The European Commission has decided to continue to allow Higher Education Institutions to claim 60 per cent of eligible direct costs as overheads on FP7 projects. The Special Transitional Flat Rate (“transitional” in the sense that it was supposed to be a temporary arrangement until universities and the EC could agree on a method of calculating real indirect costs) will stay in effect until the end of Framework Programme 7 in 2013.

The move has been welcomed by most stakeholders, including the European Universities Association which has argued that any reduction could threaten sustainability of universities and thus participation in FP7.

So what does this mean for you? If you are a researcher interested in applying for FP7 funding or getting involved in a funded project it means that it will remain financially viable to take part.

A quick illustration: Let’s say your project has £100K of direct costs – this can include things like investigator time, RA, travel, consumables, and equipment. You’ll automatically be able to add £60K of indirect costs on top = £160K. Now, the EC will only actually fund 75% of most types of costs in FP7 (the exception being management costs, which they’ll fund at 100%), so the EC’s contribution will be £120K. This means the direct costs (of £100K) are covered with a contribution to university overheads of 16.67% of total costs, or £20K – which is very reasonable as far as European funding goes.

If, as had been mooted earlier this year, the EC had decided to drop the flat rate to 40% or even lower, the contribution to overheads on the above example would have been £5K, or 4.8% of total costs. If it had dropped lower, the university may have been forced to make a contribution to the direct costs in order to run the project at all: a situation that would have been difficult to sustain, particularly in the current economic climate.