Research Indirect (Overheads) Costs Policy establishes the University's requirements for external research contracts and research grants (those not exempt) to include a contribution towards the Indirect Costs (overheads) of the University and to set out certain exemptions to that requirement. The policy also details how much the minimum contribution should be and how it will be allocated internally.

POLICY

Purpose

To outline the requirement for external research contracts and research grants (those not exempt) to include a contribution towards the Indirect Costs (overheads) of the University and to set out certain exemptions to that requirement. This policy also details how much the minimum contribution should be and how it will be allocated internally.
Overview

Indirect Costs (commonly also referred to as overheads) are real costs incurred by the University while doing research. If the University undertakes research paid for by externally funded grants and contracts that provide only for the Direct Costs of projects and that make no contribution to the University’s Indirect Costs, the University effectively subsidises those projects from its own resources.

While recognising the competitive and funding pressures facing researchers, the University is a provider of high-quality and high-value research and the costs paid by sponsors and clients should reflect this quality and value. The Excellence in Research for Australia (ERA) initiative has demonstrated that the University is conducting research that is the equal of that conducted at the very best institutions worldwide. The value of the University’s research must be recognised and this in part is reflected in the costing of research grants and contracts to include a contribution towards Indirect Costs.

DEFINITIONS

Administrative and Management Services: include faculty processes (such as procurement and appointment processes) as well as University processes (such as financial, procurement and legal).

Collaborative Research Contract: an agreement between Macquarie University and one or more other organisations in which all or most partners make contributions of expertise or facilities as well as cash to conduct a research project for the benefit of all partners. Intellectual Property deriving from the research is the property of the University, but the partner may be licensed to use the Intellectual Property on a non-exclusive or exclusive basis.

Commercial Research Contract: an agreement between Macquarie University and one or more other organisations in which Macquarie University makes available the expertise of researchers for cash return to conduct a project that is solely for the benefit of the organisation paying for the conduct of the research project. Intellectual Property deriving from the research is the property of the external organisation.

Contract Sum: the sum of the Direct Costs, Indirect Costs and additional monies (if applicable, normally in the nature of a profit margin) payable to Macquarie University for conduct of a research project.

Direct Costs: all costs incurred over the length of the project and specifically for the purpose of the project, such as staff costs (salary costs plus on-costs and any applicable loadings), travel and accommodation, consumables, project management costs, equipment that is purchased for the particular project in question, communications and subcontractors’ fees and expenses.

Indirect Costs: overheads and other costs that provide necessary resources for the purpose of the project but are NOT specifically costed items dedicated to the project. These costs relate to the provision of:
  • administrative and management services
  • buildings and physical infrastructure (including maintenance and repair)
  • research equipment and facilities that do not incur per use charges
  • information and communication technology (ICT) infrastructure.

Indirect Costs may also include costs associated with managing the relationship with the other parties involved in the project.

Intellectual Property: has the same meaning as is given in the Intellectual Property Policy. As at the date of this Research Indirect Costs Policy, Intellectual Property includes all copyright and teaching material and all rights in relation to inventions (including patent rights), registered and unregistered trademarks (including service marks), registered and unregistered designs, confidential information and circuit layouts and all other Intellectual Property rights resulting from intellectual activity in the academic, industrial, scientific, literary and artistic fields recognised in domestic law anywhere in the world.  

Research Grant: funding for a research project resulting from an application process which is open to more than one organisation and which is to some degree investigator-driven.

Scope

This policy applies to all staff, students, Honorary, Visiting and Clinical Academics, and any other personnel involved in the conduct of externally funded research on behalf of the University.

Policy

Organisations that fund the University to conduct research must be made aware of the Direct and Indirect Costs associated with the conduct of projects and must be requested to make a contribution towards the true costs of the research.


The Indirect Cost of a typical research project is 125% of total Direct Costs of the project. Thus, a fully funded project would include all Direct Costs, plus the additional 125% of these costs to cover Indirect Costs.

In the preliminary costing negotiations with external partners in relation to potential research projects, University Staff must make provision for Indirect Costs, including the project-specific costs of project management.

RESEARCH GRANTS AND COLLABORATIVE RESEARCH CONTRACTS

Pricing of Indirect CostsOften the full Indirect Costs cannot be recovered in the context of a Research Grant or Collaborative Research Contracts. The University accepts that both the University and the external funder must contribute to these costs. The minimum contribution towards Indirect Costs to be paid by an external funder is the sum of the following:
  • 25% of the first $200,000 of the Direct Costs, plus
  • 15% of any amount of the Direct Costs above $200,000.
Where the minimum contribution toward the Indirect Cost is agreed, the project documentation must stipulate that the University will own all Intellectual Property rights in the project material. 

Allocation of Indirect Costs
The first $50,000 of the contribution of the external funding body towards Indirect Costs (that is the Indirect Costs related to the first $200,000 of Direct Costs) will be distributed as follows:
  • two-fifths will be retained centrally, and
  • three-fifths will be provided to the faculty of the Chief Investigator.

Where Direct Costs of the project exceed $200,000, two-thirds of the recovered Indirect Costs will be distributed to the host faculty and one-third will be retained centrally.

It is expected that, the contribution allocated to the faculty will be divided between the research area of the Chief Investigators and the strategic development of research within the faculty.

Numerical examples are displayed below.

Direct cost of projectIndirect costAllocation retained centrallyAllocation to host faculty
up to $200,00025%10%15%
Project direct costs = $150,000
Indirect costs = 25% of $150,000 = $37,500
Total project cost to sponsor = $187,500
Allocation retained centrally = 10% of $150,000 = $15,000
Allocation to host faculty = 15% of $150,000 = $22,500
Direct cost of projectIndirect costAllocation retained centrallyAllocation to host faculty
greater than $200,00015%5%10%
Project direct costs = $300,000
Indirect costs = 25% of $200,000 + 15% of $100,000 = $50,000 + $15,000 = $65,000
Total project cost to sponsor = $365,000
Allocation retained centrally = 10% of $200,000 + 5% of $100,000 = $20,000 + $5,000 = $25,000
Allocation to host faculty = 15% of $200,000 +10% of $100,000 = $30,000 + 10,000 = $40,000

COMMERCIAL RESEARCH CONTRACTS

Pricing of Indirect CostsIn the case of Commercial Research Contracts the starting point will be inclusion of full Indirect Costs, ie 125% of the total Direct Costs.

The Deputy Vice-Chancellor (Research), or authorised delegate, may approve discounts to this Indirect Costs rate associated with a Commercial Research Contract in certain circumstances. Examples include, but are not limited to:
  • when the University will derive benefits from the Intellectual Property developed in the research. Such benefits would typically include:
    • no restrictions on publishing of the outcomes of the research
    • University ownership of the Intellectual Property, and/or
    • University receipt of royalties or licensing fees derived from the commercialisation of the Intellectual Property.
  • when the University has, or will have, an ongoing research relationship with the companies involved.

The Executive Manager, Sponsored Research will respond to initial enquiries regarding discounts to Indirect Costs prior to requesting Deputy-Vice Chancellor (Research) approval.

In some industries, it may be more appropriate to charge Market Rates than an Indirect Cost rate on the Direct Costs. This must also be discussed with the Executive Manager, Sponsored Research prior to applying a Market Rate over an Indirect Cost rate.

In no case shall the discounted contribution towards Indirect Costs on a Commercial Research Contract be less than the minimum Indirect Costs described above in relation to Research Grants and Collaborative Research Contracts.  These minimum rates are subject to increase as the University deems appropriate at any future time.

Allocation of Indirect Costs RecoveredIndirect Costs will be distributed as follows:
  • two-fifths will be retained centrally
  • three-fifths will be allocated to the host faculty.

It is expected that the contribution allocated to the faculty will be divided between the research area of the Chief Investigators and the strategic development of research within the faculty.

EXCEPTIONS

Exceptions to Recovery of Indirect CostsThere are a limited number of exceptions to these specific contribution requirements. No contribution to Indirect Costs will be required on:
  • donations
  • any Macquarie University internal grant
  • any ‘Category 1’ grant - such funding attracts block grants that contribute towards the University’s overheads
  • any grant scheme that specifies (in the funding rules, guidelines or funding agreement) that no Indirect Costs or overheads may be charged
  • that part of a shared grant or contract that will be distributed to Macquarie’s partner university or universities, under a ‘Multi-Institutional Agreement’ or similar. In this case, the partner universities will impose their own overheads on the part of the grant that they receive, and Macquarie will only recoup Indirect Costs from the part of the grant it retains
  • travel grants (ie grants awarded solely to cover travel), because these represent little or no overhead cost to the University
  • competitively awarded grants of up to $10,000 in value
  • applications for research funding that are submitted through the NHMRC RGMS system even where the scheme is not listed on the Australian Competitive Grant Register
  • partner organisation funding referred to in an unsuccessful application for ARC Linkage Project or NHMRC Partnership (or equivalent) funding where the partner organisation wishes to fund a part or preliminary phase of the project and is committed to submitting a future Linkage Project application
  • external funding that is provided to cover the core operating funding of a facility or centre, which will normally be a national facility or centre. (Indirect Costs cannot be charged on a grant which itself is supporting Indirect Costs.)
  • grants for a specific and competitively awarded Fellowship or Scholarship
  • grants from a Cooperative Research Centre (CRC) of which Macquarie is a member.

The minimum Indirect Costs will be adjusted where the research funding entity regulates how prices are set in grants, thereby limiting the amount of cost recovery below the University’s minimum level.

Any other exceptions to the recovery and allocation requirements will require the approval of the Deputy Vice-Chancellor (Research) or authorised delegate.

Exceptions to Intellectual Property rightsAll exceptions to the ownership of Intellectual Property require the approval of the Deputy Vice-Chancellor (Research) or authorised delegate.

REVIEWThe University will review this policy annually and make necessary adjustments, taking into consideration costs to the University and other external factors (such as the competitiveness of the market for research services).

COMPLIANCE AND BREACHES
The University may commence applicable disciplinary procedures if a person to whom this Policy applies breaches this Policy (or any of its related procedures).

Policy Information

Contact OfficerDirector, Research Office
Date Approved3 June 2013
Approval AuthorityDeputy Vice-Chancellor (Research)
Date of Commencement3 June 2013
Amendment Historyn/a
Date for Next ReviewJune 2014
Related Documents

University Strategic Plans
Faculty Strategic Plans
NSW and Commonwealth government policies on competitive neutrality

Links
Australian Competitive Grants Register
Excellence in Research for Australia
Universities Australia
Policies / Rules Superseded by this Policy

Nil

KeywordsResearch, cost, overheads, infrastructure, Collaborative Research, Commercial Research
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