Full Economic Costing (fEC)

Full economic costing (fEC) is the UK’s standard methodology for calculating what a piece of research actually costs an institution to deliver, including a fair share of overheads and infrastructure, not just the cash that will be spent directly on the project. All UK Research and Innovation (UKRI) grant and fellowship applications must be costed on an fEC basis, and the underlying calculation method — the Transparent Approach to Costing (TRAC) — is the sector-wide system UK higher education institutions use to produce those figures consistently and auditably across institutions.

What makes a costing “full economic”

An fEC figure is built from three cost categories, and a proposal is only genuinely costed at fEC if all three are present and calculated using the institution’s TRAC-derived rates rather than estimated ad hoc:

• Directly incurred costs — costs that exist only because this specific project exists and that the institution actually pays out for it: named research staff salaries, project-specific consumables, travel, equipment purchased for the project, and similar identifiable spend.
• Directly allocated costs — costs shared across several activities but attributed to this project on a reasonable, defensible basis, most commonly a share of the principal investigator’s and co-investigators’ time (calculated via institutional costing tools, not a flat guess) and shared departmental facilities.
• Indirect costs — the institution’s estates and central overheads (buildings, utilities, library, HR, finance, and other support functions) recovered at a standard institutional rate derived from the TRAC return, rather than itemised project-by-project.

The distinction between “directly incurred” and “directly allocated” is a UK-specific accounting split that doesn’t map cleanly onto other national costing systems: it separates costs the institution can point to a specific invoice or timesheet for from costs it apportions using an agreed methodology. Both are still “direct” in the sense of being attributable to the project, as opposed to the indirect estates/overhead share.

Why 80% and not 100%

A grant costed correctly at fEC does not mean the institution receives the full fEC figure in cash. Research Council grants awarded through UKRI are funded at 80% of fEC for most fund headings — the institution has to find the remaining roughly 20% from other resources. That gap is not usually funded from the grant itself; in England it is substantially covered by QR funding (quality-related research funding), the block grant Research England (part of UKRI) allocates to universities based on Research Excellence Framework (REF) performance, rather than tied to any individual grant. The devolved nations have equivalent block-grant mechanisms (the Scottish Funding Council, the Higher Education Funding Council for Wales successor arrangements, and the Department for the Economy in Northern Ireland). This is why fEC and the 80% funding rate matter for research administrators specifically: they determine how much of a project’s true cost an institution absorbs centrally versus recovers directly through the grant, and that absorbed share has to be accounted for somewhere in institutional planning even though it never appears as a line item on the award itself.

Not every UKRI fund heading pays the standard 80% rate, and non-Research-Council funders that require fEC-based costing (for example some charities and industry co-funders) may pay a different percentage or none of the indirect cost element at all — the 80% figure specifically describes UKRI’s Research Council grant funding, not a universal rule across every funder that asks for an fEC-costed proposal.

TRAC: the calculation method behind the number

TRAC (Transparent Approach to Costing) is the costing methodology UK higher education institutions use, sector-wide, to generate the indirect cost rates and time-allocation data that feed into an fEC figure. It was developed jointly by representative UK higher education bodies and funders specifically so that institutions would cost research consistently and transparently rather than each using an unaccountable internal method, and UKRI validates institutional TRAC-derived rates as part of accepting them for grant costing. Non-university research organisations that don’t run a full TRAC return can instead apply UKRI-agreed dispensation rates, or have their own costing methodology validated directly by UKRI’s Funding Assurance function.

Worked example

A university researcher applies to EPSRC (a UKRI Research Council) for a three-year grant. The institution’s costing team calculates: directly incurred costs (a postdoctoral researcher’s salary, project consumables, conference travel) plus directly allocated costs (a percentage of the PI’s time, calculated via the institution’s academic time-allocation return) plus indirect costs (the institution’s TRAC-derived estates and central overhead rate). Summed, these produce the project’s fEC — say, £500,000 over three years. EPSRC awards the grant at 80% of that figure, roughly £400,000, paid to the institution over the grant period. The remaining £100,000 is not billed to the funder; the institution absorbs it, in practice substantially from its QR block grant allocation rather than from the specific award.

Counter-example

A researcher applying to a funder that does not require fEC-based costing — for instance, many UK medical research charities historically costed and paid only directly incurred costs, with little or no contribution to institutional overheads — is not producing an fEC costing even though real institutional overhead is still being incurred behind the scenes. The absence of a TRAC-derived indirect cost line, and of the accompanying 80%-of-total funding structure, is what marks this as outside the fEC framework, not merely a different reimbursement rate on the same kind of figure.

Related terms

• Indirect cost recovery — the broader (largely US-oriented) concept of recovering institutional overhead through a negotiated rate; fEC/TRAC is the UK-specific implementation of the same underlying idea.
• Indirect costs (overheads) — the general concept that fEC’s indirect cost category is one specific national instance of.