Some Comments on the Promised Commission Guidance on Direct Costing of Research Infrastructures in Horizon 2020

Transcription

1 15 th April 2013 Some Comments on the Promised Commission Guidance on Direct Costing of Research Infrastructures in Horizon 2020 Background At the Competitiveness Council meeting of 10 th October 2012, at which the Council reached a Partial General Agreement on the Rules for Participation for Horizon 2020, some Member States appear to have agreed to the proposed flatrate cost-reimbursement model after a statement by the Commission: For large research infrastructures, the Commission will, based on best practices, issue guidelines on how some indirect costs can be moved to direct costs, i.e. where those costs can be directly attributed to the project. The Commission s statement was evidently made because important organisations with high-end research facilities had signalled to their governments that the Commission s flat-rate reimbursement model would not provide sufficient compensation in relation to their high indirect costs. The Commission thus suggested on October 10 th that by transferring certain indirect costs to direct costs beneficiaries would be able to obtain a more satisfactory level of reimbursement. Six months after the October 10 th Competitiveness Council meeting, the Commission has still not provided the promised guidelines, not even in draft form. It is to be emphasised that the proposed guidelines on the direct costing of research infrastructures given their origins at the October 10 th Competitiveness Council are integral to the Horizon 2020 costreimbursement discussion. EARTO therefore calls on Council and Parliament to take no decision on the Horizon 2020 costreimbursement model before the Commission has produced the promised guidelines. Only then will it be possible to take an informed decision.

2 In January of this year the Commission organised technical workshops with universities, RTOs, and enterprises, with the aim of discussing issues relating to the direct costing of research infrastructures as well as of identifying examples of good practice. Five EARTO members participated in one of these workshops, on January 22 nd. On February 20 th EARTO itself participated in a workshop organised by the Commission to discuss direct costing issues with selected stakeholder organisations. At that meeting, incidentally, the Commission indicated that guidelines would be available at the end of March, which however has not happened. On April 8 th the Commission made a presentation to the Council Research Working Group on key points for the future guidance. As the title of this presentation indicates, the promised guidelines are still not ready. The comments that follow are based on the limited information currently available, and on the substantial experience of larger EARTO members in managing large research infrastructures. The references to Slides are to the Commission s PPT presentation to the Council Research Working Group on April 8 th. Comments 1. Although not stated explicitly in the Commission s April 8 th PPT presentation, it is evident including from Commission statements made at the February 20 th workshop that the Commission is in no sense proposing to offer an exception or derogation to the Financial Regulation and/or the H2020 Rules for Participation. The guidelines will do no more than indicate what is possible within the existing legislative framework applicable to H The Commission s October 10 th statement refers exclusively to large research infrastructures. The Commission has nowhere specified what it means by large or, to put it differently, what infrastructures it would exclude because small. 3. Slide 7 underlines that key goals are simplification and legal certainty. As will become apparent, EARTO seriously doubts whether this will be achieved. 4. Slides 10, 13 and 14 recognise that a research infrastructure may occasion a broad range of both capital and operating costs. This is welcome.

3 5. Slide 11 explicitly limits eligible direct costs to costs which are directly measurable and attributable to the project (see also Slide 23). The use of cost drivers, proxies or similar estimators will not be accepted. This is a severe limitation, since in practice it is often administratively complex and/or economically unjustifiable to set up and operate recording systems to capture directly all project-related costs occasioned by the use of an infrastructure. Here, the Commission is proposing simplification by exclusion. 6. Slide 21 interprets usual accounting principles to mean that only assets carried in the balance sheet of the beneficiary, or subject to leasing arrangements, may be direct-costed. However, the capital costs of some large infrastructures may be held in the balance sheets of other (usually government) organisations, without there being any leasing or analogous contractual arrangement between the beneficiary and the owner. Again, simplification by exclusion. 7. Slide 24 makes clear that infrastructure down-time ( idle time ) will not be admitted as an eligible cost. This is a critical limitation. Many specialised infrastructures, by their nature, are employed only for very particular purposes and hence are used for significantly less than the total number of working days in the year. Their costs, nevertheless, have to be covered. It is usual commercial practice to factor this down-time, in whole or in part, into hourly/daily prices. The Commission, however, will not accept this usual practice. 8. Slide 24, but also the whole document, totally fails to address the issue of infrastructure granularity. Is an ocean-going research vessel (Slide 24) a single infrastructure? In general, no. It is usually a collection of specialised laboratory facilities (marine, biological, geological, etc., each with varying dedicated analytical equipment) and other specialised material, e.g. a bathyscaphe. Similarly, is a microbiological laboratory (Slide 19) a single infrastructure? In practice, often not, but a collection of separate (e.g. Class I, Class II, Class III, etc.) laboratory facilities, again with varying analytical equipment. The general tone of the Commission document suggests very strongly that the Commission (and auditors) will tend to view each selfcontained item as an infrastructure in its own right, to be accounted for and priced individually, and to be related to the specific research action (subject to the caveats in comments 5, 6 and 7 above), and to which the capital and operating costs of the vessel itself could then somehow be allocated. In reality, what is proposed is not simplification at all and, unless clarified absolutely, is a source of huge legal uncertainty.

4 Concluding Remarks The general tone of the Commission s April 8 th presentation seems to be: The rules are the rules. You can optimise your reimbursement by improving your understanding of the rules, but that s all. Slide 15 assures us that the guidelines will be feasible for beneficiaries, while being acceptable for the Commission. One is reminded of the introduction of FP7 Methodology Certification. It, too, was promised as a major simplification for beneficiaries. But there, also, the rules are the rules. The outcome was that only about 20 FP7 beneficiaries were able to obtain full certification and then only after a huge additional administrative effort. On the present evidence, the proposed direct-costing guidelines seem likely to produce a similar failure. Most large research infrastructures are managed by large organisations with sophisticated accounting systems. The general practice in such organisations is to cost infrastructures directly whenever it is administratively and economically feasible to do so (which, however, may also involve using cost drivers or other proxies) because it is in the organization s own interest to have the clearest possible picture of its income and expenditure. EARTO members managing large infrastructures already employ direct costing as far as the Commission will allow in FP7. The promised guidelines will offer nothing new. The EARTO members which attended the Commission technical workshops in January (see p. 2) were among those which had complained to their government about the unsatisfactory compensation implied by the Commission s flat-rate proposal. In January, they offered their best practice to the Commission. When finally the guidelines appear, those stakeholders will receive as advice their own best practice! Slide 6 of the Commission s April 8 th presentation states that the presentation is valid only insofar as the legislator retains the Commission s proposal concerning the reimbursement of indirect costs through a flat rate. We have heard a senior Commission official imply that it will not be possible to produce guidelines until after the legislator has decided on the funding model because we cannot know in advance what the legislator will decide. This is disingenuous. The Commission should produce its guidelines now on the assumption that the legislator will retain a flat-rate funding model, so that Council and Parliament can judge the real practical value of the proposed guidelines.

5 EARTO repeats: It is to be emphasised that the proposed guidelines on the direct costing of research infrastructures given their origins at the October 10 th Competitiveness Council are integral to the Horizon 2020 costreimbursement discussion. EARTO therefore calls on Council and Parliament to take no decision on the H2020 cost-reimbursement model before the Commission has produced guidelines offering significant perspectives. EARTO - like BUSINESSEUROPE (41 business federations from 35 countries), EUA (850 universities and 30 national university associations) and Science Europe (51 research funding and performing organisations, representing around 30 billion of research spending per year) continues to believe that an option on full-cost reimbursement is essential to enable the full participation of major research and business organisations with essential research facilities in Horizon 2020.