Ask what a research project costs and most people will think of the obvious things: the salaries of the researchers, the equipment, the consumables, the travel. These are real costs, but far from the whole story. Behind every project stands an apparatus that makes it possible — the buildings, the heat and light, the libraries and computing, the finance, HR and research-management staff, the depreciation of shared facilities, the cost of the institution’s very existence. These are no less real for being less visible, and if they are not accounted for the institution is quietly subsidising the research from elsewhere. Working out what research genuinely costs, and how much of it a funder will pay, is the unglamorous but essential discipline of research costing. This article explains how the true cost of research is calculated and recovered, drawing on the funding and finance domain of the CASRAI Dictionary.
Direct and indirect costs
The foundational distinction in research costing is between direct and indirect costs. Direct costs are those that can be attributed specifically to a project: the salaries of the people working on it, the equipment bought for it, its consumables and its travel. Indirect costs — often called overheads — are the costs of shared infrastructure and services the project relies on but that cannot be tied to it alone: estates, central administration, IT, libraries, finance and HR, and the general running of the institution. The crucial point is that indirect costs are real costs of doing the research, even though they are shared. A project conducted as if only its direct costs mattered would appear far cheaper than it truly is, and the gap would be made up invisibly by the host institution.
Full economic costing
The principle that the entire cost of research — direct and indirect — should be identified is captured in the idea of full economic costing (FEC). Its aim is to reveal what research actually costs to undertake, including a fair share of the institution’s overheads and infrastructure, so that decisions about pricing, funding and sustainability rest on an honest basis. Without it, institutions cannot know whether their research is financially sustainable, and may unknowingly run at a loss on activity that appears, on a narrow view, to be funded. Full economic costing does not by itself determine who pays; it establishes the true figure against which questions of payment can be sensibly considered. It is, in effect, the costing equivalent of telling the truth about the bill.
TRAC: the UK approach
In the United Kingdom, the method used to arrive at the full economic cost is TRAC — the Transparent Approach to Costing. TRAC is the standard by which UK universities cost their activities, including research, attributing the relevant share of indirect and estates costs to reach a full economic cost figure, from which the rates used in pricing proposals derive. TRAC matters because it provides a consistent, accepted basis for understanding institutional costs, which underpins negotiations with funders about what they will pay. Its existence means the full cost of UK research is not guesswork or special pleading but the output of an agreed methodology — giving institutions and funders a common, defensible starting point.
Funders rarely pay the full cost
Here lies the central tension of research costing: knowing the full economic cost does not mean a funder will pay it. Funder cost policies vary widely in how much of the full cost they cover, and many fund research at less than its full economic cost. The shortfall — between what the research costs and what the funder pays — must be met by the institution from its other income. This has profound consequences: institutions must think carefully about the portfolio of research they undertake and how it is sustained; winning a grant is not the same as the research being fully funded; and the apparently arcane details of funder cost policies bear directly on institutional viability. The recovery of indirect costs in particular is a perennial point of negotiation, because indirect costs are precisely what funders are most often reluctant to pay in full.
International approaches to indirect costs
Different systems handle indirect costs in characteristically different ways, and the contrasts are illuminating:
- In the United States, federal research grants typically apply a negotiated indirect cost rate — facilities and administrative (F&A) costs — agreed between an institution and the government and applied to direct costs.
- In the European Union’s research framework programmes, indirect costs have commonly been handled through a flat-rate approach, reimbursing overheads as a fixed percentage of eligible direct costs rather than calculating them project by project.
- In the United Kingdom, the TRAC methodology produces full economic cost figures, with funders such as the research councils contributing a defined proportion of that cost.
Each model attempts to solve the same problem — how to recognise and recover the genuine but shared costs of research — and each strikes a different balance between accuracy, simplicity and the funder’s willingness to pay. The differences matter for institutions working across multiple funders and jurisdictions, where the same project may be costed and reimbursed quite differently depending on whose rules apply.
Costing as part of research management
Research costing is one of the less visible but more consequential parts of research administration. Getting it right protects the financial health of institutions and ensures that difficult conversations about funding rest on accurate figures rather than wishful thinking. For costs to be compared, reported and managed across institutions, funders and systems, the categories involved — direct, indirect, estates, full economic cost, recovery rate — must mean the same thing everywhere. That consistency is what the CASRAI Dictionary provides: a shared vocabulary so that financial information about research is understood identically wherever it is recorded. And because the work behind every funded project is what the costing supports, the contributions involved can be described within the same framework as any other — the CRediT taxonomy and its contribution roles. Research is never free, and someone always pays for the infrastructure that makes it possible; full economic costing is the discipline of being honest about that fact.