FMPM 621 Pricing - Commercial and Non-Commercial Activities Procedure

Intent

This Procedure supports and must be read in conjunction with FMPM 620 Revenue – Commercial and Non-commercial Activities Policy, and outlines the requirements for:

• pricing applications for external grant funds and negotiating or tendering to supply goods or services to external parties;
• setting and waiving indirect costs (overheads); and
• utilising project surpluses.

Scope

This Procedure applies to all staff and individuals acting on behalf of the University involved in the management, review, and approval of Commercial and Non-Commercial activities/projects at James Cook University (JCU; the University) Australia (excluding JCU Brisbane). This Procedure does not apply to the Singapore campus.

This Procedure applies to any commercial or non-commercial activity/project undertaken on behalf of JCU, including, but not limited to, revenue generating activities/projects involving grants, contracts, consultancies and commercial services. It does not apply to untied cash donations covered by FMPM 940 Donated Property, Plant, Equipment and Cash.

Definitions

Except as otherwise specified in this Procedure, the meaning of the terms used are as per FMPM 620 Revenue – Commercial and Non-commercial Activities Policy or the FMPM Glossary.

On-costs - Costs applied to salaries to cover legislated employment obligations including superannuation and leave entitlements.

Project Surplus - Fee on top of full cost recovery for a commercial project (profit margin). Fee charged to third party minus taxes, direct and indirect costs.

Procedure

1. Responsibilities

2. Viability

When considering a commercial or non-commercial activity/project, the following factors must be taken into account to ensure viability:

• the University resources required for the activity/project;
• whether the proposed pricing aligns with this Procedure and any relevant University guidelines;
• whether provisions for installation, establishment and recurrent costs associated with the purchase of equipment or the establishment of a facility within the project are adequate;
• the ability to meet project milestones, ensuring that the time commitment of staff, including the Chief/Principal Investigator(s), is appropriate considering existing workloads;
• whether the project aligns with the University’s risk appetite, particularly in relation to reputational risk and indemnity;
• the accuracy and availability of any cash and in-kind contributions proposed to be contributed by the University, ensuring these resources will be provided if the application is successful; and
• whether appropriate approval for cash contributions have been obtained and documented prior to submission.

3. Costing

3.1 All projects must recover the maximum allowable indirect cost rate.

3.2 Direct Costs

All direct costs must be included in the activity/project budget. This includes:

• Base salary and on-costs for all staff involved in the activity/project, regardless of whether the costs are covered by the external third party/funding body or by JCU as an in-kind or cash contribution.
• Salaries of the Chief/Principal Investigators and other University staff involved must be included, even if their salaries are funded through other sources (such as general operating funds), unless:
  • excluded by rules of the grant scheme rules, or
  • a waiver of the full-costing requirement has been obtained (refer to clause 4).
• Any non-salary costs incurred in the activity/project including, but not limited to, facility fees, consumables, travel and equipment purchases.
• Any Higher Degree by Research (HDR) scholarship/s associated with the project. Where JCU assigns a HDR scholarship to a project, it must be recorded as a cash co-contribution, and requires documented approval by the Dean, Graduate Research and Researcher Development before inclusion in the activity/project budget.

3.3 Indirect Costs (Overheads)

• The indirect cost (overheads) rate of 35% must be applied to the total direct costs (as described at 2.2) for the activity/project. This appliesregardless ofwhether the costs are to be covered by the third party or by JCU as an in-kind or cash contribution.
• Indirect costs must be applied unless:
  • excluded by the rules of the grant scheme;
  • a waiver of full-costing requirement has been obtained (refer to section 3); or
  • the funding is received for the sole purpose of supporting a HDR scholarship.

3.4 Project Surplus

• A project surplus should be incorporated into the pricing of commercial activities/projects. The appropriate size of the project surplus will depend on the degree of commercial benefit to the third party and, conversely, the extent to which the University retains unregistered access to the project results.
• The relevant College Dean or Institute Director is responsible for setting the default project surplus rate or an appropriate range of project surpluses.
• A surplus can only be included in the activity/project budget if full indirect costs are being charged.

3.5 Example application of rates:

Notes:

• Any activity/project that constitutes the provision of a good or service in Australia attracts Goods and Services Tax (GST) at a rate of 10% (refer FMPM 732 Goods and Services Tax Procedure). Financial and Business Services (FaBS) can provide advice in respect of pricing GST.
• A project surplus of 25% is used in this example. The project surplus is set by the relevant College Dean or Institute Director.

4. Waiver of Full-Costing Requirement

The full cost of an activity/project, including direct costs and indirect costs (overheads) and any project surplus, must be included in the price charged by the University to the third party or funding agency, unless the project is:

4.1 A Non-Commercial Activity/Project such as:

• A grant with specific exclusions: Indirect costs will be waived to the extent required under published Grant Funding Rules (e.g. ARC) or agreed Collaborative Venture Guidelines (e.g. CRC). In this case, waived indirect costs will be included as an in-kind contribution by JCU.
• A Non-Commercial Activity/Project with exceptional circumstances: the Deputy Vice Chancellor, Research or Vice Chancellor may waive or reduce indirect costs and approve the inclusion of salaries as in-kind contributions, where:
  • Funding support is solely for a student thesis project.
  • The project is funded by a charitable or community organisation.
  • Funding is solely for sponsorship of a salaried position at the University.
  • The project is sponsored by an organisation that genuinely cannot commit a budget sufficient to fully cover such costs, and there is demonstrable value to the University.

4.2 Commercial Activities/Projects: For research-related projects of total value greater than $2m the Deputy Vice-Chancellor (Research) may waive or reduce the full-costing requirement in exceptional circumstance, such as when a commercial research activity/project is valued at greater than $2m and aligns with an area of strategic research importance to the University and provides significant additional benefit to the University.

4.3 The requirement to include all direct costs and indirect costs (overheads) cannot be waived if the proposed pricing structure would breach the principles of competitive neutrality.

4.4 The requirement to include all direct costs and indirect costs (overheads) cannot be waived retrospectively. If a staff member has proposed a price to a third party or funding agency before  following the requirements outlined in FMPM 620 Revenue – Commercial and Non-Commercial Activities Policy and this Procedure, the project surplus will be reduced in the first instance. If the price remains below the full cost, it must be renegotiated.

5. Pricing

5.1 A pricing tool is available in the University’s research contract management system (GECO) to assist in pricing both commercial and non-commercial activities/projects in accordance with this Procedure.

5.2 Any variation of pricing from that described in this Procedure must be approved by the relevant delegate ahead of any negotiation of price with the third party.

5.3 The activity/project price must be presented as follows:

• Group the total direct costs, indirect costs (overheads) and project surplus in one line.
• Show the GST as a separate line to avoid any confusion about the total GST-inclusive price.

6. Project Accounts

6.1 For research activities/projects, a separate project account will be established by FaBS based on information provided by the Research and Innovation Services office, if the activity/project revenue can be counted towards the Higher Education Research Data Collection (HERDC).

6.2 For non-research activities/projects, a separate project account is required if, based on the information provided by the organisational unit, one or more of the following criteria are met:

• Financial reporting is required
• Funding had to be applied for, or services requested
• The project has a defined end date
• The project has milestones or deliverables
• Any unspent funds must be returned to the funding body
• The value of the contracted activity/project is $10,000 or more.

6.3 A separate project account is generated upon execution of the contract/agreement and after obtaining Ethics approval (where relevant). For research activities/projects, a project account may be created earlier in limited circumstances upon written request to the Research and Innovation Services office.

6.4 FaBS will determine the most appropriate fund pool for all new project accounts.

6.5 Indirect costs (overheads) are applied at the time the account is established, based on the contractual terms of the agreement or the activity/project pricing budget, unless otherwise directed. If revenue exceeds the original budget (e.g. due to contract extensions), indirect costs (overheads) will be applied to the additional income on the same basis as the original terms, unless otherwise directed.

6.6 The FaBS Grants team is responsible for financial reporting and invoicing related to project accounts.

7. Use of funds

7.1 Revenue from grants, contracts, consultancies or commercial services will be used to cover all costs associated with the activity/project, including:

• Non-salary direct costs: all non-salary direct costs associated with the activity/project.
• Direct salary costs: costs related to the salaries of staff employed on the activity/project. This includes:
  • Staff employed on and paid directly from the activity/project account; and
  • For staff whose salaries are paid from another source (e.g. operating funds), but whose costs are covered by grant funds, an amount equivalent to salary cost (as included in the activity/project pricing), must be transferred from the project account to the account from which the staff member is paid. Any remaining funds will be transferred into the relevant College or Institute Strategic Research Fund.

7.2 Indirect costs (overhead): The indirect costs (overheads) priced in the activity/project budget are allocated 50% to the College or Institute Strategic Research fund of the Principal Investigator (or split across multiple colleges or institutes if the Principal Investigator has advised a split between researchers) and 50% to JCU Corporate (to cover university-wide enabling expenses).

7.3 The relevant Dean of College or Institute Director is responsible for approving the use of any project surplus remaining after all direct and indirect costs have been met. Once all costs are covered, the remaining project surplus will be applied in the following order:

• If indirect costs (overheads) were not included in the activity/project pricing, an amount equivalent to the waived overheads will be charged to the activity/project.
• The remaining balance of the activity/project revenue may be applied in accordance with the Distribution of Unspent Research Funds Guideline.
• Under no circumstances are project surpluses to be paid out to employees.

Related policy instruments

FMPM 620 Revenue – Commercial and Non-Commercial Activities Policy

GECO – Research Information Management System for Grants, Ethics, Contracts and Outputs

Distribution of Unspent Research Funds Guideline

FMPM 940 Donated Property, Plant, Equipment and Cash

Schedules/Appendices

Nil

Administration

NOTE: Printed copies of this procedure are uncontrolled, and currency can only be assured at the time of printing.

Approval Details

Revision History