Invitation 98/32

Strategy for costing and pricing: Application for funds

Executive summary

Purpose

1. We invite higher education institutions (HEIs) to apply for funds to help them develop and implement strategies for costing and pricing their activities.

Key points

2. All HEIs directly funded by the HEFCE and DENI are eligible to apply.

3. We have up to £2.5 million of funding available over a three year period starting in 1998-99. Each institution will be eligible to receive either £15,000, £20,000 or £25,000 depending on its total income.

Action required

4. Institutions can apply for funding as soon as they have a strategy and plan for development and implementation. We will not accept applications after 31 July 2001.

Background

5. Previous initiatives to improve costing and pricing in higher education have tended to work independently of one another. During 1997, discussions between the funding councils and sector representative bodies led to a wide acceptance of the benefits of bringing all these activities together. They therefore formed the Joint Costing and Pricing Steering Group (JCPSG) led by Professor David Westbury, Vice Principal, University of Birmingham.

6. In April 1998 the JCPSG published its joint strategy and implementation plan to support universities and colleges in adopting good practice for costing and pricing ('Integrating financial and academic decision making: Strategy for costing and pricing', published by the JCPSG in April 1998 (HEFCE Circular letter 11/98)). Available from the HEFCE, or on the Council's web site: http//www.hefce.ac.uk) It aims to help them make better informed decisions by integrating the financial and academic considerations.

7. As part of the JCPSG's implementation plan, the funding bodies are providing funds to HEIs to help them develop their own strategies for costing and pricing. The JCPSG will oversee the initiative.

Funding

8. The HEFCE and DENI are providing up to £2.5 million over three years, starting in 1998-99.

9. The amount that institutions will be able to apply for depends on their income in 1996-97, as follows:

a. Institutions with income up to £25 million are eligible to apply for £15,000.

b. Institutions with income of between £25 million and £100 million are eligible to apply for £20,000.

c. Institutions with income over £100 million above are eligible to apply for £25,000.

10. Institutions will receive 50 per cent of their funding on submission of a strategy and implementation plan that meets the criteria set out in paragraph 11. The balance will be paid when we have been informed about progress on implementation. Annex A provides a structure to provide this information. This should be no more than two sides of A4.

Criteria

11. Applications must meet all the following criteria.

a. The strategy covers costing and pricing of all activities, whether in the UK or overseas, and is based on the principles set out in the guidance from the funding councils and the CVCP. This includes 'Management Information for Decision Making: Costing Guidelines for Higher Education Institutions' (Available from the HEFCE, ref M13/97, price £20, or on the Council's web site), published by the funding councils in July 1997; and 'Costing and Pricing of Research and Other Projects' (Available from CVCP, free of charge), published by the CVCP in June 1997.

b. A supporting implementation plan has been developed with a clear timetable for delivery.

c. The resources and training requirements needed to develop and implement the strategy have been identified and are available to meet the timetable.

d. The governing body of the university or college has approved the strategy, implementation plan and timetable.

e. The plan includes a post-implementation review, the outcome of which will be reported to the governing body to quantify the benefits delivered.

12. We envisage these criteria being met in two stages: the first stage dealing with criteria 'a' through to 'd' and the development of a strategy; and the second stage relating to development work leading to implementation across the institution (see paragraph 16 for further details).

Eligibility

13. All HEIs directly-funded by the HEFCE and universities funded by DENI are eligible to apply.

14. Each institution may submit one application only.

Implementation

15. We will produce an annual report on the progress of strategies being undertaken by institutions.

Application process

16. HEIs may apply for the first tranche of funding as soon as they have a strategy and plan for development and implementation. To reach this stage, we envisage that the institution would have to:

• define objectives
• set target dates and outputs
• identify resources
• secure support from the governing body.
  

We envisage that the second stage will involve development work leading to implementation across the institution.

17. Applications should be no more than six sides of A4 including the strategy, implementation plan and supporting evidence. We require two copies of each application.

18. Institutions should post hard copies of applications to Heather Williams, Project Manager, HEFCE, Northavon House, Coldharbour Lane, Frenchay, Bristol BS16 1QD. We will not accept any applications after 31 July 2001.

19. Applications will be assessed against the criteria set out in paragraphs 11 and 12.

20. We will normally tell institutions the outcome of their applications within four weeks, and give them details of how to apply for the second tranche of funding.

Annex A

Costing and pricing strategy: Implementation

This structure should be used to confirm the institution's progress with implementing their costing and pricing strategies.

We will be looking for the following developments, with examples of change arising from implementation of the costing and pricing strategy.

1. An increase in the understanding and commitment of the governing body, senior managers and the head of the institution to applying good practice in costing and pricing.

2. Standardising the approach of the institution in identifying cost centres, and the costs (direct and indirect) associated with them.

3. Integration of academic and financial decision making.

4. Improving net contributions with examples of figures and improvements.

5. Any additional guidance developed to further improve costing and pricing in the institution.