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14 Funding Section 3 n Costing You need to cost the research out carefully. There should be plenty of expertise in this regard in your institution. You should make sure that you are familiar with your institution's approach to research costing before you start to discuss the possible costs for a research project with a third party. Many research institutions are charitable institutions and cannot subsidise purely commercial research. There is also a drive towards sustainability for the UK research base. This means recovering the true cost of any research undertaken. As a consequence the concept of Full Economic Costing (FEC) has been introduced. Historically, the method used to cost a research grant or contract simply identified those costs which the funder had agreed to pay. Under FEC, all costs of the proposed grant/contract must be identified; not just those the funder will actually pay for. The full economic cost of a research project includes the Directly Incurred and Directly Allocated costs. These are items and services incurred specifically for the Project. For example, Directly Incurred costs include the staff (research assistants), travel, consumables and equipment costs required to undertake the Project. Directly Allocated costs are the costs of resources or services on a Project, where those resources are shared with other activities or projects, for example, the cost of the time which Principal Investigators (PIs) and Co-Investigators (CoIs) spend on the Project, estates costs, the Project's use of research institution space (including heat, light, power, maintenance and depreciation of buildings and equipment), and Indirect costs (costs that are not related to any one project or activity but are required to maintain the research institution's infrastructure such as, secretarial and technical support, library, central administration and IT support). For contract research you would generally expect the funder to pay the full economic cost of the research plus a profit element. For other types of contract you might take into account factors such as the closeness of the research to your normal programme of research, the possibilities of its publication and the ownership of IP. For contracts with industry and commerce, most likely all the above would apply, plus certain taxes, such as VAT (see below). If the contract has an overseas element you also need to consider the fluctuation of exchange rates.