Cost Recovery and Pricing Policy

Approving Authority:
Establishment Date:	9 March 2006
Date Last Amendment:
Nature of Amendment:
Date Last Reviewed:
Publication Reference:
Contact Officer:	Director, Financial Services

1.	Principles In general, the University expects that all costs incurred in the conduct of professional activities that attract a payment to the University or to a staff member will be recovered. Wherever possible, the University also expects to receive an additional margin or reasonable compensation for access to the expertise of its employees, for reinvestment in the University. 1.1 Where the University is a party to an agreement for provision of an activity or service: • Staff capacity, availability of resources and cost considerations will be adequately addressed prior to any commitment being made to a client or funding agency; • The full cost of an activity will be recovered in the price charged to the client or funding agency, wherever possible; • The price charged will include a margin for reinvestment in the University, where appropriate; • Any unrecovered costs will be properly recognised as a University in-kind contribution to the activity, where applicable e.g. in collaborative research; and • The University will adopt practices that provide reasonable assurance that public funding received by the University is not used to cross-subsidise its activities to gain a competitive advantage over the private sector. 1.2 In the case of approved professional activities, which attract income to a staff member from another organisation or employer, the University expects: • reimbursement for all costs borne by the University in the conduct of the work; and • reasonable compensation for access to the expertise of its employees and for providing an environment that is conducive to the performance of such work. This Policy does not apply to funding received from donations and bequests.
2.	Definitions For the purposes of this policy, Agreement can mean either a formal written contract executed by all parties, an exchange of letters committing the parties to certain things or a verbal arrangement between the parties to do certain things for an agreed fee. Further information on contract management is available at Contracts Management Capital and special costs means the sum of the cost of special space requirements, charged at suitable commercial rates, as advised by Buildings and Property Division from time to time, building works costs and depreciation costs for major equipment items. Cost Centre Head means Executive Dean, University Librarian, Executive Director of Administration and the manager of any other major cost centre that Council may approve from time to time. Costing/Full Costing means identification of all relevant costs associated with the activity, including capital and special costs, direct costs, infrastructure costs and GST. Direct costs are the total of all those costs that are easily identified with the project, including professional fees and/or payroll costs, specific service costs, consumables, equipment purchases, travel and per diems etc. GST stands for Goods and Services Tax, a 10% tax on sales and services rendered. Infrastructure costs (sometimes also referred to as indirect costs or overheads) are those costs that relate to the general infrastructure associated with the functioning of the University and are not easily calculated and assigned to the specific project or activity. They include but are not necessarily limited to financial, personnel and payroll services, legal, contractual and administrative services, buildings and grounds maintenance, utility costs, library, computing and telecommunications, laboratories, workshops, insurance and indemnity cover. Margin for reinvestment means a component of the professional fee or price charged to a client or funding agency that is over and above recovery of the full costs of the activity or service. It is a charge that is applied in pricing activities when a commercial return or a margin to compensate for risk is considered to be warranted. Pricing means the determination of the amount the client is charged, whether it be less or greater than the full cost of the activity, plus GST. Where the GST exclusive price exceeds full costs, the difference is margin or profit. Where the price charged is less than the full cost, the difference constitutes an in-kind contribution by the University.
3.	Policy 3.1 Wherever possible, the full cost of an activity, comprising all relevant direct, capital and infrastructure costs in accordance with the guidelines to this Policy will be recovered in the price charged to the client or funding agency. Any unrecovered costs will be recognized as a University in-kind contribution. 3.2 Subject to exemptions for specific categories of research funding outlined in the guidelines, the minimum charge to a client or funding agency to compensate the University for infrastructure costs will be 15% of the total direct costs of the activity. Discretion to vary the minimum infrastructure charge vests in the relevant Cost Centre Head. 3.3 The price charged for an activity will include a margin for reinvestment in the University, where appropriate. The margin for reinvestment will normally be guided by what the market for the activity will bear. Discretion to determine the margin for reinvestment vests in the relevant Cost Centre Head. 3.4 The price charged for activities where the University competes with the private sector for provision of the service, e.g., in consulting and in contract research, will normally include: (i) Generally accepted professional fees for the academic or professional staff member’s time to provide reasonable assurance of no unfair advantage over the private sector from undercharging for professional staff time and use of University infrastructure; plus (ii) All other direct and capital or special costs borne by the University in the conduct of the work; plus (iii) An additional margin, where the market will bear it. 3.5 Except with the approval of the Cost Centre Head, the budget or price charged for an activity will be in accordance with the above pricing clauses and the guidelines.
4.	Responsibilities For all activities that will attract a payment to a staff member or to the University 4.1 The staff member must: (i) consult their supervisor at the earliest possible time the activity is being considered, and before any commitment is made to the client or funding agency; (ii) consult Faculty Resources Officers, or staff in the Office of Research or Financial Services Division for advice on the budget or price to be charged for activities as per clause 1.1; and (iii) in the case of income received from activities as per clause 1.2, make arrangements with their Cost Centre Head for: • identification and reimbursement of all University costs; and • payment to the University of a share of the revenue equivalent to infrastructure levy as per clause 5.2. 4.2 The staff member’s supervisor must: (i) be satisfied the staff member has the capacity, relative to other priorities and commitments, to undertake the activity; (ii) be satisfied that the staff member has consulted on the budget or price to be charged, as per 4.1(ii); (iii) be satisfied that any University resources that need to be accessed are available; (iv) ensure that the Cost Centre Head is consulted, as appropriate; and (v) ensure that the activity is approved and undertaken in accordance with this and any other relevant University policies and guidelines, e.g. offshore teaching, delegations of authority to enter into contracts, intellectual property, risk management. 4.3 Faculty Resources Officers or staff in the Office of Research or Financial Services Division will provide costing and pricing advice consistent with this Policy and with reference to the associated guidelines and financial tools developed by the Financial Services Division from time to time. 4.4 The Cost Centre Head will ensure that other senior staff of the University are consulted about the activity, as appropriate.
5.	Distribution of Revenue 5.1 Direct costs will be reimbursed to the relevant cost centre where the expenditure is incurred. 5.2 A levy of 13.043% of the GST exclusive amount (the ‘infrastructure levy’) will apply to: (i) research and non-research revenue, subject to certain exemptions outlined in the guidelines and in the absence of alternative arrangements as per clause 5.3, below; and (ii) revenue credited to consulting accounts. 5.3 Different levies may operate in accordance with University policies and procedures for specific activities that are approved from time to time. 5.4 Infrastructure levy as per clause 5.2 will be distributed as follows: 10% to the capital development fund; 18% to a nominated central account; and 72% to a nominated Faculty account. 5.5 Subject to any over-riding contractual requirement, the margin for reinvestment or any surplus revenue remaining after recovery of all costs and distribution of infrastructure levy will be available to the relevant Cost Centre for expenditure for University purposes. 5.6 A Cost Centre Head may approve payment as salary of such amount of a consulting fee after deduction of infrastructure levy and all relevant costs borne by the University as is mutually agreed with the staff member. The University will deduct the applicable taxes and superannuation guarantee contribution from the staff member payment. 5.7 Cost Centre Heads will determine the distribution of their share of revenue in accordance with this clause 5 by agreement with relevant parties, which may include other Faculties, Academic Organisational Units, Areas of Strategic Research Investment and Centres.