The Sustainability of University Research: A consultation on reforming parts of the Dual Support system

The Sustainability of University Research: A consultation on reforming parts of the Dual Support system

The Royal Society of Edinburgh (RSE) is pleased to respond to the Department of Trade and Industry consultation into the sustainability of university research. This response has been compiled by the General Secretary, Professor Andrew Miller and the Research Officer, Dr Marc Rands, with the assistance of a number of Fellows with extensive experience of the university research base.

It is now recognised in several quarters, most notably Treasury and the DTI, that the Funding Council stream is no longer sufficient to support the infrastructure required to provide a sustainable research base given the very significant increase in total volume of research activities that HEls have decided over the years to support at essentially marginal cost. In addressing this, the consultation paper has two fundamental propositions. The first is that it will prove to be possible, in a reasonably robust manner, to calculate the full economic cost of research carried out in universities. The second is that universities will be required to ensure that the totality of the research they do carry out, fully costed in this way, is fully covered by the sum of all contributions, public and private, made to the universities to pay for research.

The RSE supports the aim of understanding the full economic costs (FEC) of research, and of using this information in pricing and managing university research. Ensuring the long-term sustainability of research is an institutional responsibility and within institutions the extent of the problem depends on approaches to cost recovery but also institutional accounting practices. Institutions which are making surpluses after full depreciation of assets are currently generating sufficient capital resources for sustainability of their businesses as a whole. However, for institutions with only small levels of Funding Council block grant (QR) the paper’s proposals will make it harder to grow research capacity in new disciplines or research areas.
In addition, whilst it is true that the Transparent Approach to Costing (TRAC) methodology has moved us substantially closer towards a fuller understanding of the real costs of research taken in the round, it is not clear that this highly aggregated methodology can be easily expanded to cover the costs of research carried out in a large number of substantially different disciplines and there will continue to be debate on a project-by-project basis between researcher, institution and external funder as to the validity of QR or other funds being used to underpin a particular activity. Certainly, to enjoy support across the higher education (HE) sector, this methodology will have to reflect in a transparent way the real costs of research, and this will be far from easy to achieve. The original TRAC methodology, for example, is unacceptable to the European Commission as being far to broad-brush in nature and whilst we would strongly support the development of better models we are under no illusions as to the difficulties that this would entail.

The specific questions identified in the consultation paper are now addressed below:

Are there options or alternatives that have not been set out here which would provide a better overall solution?

The proposal in the consultation paper is to fund a fixed proportion of the full economic costs, with the balance made up from the research component of the Funding Councils block grant. Whilst this has the benefit of recognising the dual support British universities enjoy, it is hard to see any really sensible justification, given that most of the QR income from the Funding Council is used to provide salaries, whereas the proportion of time spent by principal investigators on the prosecution of research grants varies substantially from subject to subject. That said, it is accepted that the other options of retaining the current system, or changing the basis for the calculation of indirect costs do also have disadvantages. However, given the work that will be necessary to make the TRAC methodology acceptable, changing the basis for the calculation of indirect costs would appear more feasible than suggested by the text. Provided that an agreed methodology could be developed then the RSE would regard the transparency introduced by this method to be well worth the gain in complexity, particularly given to calculations that will have, in any case, to be carried out.

Is there a danger that our proposal might reward past infrastructure under-investment or current institutional inefficiencies? Does this matter and, if so, what can be done about it?

Yes. At present Research Council grant committees score grants on scientific merit and then prune costs to ‘norms’. Under the new proposals this might change so that ‘value for money’ is taken into consideration. With no pruning of costs possible under a FEC model, proposals from those in institutions with high costs (due to the cost of capital or institutional structures and processes) may be considered too expensive and turned down because of value for money considerations. It may also disadvantage senior (i.e. expensive) research assistants.

Are there general systemic problems with our proposal, e.g. the creation of perverse incentives, and if so what can be done to resolve them?

Yes. The proposed approach could have a number of perverse outcomes. For example, given the level of research currently being undertaken at marginal costs, moving to a system of FEC will result in a reduction in the volume of research with downstream impact on commercialisation and encouraging the brain drain of academic staff, unless sufficient additional funding is provided to meet the full costs. It may lead to research being done where Funding Council QR exists to absorb it rather than where it could be best done. It could also freeze the existing pattern of research as an institution with little or no QR would also have to seek full cost recovery from its research and have little or no capacity to undertake Research Council-funded or charitable funded research.

Do you agree that a single percentage of FEC should be used to calculate the Research Council contribution for all research proposals? What are the possible drawbacks and how might these be overcome?

No. There should be some variation between subject areas and/or project size otherwise it could result in Institutions favouring research proposals light on equipment requirements, to the detriment of the hard sciences and engineering. The time of principal investigators (PIs) should also be included as part of the FEC calculation and that these PIs should be allowed to be contract research staff as well as permanent academic members of staff, in order to enable the development of the next generation of researchers.

Should we simply allocate the £120 million among the Research Councils in proportion to their current research spend in HEIs? Or is a more sophisticated approach required in order to protect the present broad balance of funding across the disciplines? If so, what might that approach be?

No. The proportion of full costs currently covered by each Council is likely to differ, because of the basis of the variation of the distribution of research costs between different headings (staff, equipment, etc.) from one discipline/subject area to the next.

Will undesirable consequences arise within HEIs from local variations in FEC (e.g. between disciplines) and, if so, what should the Government do to mitigate them?

Full economic costs will vary by subject and by geographic location. There is a broad consensus that the proposed model will result in serious under funding for some subject areas. A typical Engineering/Science project the grant would be either no better than at present, using the 70% of FEC formula, or actually less using 60% of the FEC formula. A project with a large item of equipment, which is expected to attract no overhead, will receive less than the direct costs and would therefore no longer be viable. It could be argued, therefore, that the Research Council should pay either 100% of the FEC cost, or pay full 'traditional' direct costs plus an affordable percentage of academic investigator costs and indirect costs. Variations should be allowed but "in bands" where claims for inflated prices would need to be fully justified. Some of these issues may be dealt with in the current tenuniversity pilot scheme under the auspices of the Joint Costing and Pricing Steering Group (JCPSG).

One undesirable consequence could be linked to the sources of income for a subject area. If one subject area had a high dependency on charity or EU funding (with low overhead recovery), it would need more underpinning than another would with more Research Council and industrial funding. Over time, this could lead to pressure on an institution to reduce activity in those subjects on financial decisions, rather than strategic research decisions.

How can excessive applications of this sort be prevented? One possibility might be for Research Councils to specify which types of proposals are not eligible for their support in order to ‘define-out’ this problem. Would you favour such an approach?

Research Councils should be no more prescriptive than at present about the sorts of research they fund. The proposals which are scientifically the most outstanding should be funded. The thing which modulates the number of applications submitted is the perceived success rate. Only if this were to increase significantly as a result of these proposed changes would there be a significant increase in applications.

Are there other technical issues raised by our proposal which you think we may have missed? How could they be resolved?

The full cost methodology will require significant changes to universities processes and systems. There could be technical problems with its integration with existing IT systems and the effects on academic members of staff will be that they will have to account for their time in detail, in order that it can be charged against each project. The time and resources required to achieve these changes will, therefore, need to be recognised. In its current form the TRAC methodology will also still not meet EU requirements for its Full Cost model (because of the numbers of assumptions and averages). The DTI should consider addressing this with the Commission so as not to inhibit engagement with the Commission's 6th Research Framework Programme.

Are the benefits in implementing the costing methodology sufficient to persuade mid-research spectrum HEIs to invest the necessary resources to achieve this by September 2004?

As noted above, the time and resources required to achieve these changes will need to be recognised. In this context, September 2004 may be too ambitious for many institutions, regardless of the availability of resource. It will be important that the relevant methodologies and systems, in both universities and Research Councils, should not be unduly rushed and therefore 2005 may be a more appropriate timescale.

Should the implementation of these reforms be phased in some way? If so, do you support the mixed economy approach, shadow running or some other method (please specify).

There will have to be some phasing in, as there will be a period when grants funded under both models will be running together. Given the scale of the potential changes between different funding channels, there would be merit in a phasing of the implementation of the reforms, with an initial process of introducing FEC to institutions followed by the adoption of methodologies by the Research Councils to fund projects.

Do you agree that research studentships should be excluded from this reform?

Research students in many subject areas far outnumber post doctoral research assistants and fellows and therefore it would be difficult, if not impossible, to carry out a comprehensive full economic cost analysis without considering the research needs of tomorrow's research leaders. Moreover, only some 25% of all doctoral research students are supported by the Research Councils. The remaining 75% are supported by a wider array of other funders under circumstances where many universities have stretched marginal costs to increase research activity. This is an unsustainable practice with respect to the maintenance of high educational qualities in the provision of research training. The whole area of postgraduate research training standards is currently out for a separate consultation by the four Funding Councils and the Research Councils and therefore it would be timely to incorporate doctoral research students' training costs into a full analysis of the cost of UK research in HEls.

Do you feel the guidance in Appendix A is sufficiently detailed to allow academics and research administrators to apply the principles in practice?

Presently the Royal Society of London, the Royal Society of Edinburgh and Research Council Fellowships are not provided for fully by the QR element of the Funding Councils' block grants. In the future, this situation should change such that all post-doctoral researchers with substantive positions in universities are treated equally by funding council research grant allocations. It should also be noted that all research staff with contracts extending for more than four years will need to be brought into the QR funding stream by the Funding Councils in recognition of changes in European law; where they remain research-active and in departments sufficiently high to be awarded a QR funding stream.

One other issue which needs to be highlighted is the interaction of UK institutions with charities, and partners in Europe where funding under the framework programmes are requested. Here, not only is the cost of setting up collaborations and participating so high as to be a negative driver for UK HEIs, but also the costs awarded by the EU are so low that HEls are underpinning activities in such programmes through their own resources. Again, this is not a sustainable situation and given that strong research and knowledge transfer links with Europe should be advantageous to the quality of the education and research base, the review of sustainability should clearly recognise these issues. Universities will be under pressure to overcharge other customers in order to achieve the balance required. However, if the system is as transparent as the Government desires then it will be relatively straightforward for non-research council sponsors to estimate the actual costs of the research and it is doubtful that industry or Government departments would be prepared to pay substantially over the odds for their research to be carried out in the UK. They would, in this global age, commission research either primarily from universities with very little EU and charity funding, or they would commission research from universities abroad.

Will funders and users of the research base also find the guidelines useful in understanding and negotiating the prices they are offered?

While the guidelines will give universities and funders a clearer idea of the cost of performing a research contract, it remains to be seen whether SMEs and multinationals will be either able to afford the research or move their research elsewhere. Funders may also seek to reflect the revised Research Council funding level of 70% rather than the full economic cost.

In this context, the Government should establish the Funders’ Forum as soon as possible to discuss the attitudes and approaches of other funding bodies, such as charities, Government Departments, agencies and the EU. In addition, discussions with the EU Commission should be undertaken on the use of the TRAC methodology for use in the Full Cost model in their Framework Programmes.

Additional Information

In responding to this consultation the Society would like to draw attention to the following Royal Society of Edinburgh responses which are of relevance to this subject: A Framework for Economic Development (March 2000); A Science Strategy for Scotland (July 2000); The Are We Realising Our Potential Inquiry (July 2000; January 2001); Review of the supply of scientists and engineers (August 2001); Scottish Higher Education Review (January 2002); Research and Knowledge Transfer in Scotland (September 2002); Review of Research Assessment (December 2002) and The Future of Higher Education (May 2003).
September 2003


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