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Finances

Costing

Costing a consultancy project is vital to ensuring the benefits of the work are realised by both the academic and by the University / Department. If the financial aspects of consultancy projects are not managed then the financial risk will be borne by the Department, in terms of lost contribution or lost staff time. It is expected that:

• approved consultancy projects are managed appropriately in terms of their financial aspects.
• the opportunity costs of staff time are considered
• prices are quoted and negotiated in a manner appropriate to the type of service being delivered
• all significant resource inputs are costed in a consistent and comprehensive way
• paying clients are presented with prompt and accurate invoices.

Departments have different policies on the costing of consultancy, and academics should refer to any Departmental policies before concluding costs. However the following is a list of costs that should be taken into account.

• FEC should be taken as a starting point price for an academic’s time.
• Travel costs should be considered.
• Equipment and facilities usage.
• Admin / support time.
• Subcontract costs.

Academics are advised to discuss costing with their Management Accountant if the work is being undertaken via University systems.

Pricing

Costing is a technical issue, pricing, ie the amount charged to the client, is a decision made based on covering the costs as outlined above, and based on market value for the services provided. This can be seen as the profit charged for the work as opposed to the costs for undertaking the work.

It is good practice to ensure that prices reflect:

• the market value of the work (what the client would have to pay elsewhere)
• the level of expertise and service provided (if the University has unique expertise clients would expect to pay a premium)
• the impact of the consultancy on the University / Department (eg the opportunity costs, impact on students or research, what other benefits it will bring in terms of developing relationships with external organisations).

• Costs should therefore inform pricing, but not determine it. Situations can be envisaged where the work is undertaken at or below cost in order to cement or develop a relationship with a prospective client. If consultancy is being undertaken in a private capacity this is entirely at the discretion of the individual; if the consultancy is being processed via University systems then pricing must be agreed with the academic’s HoD.

It is good practice for only the fee to be shown to the client. The cost calculation is for internal use only. Prices should be quoted on a daily (or other time period) all-inclusive rate. VAT will also be chargeable; all invoices should be marked accordingly.

Distribution of income

Unlike the distribution of revenue from licensing or spinning-out a company, there are no University policies on the distribution of income from consultancy. Distribution of income should be agreed upon between the academic and the Head of Department. This conversation should take into account the cost to the University, the value of the consultancy to the University, and the use of University brand or facilities, and is therefore very much dependent on the nature of any specific consultancy project.

The Department should expect to cover the associated costs and then discuss the distribution of any additional income. It is preferable that this an agreement on distribution of income is made between the academic and the University prior to the consultancy taking place.

Consultancy guidelines

Download the Consultancy guidelines (PDF , 890kb) document