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Indirect Costs of Contract Research

  

Principle:

The costs of carrying out research, whether grant or contract based, fall into two broad categories: direct costs and indirect costs (also known as research overhead)

Indirect costs at one time were only recovered from research contracts in the form of overhead. However, the establishment of the Indirect Costs of Research by the Government of Canada allows for the recovery of indirect costs of research funded by the Canadian Institutes of Health Research, the Natural Sciences and Engineering Research Council of Canada, and the Social Sciences and Humanities Research Council of Canada. This major initiative recognizes the need for institutions to recover both the direct and indirect costs of research.

 

Purpose:

To provide a mechanism whereby the indirect costs of contract research could be recovered from sponsors and a portion allocated to researchers to support their research directly.

 

Scope:

University-wide with respect to indirect costs associated with contract research. This policy does not deal with the annual allocation provided by the Tri-Council towards the indirect costs of research, nor does it apply to research grants.

 

Definitions:

Indirect costs include, but are not limited to, building use and depreciation, equipment depreciation, physical plant and maintenance (including utilities, hazardous waste disposal, security) insurance, research administration, financial administration (including purchasing and accounting), academic administration human resources, and libraries.

Direct costs include the salaries and benefits or research personnel, materials and supplies, travel, equipment, and purchase of specialized services.

Research grant is an agreement under which a public or private organization provides funding to pay for all or part of the direct costs of a research project. Payment is not conditional on the researcher delivering to the sponsor a pre-determined set of research outcomes.

Research contract is any formal, legally enforceable agreement signed between the University and a Sponsor which, in exchange for payment of direct and indirect costs, sets out a task or tasks to be completed within a specified timeframe to arrive at an outcome, the results of which constitute a deliverable under the agreement. These results can be published in the scholarly literature following an appropriate deferral period.

 

Policy:

1. Indirect costs are charged on all University research contracts. In exceptional circumstances, the University may return some or all of this to support the research work. These circumstances are documented by the Office of Research and approved by the relevant Dean/Director and the Vice-President (Research) in advance of the signing of the contract.

2. Indirect costs are charged at the rate of 40% of total direct costs. The following variances, however, apply to student or postdoctoral support, equipment purchase, and external subcontracts:

2 (a) When support for graduate students, postdoctoral fellows and/or honours students is included in the contract budget:

  1. the full indirect cost rate at 40% is charged on total direct costs where the students or fellows have been hired to undertake research which is not part of their ongoing program of research (i.e., the research will not be incorporated into their thesis, dissertation, or senior level project).
  2. indirect costs of 20% are charged where the research to be carried out by the students or fellows will be incorporated in whole or in part into their ongoing program of research, but will also constitute a deliverable which is to be owned by the sponsor of the research. The rate of 40% applies to all remaining costs unless other exceptions apply as provided herein.
  3. indirect costs are not charged where the ownership of the work remains with the University and the student/fellow, and where the results of the research will be incorporated into a thesis, dissertation, or senior level project. In the case of postdoctoral fellows where thesis, dissertation, or senior level project does not apply, the research must be within their planned program of research and scholarly publication. The rate of 40% applies to all remaining costs unless other exceptions apply as provided herein.

Decisions on the applicability of these items are taken by the Director, Office of Research in consultation with the principal investigator and the academic unit head and or dean/director.

2 (b) In the case of equipment purchases, indirect costs are charged in accordance with the following schedule:
i) 15% on the first $100,000
ii) 10% on any amount in excess of $100,000

The rate of 40% applies to all remaining costs unless other exceptions apply as provided herein. Extraordinary costs associated with installation or operation of specialized equipment during the performance of contract work are incorporated as direct costs in the contract budget.

In the case of external subcontracts, indirect costs are charged on a similar schedule to that pertaining to equipment purchases:
i) 15% on the first $100,000
ii) 10% on any amount in excess of $100,000
The rate of 40% applies to all remaining costs unless other exceptions apply as provided herein.

3. Faculty time is calculated for each University research contract. Subject to the approval of the department head and the dean/director, the faculty member may contribute the value of his/her time to the contract work in accordance with the following:

3 (a) Faculty members may contribute their time or some portion of their time, excluding the indirect costs associated with their time, where the work is of scholarly value and they anticipate publication. The sponsor may own the deliverables but scholarly publication rights remain with Memorial University and the faculty researchers as provided for within the contract in accordance with the provisions of Article 27 of the Memorial University/MUNFA Collective Agreement.

3 (b) Faculty members may contribute the full value of their time, including the indirect costs associated with their time, where the research is directly relevant to the faculty member's area of research interest and the rights to intellectual property arising from the research remain with the Memorial University and the faculty researchers involved in accordance with the provisions of Article 27 of the Memorial University/MUNFA Collective Agreement.

4. Indirect cost rates related to specific sponsors which have been agreed to on an institutional basis will apply, and can be viewed in the SCHEDULE OF SPECIAL INDIRECT COST RATE AGREEMENTS . The schedule will be amended as institutional agreements are established or expire.

5. The University recognizes that in some cases, it may be necessary to negotiate higher rates than provided under Section 2 . In this case, the indirect cost formula is based on the institutional rate and any amount received over and above this rate accrues fully to the local units as provided under 6 a), b), and c) .

6. The distribution formula for funds received in payment of indirect costs is as follows:

Local Distribution:

6 (a) 10% to Faculty Member(s) carrying out the research contract. These funds are administered under the General Research Pool Policy.

6 (b) 15% to office of the head of a centre, department, division, or equivalent. Where no subdivision exists within a Faculty or School, this portion is distributed to the Office of the Dean/Director. Where faculty researchers incur additional indirect costs because of the absence of services normally provided by a division, department, or centre, this portion is shared between the Office of the Dean/Director and the researcher based on their approximate share of costs.

6 (c) 25% to Office of the Dean or Director

Central Distribution:
6 (d) 50% to Central Administration [to be held by the Office of the Vice-President (Research)]

In the case of multi-disciplinary or inter-disciplinary research projects, information on the division of effort agreed to by the research team is provided to the Office of Research prior to starting the research project. This information is used to determine the appropriate distribution of indirect cost recovery.

7. Exceptions to this distribution formula are:

7 (a) Research Contracts with the Marine Institute where 100% will accrue to the Office of the Executive Director, Marine Institute.

7 (b) Research Contracts and clinical trials involving the Health Care Corporation of St. John's where a sharing formula between the Health Care Corporation and the University is in place.

7 (c) The division between central and local distribution in the case of research contracts involving the Faculty of Medicine will be on the basis of 25% (central distribution)-75% (Office of the Dean, Faculty of Medicine).

7 (d) Contracts for international development which are outside the purview of this policy.

7 (e) Any other short-term arrangements with specific academic units or centres that may be specifically agreed to by the Vice-President (Research).

8. It is the responsibility of all researchers to consult with the Office of Research regarding this policy prior to budgetary discussions with sponsors. Any budget negotiations that are finalized with sponsors without prior consultation with the Office of Research shall automatically be assumed to have the appropriate indirect costs included.

 

Related Documents:

Contracts vs Grants

Schedule of Special Indirect Cost Rate Agreements

 
Title: Indirect Costs of Contract Research
Category : Research Approval Date: 2005-02-01
Effective Date : 2005-04-01 Review Date: 2013-04-01
Authority:
Vice-President (Research)
Sponsor:
Vice-President (Research)
Contact:

Office of Research 709-864-8241

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