Price Tag

Most universities support the bulk of their research through competitive funding from government agencies or large charities. Simplifying grossly, to secure this funding they supply a costing - labour, equipment etc. - to which is applied an agreed overhead rate (that may, or may not, meet the actual costs, mostly not). Research for commercial organisations is different. In principle, these organisations should pay the full economic cost plus a margin to support the broader social goals of the university. In practice, of course, they want to pay the minimum necessary to secure the work.

We are presented here with a dilemma. In a world where research 'impact' is highly valued, where there is a dynamic (often government subsidised) global market for research, and where the negotiating party within the university is often the main beneficiary of the direct funding element, the negotiation can be difficult. This, you might say, is no different to selling any service and nothing worthy of particular note.

Universities have however made life particularly difficult for themselves. As a legacy of state research funding they tend to cost rather than price. Imagine a situation in which you are buying a new fridge. The sales assistant persuades you of its virtues and then says ... 'It costs us £50 to make, we are charging £100 to cover the costs of the Chairman's Jaguar and our annual Christmas dinner'. The fridge sounds good but the costs seem unattractive and, quite frankly, why should -you- pay them. Surely, there must be somebody with a less profligate Chairman? The sale is probably not going well, despite the fact that you want the fridge and, in the scheme of things, £100 is not a lot to pay.

We should not be disclosing our cost structures and business models to our research customers. It is none of their business. All they need to know is that they are getting a great service at a good price. The price should reflect the competitive situation, the capacity of the customer to pay and the advantage yielded to them by the research and know-how of the institution. It should naturally be pitched at a level at which the university will more than cover its costs (in the longer-term and taking into account marginal effects). I, point blank, refuse to discuss overheads and costs with research customers. If they absolutely insist, it can only be in the context of a strategic relationship and a stable long-term guaranteed stream of research funding. It ought to be made a capital offence for academics to disclose internal cost structures to customers particularly it is part of a game in which they seek to maximise the direct elements of research support - immediately beneficial to them - by getting the customer to argue over the indirect or overhead rate. That never happens, of course. Yes, it does.