Cost Sharing 101: The Basics

Cost sharing is a straight forward concept, but the more we explain it, the more complicated it sounds, especially with all the grant administration terminology being thrown around. Once you've grown more accustomed to the jargon, cost sharing will make more sense in your day-to-day job. Let's jump in!

• The university maintains information about cost sharing via its contracting arm, the Office of Sponsored Projects (OSP). Here it is in all its glory: Cost Share Guidance -it's nicely laid out and easy to navigate, and certainly worth a read.
   
  • OSP keeps cost sharing tucked under a link about preparing and submitting proposals, which is where we as Research Administrators often first encounter it, but considering how much cost sharing impacts post-award administration, placing guidance in this pre-award place may not be doing us many favors. 
    
    That resource outlines the university's overall position toward cost sharing and provides specifics on the different types of cost sharing, how to calculate, manage and track it, and also shares the link to the OSP form used for contractually (irrevocably) obligating the university to incorporate and oversee cost sharing on sponsored awards.
     
    • If the above already sounds too much like a rabbit hole, don't worry, we're about to switch tracks.
       
      • The sections below are purposefully brief to make understanding cost sharing more manageable, and they're labeled in such a way that you don't have to go digging and sifting to find that one thing you may need at any given moment.
         
      • Check out these sections whenever you have time, in whatever order makes sense to you and as often as you need.
         
        • Cost sharing seems to come up just often enough that when it does, we have forgotten everything we think we know! If this happens to you, trust that you're not alone!

It is literally what it sounds like: Sharing Costs. 

• But who's doing the sharing, What costs are being shared,
  How are they being shared, And Why is it important?
   
  • WHO's Doing the Sharing?
    The university and project sponsors are the primary sharers of costs. As individuals, our Principal Investigators aren't actually sharing costs, but they can obligate the university to share costs with a sponsor by identifying work they plan to do on a sponsored award that they will not be getting compensated for directly on the source of funds covering project costs. The PI gets paid regardless of which funding source, if that makes sense...
     
  • WHAT Costs are Being Shared?
    Well, there's a list, but the most common type of sharing is faculty salary paid for time and effort spent on sponsored research.
     
    • We'll bring more detail on this in one of the sections below to keep it easy to manage. We are using this type of cost sharing to step through understanding it since it's the type that impacts us the most.
       
  • HOW are They Being Shared?
    Cost sharing happens the moment a faculty member spends time working on research outlined in a sponsored project without billing that time directly to the project. It really is all about the Benjamins. 
    
    So how do we know it's happening?
    It's kind of like... when someone goes in the pool. (😂 yes, we're heading there...)
     
    • There's no way to detect it on the spot, someone would have to tell you they're doing it. 
      (and no, there's no such thing as a chemical that changes the color, no matter how many fake videos say otherwise, so let's keep that one tucked in the urban myth collection bag)
      • We continue the pool analogy in the history section, so keep an eye out for it!
         
  • WHY is it Important?
    This too deserves its own section, but a simple explanation goes something like this:
     
    • Sponsors, including federal agencies, have opinions about what they should and should not pay for when it comes to covering costs for research conducted at the university.
       
    • Universities have their own opinions on that as well.
      And the two perspectives don't always agree.
       
      • ENTER:
        Negotiations, rules, tracking and accountability.

We know. Even the title of this section sounds like a big blech!-fest.

But it provides a basic building block for pulling together the concept of cost sharing, so please press on!
We promise not to switch to grant-speak... 

When it comes to research at UT, there are certain costs that are super obvious that should be included in the project's budget that is to be paid for by the sponsor who wants the research done:

• Principal Investigator salary and associated fringe benefits - for time spent on the project
• Travel that specifically benefits the project
• Materials, supplies and equipment needed specifically to do the research on the project
• Postdoctoral Fellow and other Researcher salaries and fringe benefits - for time spent on the project
• Student costs, including built-in costs for graduate students, such as tuition - for time spent on the project
• And other project-specific costs, such as publication of research results, costs associated with people in training status (often students) that gain experience and contribute to the project, and so on. 
  
  All of the above are considered direct, obvious and clear costs to research projects.
  So in the case of direct costs, it's super easy to just bill the sponsor and say thankyouverymuch!
  
  But what about the less obvious costs of doing research at the university?
  This is where indirect costs enter the picture. Keep going... you're doing great!

Principal Investigators, Postdoctoral Fellows, Students and other Researchers, during the course of conducting research on their sponsored projects at the university, are using the following UT resources, and more:

• Building space - offices, lobbies, common spaces, individual computing labs, rack-mounted server labs, meeting rooms, event venues, study areas, restaurant spaces, etc.
   
• Lights - lots and lots of lights, So. Much. Lights.
   
• Heating and Air Conditioning - heating during the two weeks of actual winter we get here in Texas usually pales in comparison to the air conditioning costs required not just to cool down the humans, but also the high-powered computing equipment that must live in a cool space to keep from overheating. True story.
   
• Water, in the drinking fountains, toilets, sinks and even refrigerators
   
  • Speaking of water in toilets and sinks, how about the cost of cleaning and maintaining those toilets and sinks? Now we're talking janitor services, repair and maintenance, etc.
     
• How about the cost of construction? All the annoying scaffolding and temporary fencing we skirt around on a regular basis... Behind those fences is university improvement. That benefits research conducted at UT, right?

 
Sponsors bring research to UT not just because of the talent represented among our community, but also because of the facilities, resources and capabilities that exist at UT as an 'R1' Top-Tier Research Institution.

• When an institution gets as big as UT (or even half as big), it becomes necessary to employ people to look out for things like... the space across campus and how it's used (as well as craft databases and reports to inform its necessary oversight), also the construction projects and their associated costs, the repair and maintenance of products and services made available and maintained at the university, and so on.
     
  • This is what indirect costs look like at UT.
    And guess what!
     
    • The university employs people to:
      • Oversee making the determination between what's direct or indirect
      • Determine what kind of price tag is associated with each type of cost
      • Negotiate how best to go about making sure sponsors pay for an appropriate portion of the infrastructure that is benefiting the research they've asked us to conduct
        This is a list that could go on and on.
        Hopefully, a clear picture is emerging about indirect costs...

Really? Cost Share History... You think this is interesting? 

Well, truthfully, some of us do enjoy geeking out on a bit o' history. But there's also something to be said for explaining what happened before, to better understand what's happening now.

'Buh see wha ha happen was...'

Back when the U.S. was smaller and the government was too, the various federal agencies went about intruducing their own guidelines and frameworks to try to manage spending and other related things.

• They got serious about these efforts in the late 1950s when they came up with a set of Government Circulars (written statements of government policy) that were put into practice equally across most agencies to bring consistency to how federal funds were managed.
   
• Fast forward to the 1980s and 1990s and you'll find a lot of grumbling by universities and other institutions about one aspect within the research community that had become so widespread and common that is wasn't being discussed properly...

Cost Sharing

• When federal agencies asked researchers to submit their best ideas to get funding, it became super competitive and universities noticed that in order for their talented researchers to 'land the gig' and get chosen for funding, they had to include things that would sweeten the deal and make their proposal stand out as the best bargain --Hey LOOK NSF! I'm gonna solve this important problem, and you don't even have to PAY ME to do it! The university pays me! Woohoo! Pretty cool, amiright? Huh? Huh?!
   
  • The more the Principal Investigators (PIs) 'sweetened the deal' to land the funds, the more costs the universities absorbed that sponsors weren't covering - costs that would otherwise have been charged to the project.
     
    • Universities found themselves stuck in a cycle of increasingly weakening operating budgets with little choice but to accept the situation if they wanted to land the important research work at their institutions.
       
    • Here's where the previously mentioned pool analogy comes into play:
       
      • You can't usually detect the moment someone decides to 'go' in your pool. 
        
        But you CAN test your pool's pH levels over time to figure out if a significant amount of something other than water is throwing off it's balance and overall cleanliness.
         
        • And that's what universities did. They documented the weakening of their operational budgets to show how cost sharing was hurting them over time. Instead of a single instance, they showed the cummulative results.

 

 In the very early 2000s, this whole thing came to a slow-grinding stop.

While the majority of federal agencies announced the discontinuance of cost sharing in research proposals, there were (and still are) a few that not only allow it, but require it, such as the National Institutes of Health, whose cost sharing policy is set by the U.S. Congress and is updated every year.

• Aside from exceptional situations, the majority of agencies were no longer allowed to suggest cost sharing as a way to improve a proposal's competiveness. And proposal solicitations had to declare cost sharing to be disallowed.
  
  But ya'll it took a while to get rid of this expectation!
   
  • These measures didn't quite go far enough because as soon as the change launched, people found clever ways to go around it, discreetly continuing to include cost sharing in research proposals submitted to federal agencies.
     
  • Eventually, the loopholes have, for the most part, been closed, and identifying cost sharing has become somewhat standardized, though this is an oversimplification of it.

 If everything we've covered so far has made sense, you may be ready to jump into a deeper dive.
Just holler if anything isn't clear.