Direct costs

refer to expense items that are specifically associated with a research project.

These costs include:
• salaries and benefits
• travel
• materials and supplies
• participant reimbursement costs
• animal care
• equipment
• subcontracting or consulting fees


Indirect costs

are those underlying or hidden costs that sustain the research activity before, during and after research outputs have been delivered. These costs that are incurred for common or joint objectives and may not be readily associated with a research project.

Typically these costs include:
• building/ infrastructure utilities
• maintenance
• insurance costs
• office supplies
• telecommunications
• library access


Full economic costing

of research is an accounting methodology or model that takes full account of both all (reasonable and necessary) direct and indirect costs associated with research


A budget

is a detailed breakdown of all anticipated costs which should mirror the activities and timelines of the research


Estimating full cost budgets for research enable

partners to develop and maintain their research environments, sustain high-quality research and access adequate funding. This goes a long way toward promoting good research costing practices where all foreseeable and underlying costs of research are included. For example, current indirect costs do not sufficiently build capacity. Funders could periodically review the indirect cost rates to ensure research partners are able to accurately cost research in a sustainable manner. The inadequacy of accurate costing around the full extent of indirect costs in research budgets has a direct impact on the sustainability of the research activity and of the research environment. It is thus critical for institutions to build capacity to accurately determine and negotiate for indirect costs in the research contract.


Establishing an effective costing culture

is important, thus all partners should work toward transparency and accountability in budget planning. In determining accurate costing of research, the following aspects should be factored to create an enabling environment:

• Develop good financial mechanisms to strengthen finance and administrative procedures is important

• Establish whether partner institutions are flexible on indirect costs and if there is room to negotiate

• Establish whether there is a pre-determined method or rate for calculating indirect costs

• Separate the direct running expenses of a particular project as different from those operational expenses that enable your institution to house and run such projects

• Research partners should also take into account the range of expenses that could fall under indirect costs such as human resources and finance services, office rental, facilities, maintenance, telephone and internet and so on

• Cost your research activities at a reasonable and current market value as it is most important not to under or overestimate how much it costs to run a research project


There are a few ways that indirect costs can be calculated in a research budget

Researchers should be able to accurately identify and allocate such expenses to a research costing (budget) – i.e. the real costs to their institution of carrying out the research project.

Ultimately, a costing culture needs to be fostered whereby full costs (the real cost of carrying out research activity) are recognized and accounted for when budgeting.

For further ideas on methods for calculating indirect costs -
See ESSENCE: Five keys to improving research costing in low- and middle-income countries. Available at http://www.who.int/tdr/publications/TDR_ESSENCE_1.12_eng.pdf


In supporting and conducting collaborative research

partners should each determine their own full economic costs of their research contribution. This requires transparency and accountability to ensure sustainability of the entire research undertaking. It is good practice for each partner to have a clear policy around research costs so that there is consistency across research collaborations.

In addition, the different partnership requirements may mean that there be flexibility to negotiate around the budget and finance arrangements.


NIPMO: National Intellectual Property Management Office

South Africa is, so far, the only country in Africa that has used legislation to encourage research institutions to move towards full-costing.

The Intellectual Property Rights from Publicly Financed Research and Development Act (No. 51 of 2008) came into effect in August 2010. Its primary goal is to ensure that intellectual property generated through the use of public funds is used to benefit the people of South Africa. The Act applies only to projects and research contracts that are fully or partially state funded (in other words, the Act does not apply when funders cover the full cost of the research).

In terms of the Act, the National Intellectual Property Management Office (NIPMO) was established, and has called on all publicly funded higher education institutions to develop their own full-costing policies as a step towards developing a nationally accepted full-costing model.

(From ESSENCE (2012a): Five keys to improving research costing in low and middle-income countries).


Financially sustainable universities: Towards full costing in European universities

Financially sustainable universities II: European universities diversifying income streams.

Five keys to improving research costing

Research costing practices

Full economic costs:Position in UK universities.

CIDA’s Contribution Agreements:Overhead Compensation Policy

Fair Research Contracting


Humentum:Full Cost Recovery: The Strategy And Mechanics


The Grantsmanship Centre


NIH:Grants and Funding


Links and Organisations

- No items under this category


Good Financial Grants Practice