Beware the “Efficiency Factor” ..

That sigh of relief we all breathed when the flat-cash settlement for UK science funding was announced last October is now looking decidely premature. For one thing the rate of inflation has climbed to 5.5%, its highest level for 20 years. That’s going to be eating away at the money available for doing science at a much higher rate than we thought it would 6 months ago.

If that weren’t bad enough we now learn that the Dark Lords of the Treasury have been beavering away in the background to come up with a way of squeezing science still further, via so-called “efficiency savings”. Now they have announced their plans under the suitably Orwellian title Ensuring Excellence with Impact.

The full document is (probably deliberately) written in almost unreadable Treasury-speak; after all, you don’t want the lambs to know too much about their impending slaughter. Hidden amid the jargon, however, is a grim message. That grant money you thought you had might not be yours after all.

Some of what is written in the RCUK document was expected. For example, there will be no indexation of grants for the next two years as the public sector pay freeze bites. However, another part of the plan is to tackle the so-called “estates” and other “indirect costs”, the contribution Research Councils pay universities to support basic infrastructure. At the moment, universities cost this themselves. In fact, whenever I’ve applied for grants I have to leave this to other people to fill in as I have no idea how it is calculated. However, different Higher Education Institutes (HEIs) charge at vastly different rates. RCUK has noticed this and will henceforth place HEIs into efficiency groups, with the more expensive being the least efficient. Depending on which efficiency group your HEI is in, the indirect costs will be subject to a squeeze. In other words an “efficiency factor” will be applied.

But this won’t just apply to new grants. Cash you though you had already will be clawed back. Here is a quote from the summary:

To ensure that these changes to indirect cost rates do not present an administrative burden to research organisations, and reflecting the time it takes to prepare an application, existing grants will for this purpose be classed as those submitted via Je-S1 before 30th June 2011. Rather than apply reductions to each individual awarded grant, a top slice will be applied by the Research Councils to research organisations’ portfolio of funding after the 1st July 2011. The percentage of this indirect cost efficiency top slice will be dependent on the efficiency group that a research organisation is in.

Reduced rates of indexation will be used both as part of the efficiency factor for indirect costs and for other elements of grants that are indexed in line with current policies. Reduced rates of indexation for other elements of grants, other than the indirect costs element, will be introduced on 1st April 2011 in line with usual Research Council policies. The indexation changes will be greatest during the first two years to coincide with the period of Public Sector pay restraints, but will be gradually relaxed as the effect of savings being applied to new grants contributes greater efficiencies. The indexation savings will be applied to both new and existing grants. For new grants, new indexation rates will be used for grants awarded from 1st April. For existing grants that have been awarded with different indexation arrangement, i.e. those awarded on or by 31st March, the changes will become part of the “top-slice” by institution.

This is scary. It means money already in departmental and university budgets and used for future planning is going to disappear pretty quickly. How this is going help “Ensuring Excellence” I have no idea, but I have to admit it’s going to have some “Impact”.

Be afraid. Be very afraid.


21 Responses to “Beware the “Efficiency Factor” ..”

  1. Bryn Jones Says:

    This is a disappointing development, but I’m afraid that I’m not at all surprised.

    The Comprehensive Spending Review document of October 2010 stated:

    “The Government will also increase the efficiency of the science budget, saving £324 million a year by 2014-15. These efficiency savings will be reinvested in science.”

    (On page 23, and repeated verbatim on page 52.)

    (Actually these words were quoted on this blog last year in comments by Iain Steele and others.)

    I did wonder where the “efficiencies” (i.e. cuts) would come from, and the full-economic costs of grants did seem like one juicy candidate.

    The extent to which science will suffer will vary between universities. It will be hardest hit in those institutions where much of the full-economic cost is transferred to the departments that won the grants. Science may be less badly affected in those universities where the costs are retained by central university bureaucracies where it is used for central university development, infrastructure projects or restocking the vice-chancellor’s wine cellar.

  2. The rates – at least the indirect costs rates – don’t vary that greatly. For example for 2010-11, the indirect rate for the top quartile of HEIs is about 42K, for the lowest quartile of HEIs about 35K.

    Bigger variation for lab-based estates cost – top quartile is 14K, lowest quartile is 8.4K.

    I suspect a lot of this may be linked into the Transparent Approach to Costing (TRAC) system, which is used by HEIs to determine their rates. There appears to be a lot of discussion ongoing regarding the use of TRAC in HEIs and the resultant costs. And how the fEC is being used.

    What will be crucial is what ‘efficiency savings’ they will make to the indirect and estates costs. I suspect that most of the research-intensive universities (that have the bulk of the RCUK funding) will be the ones with the highest indirect and estates costs rates.

  3. telescoper Says:

    Do you know what these numbers mean? What is an indirect rate of 42K? Per Staff FTE? Per postdoc? Per grant? It doesn’t seem to be explained at all in the document.

    • Its per staff FTE (including Investigators and postdocs) on the grant. So say you get a grant with 20% investigator time and a postdoc, its 1.2 FTE per year. Doesn’t apply to support staff (technicians etc) – they do not attract indirect nor estates costs.

      Also bear in mind that the HEI only gets 80% of the total funding (apart from studentships and major equipment – they are funded at 100%), so has to make up the other 20%.

    • telescoper Says:


      Thanks for the clarification.

      What it means in effect is that HEIs will no longer get 80% FEC but a smaller fraction depending on their perceived “efficiency”. They will either have to cut costs or pay more than 20% from other funds, which is unlikely since all the other funds are being cut too.


    • so what is the bottom line for someone employed as a postdoc? The treasury might say your uni is “inefficient” and we are not paying for that wastage and hence reduce what they give. The uni then refuses to cut any central admin costs and cuts the researchers contract short to save the money?

    • telescoper Says:


      PDRA salaries are “direct costs” so should not be affected by these changes to indirect and estates costs.

      Your salary will be frozen instead.


    • peter: the only PDRA salaries which will be frozen will be for those who have reached the top of their relevant pay ladders. otherwise they’ll get the increase associated with increased seniority (a concept i’ve never understood).

    • telescoper Says:

      I meant frozen in the sense of no cost-of-living increase….

    • they cant freeze PDRA salaries, unless they also freeze all staff salaries as far as I am aware – because the increase is negotiated via collective bargaining with the UCU, and applies to all employees.

    • telescoper Says:

      ..and what do you think that “negotiated” pay rise will be next year, when the sector’s funding is being cut in cash terms? It was 0.4% last year. I’m betting 0% next year.

    • and for those lucky PDRAs who still have a job and who aren’t at the top of their pay ladders (the majority) – then they’ll receive ~3% increases on top of the negotiated pay-“rise” (0 or otherwise). i don’t think they’re doing too badly, compared to some.

    • I suspect most PDRAs would rather have job security than a 3% pay rise though.

  4. John Peacock Says:

    So yet again a market approach to Higher Education fails. FEC was supposed to expose who was able to deliver research of a given quality at the lowest price – but no way was ever found of making sure that cheaper people were more likely to get that last postdoc: the grants panels didn’t really care. And FEC was weakly coupled to reality: STFC just invented levels of co-I time to be FEC’d, independent of the time that people justified in their applications (never mind the 80% fudge). So it sound like in effect we’re headed back to the status quo ante, in which a fixed percentage overhead will be paid. This would be a good thing, except that in the interim universities have decided that FEC is a cash cow that can plug their budget deficits. Getting them off that drug will cause painful withdrawal symptoms.

    • telescoper Says:

      Attitudes to the FEC funding element vary widely across universities. In some the cash completely disappears into central coffers; in these cases departments probably won’t see much difference until the university is forced to revise its overall financial model. Of course one should argue that this should involve cutting admin costs, but it is more likely that departmental budgets will bear the brunt.

      In others, some of the FEC comes directly into departments and in some even directly back to the researcher who applied for it. In such places there will be an immediate effect on budget lines.

      I wouldn’t agree that grant panels don’t care about levels of FEC – the large variations from one institute to another are definitely noticed. It’s just that it’s very difficult to do anything about it at the level of a grant panel, whose primary job is to evaluate scientific quality.

    • John:

      AGP are not allowed to use the indirect or estates costs in the rankings used as the basis of their recommendations.

      I agree that AGP could use recommended FEC awards in a more nuanced way to reward productive staff and I have argued for that. But this would run counter to the desire for AGP’s process to be “efficient” and it would only give a ~10% variation in total awards (as FEC is usually ~30% of the total).

      The thing I find most disturbing about this announcement is that (yet again) its retrospective.

  5. Just saw the details. The cuts in the indirect/estates costs range from 0 to 5%, depending on (a) the magnitude of the costs (e.g. upper quartile) and (b) the rate of change of the costs from the previous year – the greater the change (upwards) the bigger the penalty.

    Should note that they claim that the funding saved is ringfenced to go back into grants.

  6. Andrew Liddle Says:

    The examples in the RCUK document are quite intriguing.

    Apparently a university which has low FEC costs and moreover keeps them low can hope to be in Efficiency Band A and receive no penalty.

    By contrast a university which escalates its FEC costs by 20% in a single year can expect to be penalised at most by 5%.

    Which would you prefer to be?

    I suppose I must be misreading this somehow.


    • The fEC cost rates are also subject to audit, and I would assume that an HEI showing a massive percentage increase would need to justify this.

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