Content

Pricing, Costing and Income Distribution Policy and Procedure

Policy overview

1 Purpose

This policy sets out the approved uniform basis for Pricing and Costing of University Goods and Services provided to Third Parties outside of the University, its controlled entities and joint ventures; the approved exceptions to the uniform approach and the associated rationale for each exception; and the procedure to be followed to achieve approved exception status. The policy also deals with the internal distribution of income derived from the sale of Goods and Services by the University.

2 Scope

This policy applies to the Pricing and Costing of all University Goods and Services, including those of controlled entities and joint and associated ventures. Unless approved exception status is formally granted in line with this policy, the approved uniform basis for Pricing and Costing University Goods and Services must be used.

3 Policy Statement

All Goods and Services provided by the University to Third Parties will be charged for and Pricing will include all statutory taxes, duties and/or levies as required from time-to-time.

In Costing the Goods and Services it provides, USQ will consider all the expenses (see definition of Full Economic Cost, below) that go into making the Goods or Service available to a specific client or Client Group. This will enable approvers to compare the Full Economic Cost and the Price and thereby determine whether the activity returns a net financial benefit and could proceed, whether the activity fails this test and needs further authority to proceed or whether the activity should not proceed or cease altogether.

In Pricing its Goods and Services, except as provided for by legislation or legislative instrument, USQ will maximise the long-term, gross financial benefit to the University from the Specific Client Group.

4 Principles

  1. The Pricing of Goods and Services is the subject of an explicit Council delegation which vests decision-making authority in named position-holders only (Schedule of Council Delegations), the approvers.
  2. In applying the policy, approvers must determine the market and competitor information which will lead to pricing decisions which serve the long-term interests of the University as opposed to that of any individual organisational unit.
  3. In applying the policy, approvers are required to observe competitive neutrality and to Cost and Price Goods and Services so as not to use public resources in such a way as to gain an unfair competitive advantage.
  4. In general, USQ expects Price to exceed Fully Absorbed Cost by the percentage specified in Schedule A and an explanation of Pricing below this level will be required to accompany a Price recommendation which fails this test.
  5. The University's default Costing methodology to arrive at the Full Economic Cost of providing Goods and Services to specific Client Groups is to use a Fully Absorbed Costing approach. Other Costing approaches may be employed but only in the circumstances and for the purposes envisaged in this policy.
  6. Approvers must use their best endeavours to identify all the additional University expenses that would be incurred by making the Goods or Service available to an additional specific Client Group. A business case must be approved at the appropriate level for the supply of Goods and Services at less than their full economic cost (Financial Management Practices manual (FMPM) - User Charging; Procurement and Purchasing Policy and Procedure; FPMP - Expenditure).
  7. Approvers should be alert to the possibility of conflicts of interest (Code of Conduct; FMPM - Conflicts of Interest and Gifts) in Pricing and Costing decisions where a proponent's judgment may be compromised by competing aspirations. Approvers must refer Pricing and Costing decisions to a duly authorised and independent senior colleague in instances where they are both the proponent and the decision maker. Significant or major value transactions should be referred to members of the Vice-Chancellor's Committee (VC, SDVC, DVCs and CFO).
  8. Proponents and approvers are required to create a proper audit trail to support the decision made.
  9. Approvers and approval levels are aligned with current USQ Financial Delegations (refer FMPM; Schedule of Financial Delegations).
  10. Income from third parties accrues to the University and may only be distributed to organisational units in line with the formulations provided for in this policy (see 5.6). In the case of trade debtors and cash receipts, this will be achieved retrospectively by means of a post-transaction journal entry.

5 Procedures

5.1 General

  1. The requirements for Pricing, Costing, Mark Up, Discounts and Income Distribution are captured in table form in Schedule D.
  2. This document is to be read in conjunction with the following USQ policies:
    1. Overheads for Research Grants and Contracts Policy
    2. Outside employment undertaken by USQ Employees Policy and Procedure
    3. Departmental User Charging, Consultancy and Income Procedure (as per current ORPM) - Attachment 1
    4. Carry Forward Balance (as per Current ORPM)
  3. The terms, Pricing and Costing, extend to individual transactions or groups of transactions whether established by oral or written contracts, hardcopy or electronic, and whether referred to as agreements, contracts, Terms of Trade or other wording
  4. TRIM folder will be opened to capture all documentation relevant to each Pricing and Costing decision and all subsequent revisions. A business case (Business Case guidelines) must also be developed and approved for all applicable transactions and / or contracts. Application of this requirement and applicable thresholds can be found in Schedule B and approvers and approval levels are as per current USQ Financial Delegations. Planning for Costing and Pricing decisions should be based upon a sound knowledge of the authorisations required (Schedule of Council Delegations; Human Resources Delegations; Procurement and Purchasing Policy and Procedure; Schedule of Financial Delegations), the unfolding governance and executive committee meeting cycle (Meeting Schedule) and should allow realistic timelines for the capture and delivery of information.
  5. For Major Opportunities, defined as having an annual value in excess of the annual value contained in Schedule A, a project will be established through Financial Services with a financial budget appropriate to the schedule of work needed to deliver the opportunity. Such projects will normally flow from opportunities canvassed and prioritised in documents relating to the University's strategic planning, such as the Global Marketing Plan, the USQ Research Plan etc, and should reference the appropriate source document.

5.2 Pricing

  1. For Major Opportunities, a complete strategic analysis should be conducted and documented and this should involve the appropriate units of the University. The analysis should facilitate a balanced view of the size of the opportunity, its risks and USQ's likelihood of success. It should also give consideration to risks, reputation, internal resource implications, capabilities and capacity. Reasonable Costs of obtaining this information should be agreed with the decision-maker and can be charged to the project. For opportunities of a lesser value, the decision-maker must use their best endeavours to establish, record and objectify the relevant analytic information, for instance, market and competitor information, which influenced the Pricing decision.
  2. Whilst the University does not prohibit opportunistic Pricing brought about by short-term developments relevant to individual markets, approvers must give due weight to the benefit of fostering good long-term relationships with clients.
  3. Relative to the competition, USQ should endeavour to position its Pricing so as to maximise the net financial benefit to the University. With respect to Cost, Volume and Profit analysis, this will mean the decision is likely to be an iterative process and to involve a degree of modeling of alternatives. Approvers should consider whether sensitivity analysis would enhance decision making.
  4. In the absence of any other compelling rationale, Price may be based upon a “Cost-plus” Mark Up approach where Cost is the Fully Absorbed Cost and the “plus” element is an additional percentage added to the Fully Absorbed Cost, the level of which is specified in Schedule A.
  5. Agreements, contracts, Terms of Trade should provide for the (upward) review of Prices. Where the Terms of Trade permit, Prices should be kept under review by the decision maker to ensure they continue to maximise the net financial benefit to the University. This should be done at least annually, either on the anniversary of the arrangement or otherwise, as required to fit in with committee timetables with Client Groups notified promptly of any Price increases. Price revisions are to be authorised by repeating the steps which were required for their creation. Unless the contract allows, price increases cannot be retrospective.
  6. USQ treasury function operates as a cost centre (USQ Corporate) and not as a profit centre and its primary purpose will normally be to seek to avoid foreign currency exchange risks. All Pricing will be in Australian dollars (AUD) unless written advice to the contrary is obtained from the Chief Financial Officer. Such advice to deviate from AUD Pricing will normally be based on the availability and practicability of hedging arrangements or explicit forward exchange contracts put in place by Financial and Business Services. In such instances, the obligation is on the proponent to provide Financial and Business Services with the information necessary to affect such arrangements and the financial risk remains with the proponent.

    Information on foreign exchange control regimes for national markets is to form part of the Global Marketing Plan. At the selection stage, advice on dealing with foreign exchange controls in overseas markets and local taxation regimes (including withholding taxes) is available and must only be sourced via Financial and Business Services and must form part of any proposals for off-shore activities. This is a complex matter requiring some level of special documentation and proponents will need to consult Financial and Business Services at an early stage.

5.3 Discounts

  1. Domestic & International Fee discounts: it is permissible, as part of the original contract approval process, to negotiate partner/contract fee rates to be maintained at a percentage of the standard domestic and international fees approved by Council for the next year in advance at less than 100% of those fees but USQ will not normally discount its agreed Prices further. Where a proponent has grounds to consider that doing so would work to the long-term financial benefit of the University, a comprehensive explanation will be required to be submitted to Financial and Business Services and authority will be sought only from the Vice-Chancellor who will seek the advice of Financial and Business Services prior to making a decision. Such exercise of authority is to be reported retrospectively to the following meeting of Council.
  2. Other discounts: Where a proponent has grounds to consider that other discounts would work to the long-term financial benefit of the University, a comprehensive explanation will be required to be submitted to Financial and Business Services and authority will be sought only from the Vice-Chancellor who will seek the advice of Financial and Business Services prior to making a decision. Such exercise of authority is to be reported retrospectively to the following meeting of Council.

5.4 Costing

  1. All processes relating to the Costing of Goods and Services are to be undertaken under the auspices of Financial and Business Services, or arrangements approved by the Chief Financial Officer, and will require sign off by the Chief Financial Officer, unless that authority is expressly delegated by that officer.
  2. Costings will be undertaken using a consistent approach established by Financial and Business Services and using consistent conventions and rates wherever like circumstances prevail.
  3. Costing rates will be established annually and will be derived from the annual budget so as to ensure a consistent treatment of matters such as anticipated salary increases and other inflation.
  4. Costing rates may be updated by Financial Services if there are material changes in circumstances and, in any case, will explicitly be considered as part of the Semester 1 Review process.
  5. Established and, if applicable, updated Costing rates are to be formally lodged with the Vice Chancellor's Committee (VCC) and VCC will arrange for the rates to be published internally.
  6. Financial Services will liaise with the appropriate organisational units for the purposes of establishing specifications of work content to be Costed, measuring work quantities and establishing estimates of volume.

5.5 Strategic considerations in Pricing and Costing

  1. The uniform Costing methodology for use in USQ is Fully Absorbed Costing (i).

    (i) Some existing activities, prior to this policy's development, would not satisfy this requirement and be able to produce a net financial benefit based on their existing Prices. However the University will not automatically choose to discontinue these activities.
  2. This policy recognises three groups of activities requiring specific strategic consideration: grant applications, altruistic activities and marginal markets. Disposal of items surplus to requirements, or of obsolete or written off items, are explicitly not part of these activities and are dealt with elsewhere (FMPM - Assets disposal ). For all other goods and services not categorised, reliance is placed in good practice and policy principles.
  3. This policy recognises that some grant applications to external grant bodies are restricted and need to be undertaken at potentially less than Fully Absorbed Cost. All such grants require the final authority of the Deputy Vice-Chancellor (Research & Innovation) for research grants, or the Deputy Vice-Chancellor (Academic Services) and Chief Information Officer for learning and teaching grants. Even in these cases, Proponents should endeavour to follow the spirit of this policy and to maximise wherever possible the net financial benefit to the University.

    Until such time as definitive guidance is forthcoming, minimum requirements for the Costing of a grant application are:
    1. To recover all direct Costs that form part of the proposed activity (for example, specific appointments, materials and expenses which occur to establish and run a grant project, contracts for service with Third Parties); and
    2. To recover all indirect Costs that support the direct activity (for example, technical support which is not specific to the establishment and running of the grant support but which is consumed in its delivery); and
    3. Where allowable, to include an allowance as set out in Schedule A as a contribution to University overheads.
  4. Altruistic activities are activities which further the social goals of the University but which would not be affordable by the recipient if Full Economic Cost plus a percentage were to be charged. In these instances, the activity should still be fully costed and authority sought to incur the anticipated loss in line with established delegations (Schedule of Council Delegations). For approved altruistic activities, gross income will be distributed as set out in Schedule A.
  5. Marginal markets are distinguished from altruistic activities in that it is the intention of the University to secure a net financial benefit either (a) by establishing a presence that will develop the opportunity, such as the market or a relationship, to a point where Full Economic Cost plus a percentage could be recovered or (b) to establish only transitory arrangements and secure a marginal return. Approvers should consider how contract terms can best reflect these divergent objectives. In these instances, the activity should still be fully Costed (ii), but documented with a schedule of timing / migration with exit strategy and trigger dates. Authority must be sought to incur the anticipated loss in line with established delegations (Schedule of Council Delegations). In approved marginal markets, gross income will be distributed as set out in Schedule A. Prices in these markets should not be set at below the marginal cost of providing the good or service.

    (ii)This policy recognises that the specification for an off-shore activity may make a lesser call on University resources than do fully on-shore activities and this may be reflected in the relative level of the Fully Absorbed Costing used.
  6. This policy recognises that there may be a need in establishing a presence to trade at less than Full Economic Cost plus a percentage for a time. The case for arrangements of this, and the migration trajectory to achieve a net financial benefit to the University, must be part of the proposal to establish such an activity.

5.6 Distribution of income

  1. Income for the activities listed in Schedule B will be credited to agreed organisational units and, with the exception of Altruistic activities and Marginal markets, explicit incomes for distribution and relative formulae will be agreed as part of the annual budget cycle, see Schedule C. For Altruistic activities and Marginal markets, income will be distributed as per Schedule A. Attachment 1 is established each year as part of the Operational Resource Management Plan (ORMP) and principally describes the corporate contributions applying for a financial year for Departmental User Charging. All other income will be distributed in the following order:
    1. Direct and Indirect Costs: by reference to the original Costing, the proportion of income received from Third Parties to cover these Costs will be credited to the organisational units which incur the Cost and must be used to acquit the expenses for which the original Costing allowed. Internally allocated Third Party income not used for these purposes reverts to the University Corporate.
    2. Overhead distribution: Fully Absorbed Costing has an unavoidable level of aggregation as regards the calculation of overhead Costs and hence is to be regarded as a “general allowance”. Such a general allowance recognises that overhead Costs are incurred at the departmental, faculty and University level. For this reason, USQ uses a simple matrix for the distribution of this type of income is set out in Schedule C.
    3. Net financial benefit: the net financial benefit after the distribution of Costs described in (a) and (b) is split as per Schedule A between University Corporate and the lead organisational unit (or otherwise as negotiated).



      For the avoidance of doubt, to the extent possible, this approach to income distribution applies also to the external grant income referred to in 5.5 point 3 above. In the case of such grants, periodic external audits of the acquittal of the grant can be anticipated and appropriate records are required to be maintained.

6 Schedules

6.1 Schedule A: Standard Schedule of Rates

(Current from 1 July 2011)

Description

Standard

  1. Price to exceed Fully Absorbed Cost by

15%

  1. Major Opportunities

$40k per annum

  1. Additional percentage to be added to the Fully Absorbed Cost in the “Cost-plus” approach - Cost Plus or Mark Up.

See 1. above

  1. Allowance to be used in research contracts as a contribution to University overheads. (Subject only to published maxima of the grant awarding entity.) Research Centres may be exempted if carry forward policy applies different contribution methodology.

20%

(on direct costs)

  1. Allowance (Overheads) generally applicable as a contribution to University overheads.

20%

(on Full Economic Cost)

  1. Altruistic activities - gross income (less any applicable discounts, commissions, fees etc.) to originating organisational unit

100%

  1. Marginal markets- gross income (less any applicable discounts, commissions, fees etc.) to originating organisational unit

70%

  1. Net Financial Benefit Split

Corporate

20%

Org. Unit/s

80%

6.2 Schedule B: Record Keeping and Business Case Thresholds

(Current from 1 July 2011)

A TRIM record should be created and business case approved by the appropriate Financial Delegate if the:

Activity

Full economic cost of individual products (is greater than)

$

OR

Full economic cost groups of transactions (is greater than)

$

Residential Colleges

(excluding student accommodation²)

2,000

10,000

Printery

2,000

50,000

Bookshop

2,000

5,000

McGregor

2,000

20,000

QCWT

Functions / Catering / Production

2,000

10,000

Artsworx

2,000

10,000

Other Sales

2,000

10,000

Grant Applications³

All applications

Consultancy and / or Fee for Services

All activities*

2,000

10,000

Altruistic activities

All activities (where discount value is > $2,000)

Marginal market activities

All activities

Major opportunities

All above standard rate (refer Schedule A)

*Recurrent or repeat services

  1. For Grant Applications and Altruistic Activities, a local permanent record would be adequate record keeping. For Research Grants particularly, a local record would be considered being held in the Office of Research and Higher Degrees.
  2. Fee setting for standard University Student fees and standard Business Unit operational fees (e.g. Residential Colleges accommodation, Printery printing, QCWT stock etc.) should always be informed by this policy's principles, however approval will follow the University's delegated approval paths.
  3. Grant Applications may be considered equivalent to business case documentation providing financial requirements are satisfied.

6.3 Schedule C: Matrix for the Distribution of Overhead

(Current from 1 July 2011)

Types Of Income

Is Overhead Distribution Applicable?

Financial Services

ORHD

Other Org Unit

University Research Investment

University Corporate

Student Fees

Commonwealth

No (RAM*)

Domestic Fee

(incl. Cont Ed)

No (RAM)

International Fee

No (RAM)

International Partners

No (Marginal)

Australian Partners

No (RAM)

Short Courses

Yes

100%

Grants

No O/H Allowable

N/A

O/H Allowable

Yes

20%

40%

40%

Corporate

No (RAM)

Consultancy

Dept / Faculty (General)

Yes

20%

80%

OER (General)

Yes

20%

50%

30%

Sales

Bookshop

No (RAM)

Res Colleges

No (RAM)

Printery

No (RAM)

QCWT

No (RAM)

Other

Yes

100%

General

Investments

No (RAM)

Bequests (Tied)

No (RAM)

Donations (Untied)

Yes

50%

50%

Facilities Rental

Yes

5%

15%

80%

Other Sales & Services

Yes

100%

*Resource Allocation Model (RAM) - USQ Corporate Budget Model as published in the annual ORMP

6.4 Schedule D: Applicable Requirements for Goods and Services provided to Third Parties

(Current from 1 July 2011)

Activities where Prices are determined by legislation

Commonwealth Grants applications for Research and Learning & Teaching; Grants in aid and Travel allowances

(See definitions)

Business Unit activities

(Business Units include Residential Colleges, Bookshop, Printery and QCWT.)

Marginal activities

(Marginal markets are distinguished from altruistic activities in that it is the intention of the University to secure a net financial benefit either (a) by establishing a presence that will develop the opportunity, such as the market or a relationship, to a point where Full Economic Cost plus a percentage could be recovered or (b) to establish only transitory arrangements and secure a marginal return. See 3.5 point 5 above.)

Altruistic activities

(Altruistic activities are activities which further the social goals of the University but which would not be affordable by the recipient if Full Economic Cost plus a percentage were to be charged. See 3.5 point 4 above.)

Disposal of assets surplus to requirements

All other activities

(including Non-government research grants and contracts and all consultancy)

Pricing

NA

See 3.5 point 3

What the market will bear with “Cost Plus” Mark Up as default

What the market will bear with “Cost Plus” Mark Up as default

See 3.5 point 5

What the market will bear with “Cost Plus” Mark Up as default

See 3.5 point 4

Outside of scope

What the market will bear with “Cost Plus” Mark Up as default

Discounts approval

NA

See 3.5 point 3

V-C (or Nominated Delegate) approval required

V-C approval required

See 3.5 point 4

Outside of scope

V-C approval required

Costing

Fully absorbed cost

Fully absorbed cost

Fully absorbed cost

Fully absorbed cost

Fully absorbed cost

Outside of scope

Fully absorbed cost

Applicable overhead rate as a % of direct cost

As advised by BMC

Schedule A

As advised by BMC

As advised by BMC

As advised by BMC

Outside of scope

As advised by BMC

Mark up

NA

DVCs (R&I) and (AS)

See 3.5 point 3

Explicit income distribution formulae agreed as part of the annual budget cycle

Schedule A

Nil

Outside of scope

Schedule A

Distribution rules

NA

Schedule C

NA

Schedule A

Schedule A

Outside of scope

Schedule C

Overhead

Net financial benefit

NA

See 3.6 (c)

Surpluses accrue to University

See 3.6 (c)

Nil

NA

See 3.6 (c)

7 Attachment 1: ORMP 2012 User Charging, Consultancy and Income Policy

Attachment 1 is provided for completeness. It is established each year as part of the Operational Resource Management Plan (ORMP) and principally describes the corporate contributions applying for a financial year for Departmental User Charging.

User charging for the purpose of this policy is defined as charging for or seeking compensation and / or remuneration for, goods and / or services made available under the auspices of individual Organisational or Business Units.

User charging is generally limited to Business Units of the University (Residential Colleges, Artsworx, QCWT, Printery & Bookshop) except where policy states otherwise. This policy specifically details which Organisational Units are entitled to charge either internally and /or externally for goods and services.

This policy should be read in conjunction with the Pricing, Costing and Income Distribution policy as it determines the applicable overheads, contributions and distributions applicable to external charging.

Some general charging and cost recovery principles that apply outside of policy and should be noted are:

  • Organisational units are not to supplement their operational budgets by charging for their services. There will be limited exceptions, and only with express VC approval on recommendation from BMC. (BMC will publish approved arrangements and review annually);
  • Where expenditure has been incurred on behalf of another Organisational or Business Unit, and only where appropriate and incurred in the current year, direct external non-salary expenditure is allowed to be recovered.

Organisational Units

Description of Income

External

Internal

Fraser Coast

Facilities Hire

X

X

Motor vehicle hire

X

Springfield

Facilities Hire

X

X

Incidental Student Services (e.g. Gym)

X

Faculties

Consultancy (Direct contracts)

X

Coursework (Short and/or not for credit)

X

Office of External Relations #

Consultancy - Faculty and Research Centre (Indirect Contracts)

X

USQ Corporate Club membership

X

Fundraising activities for scholarships

X

Research Centres

Consultancy

X

Open Access College

English Language Tours

X

Student Management Division

Replacement / copies of Testamurs, Award Certificates and certified Academic Transcripts

X

Academic Dress hire

X

Examinations for External Institutions

X

Administration of external examinations other than USQ

X

Application for extension of time for payment of fees

X

Graduation Dinners and related

X

USQ promotional merchandise sales

X

X

Library

Library fines for overdue books

X

Associate borrower fees

X

Interlibrary loan charges

X

Lost and Long Overdue Books

X

LRDS

Replication copyright and distribution

X

X

Design / production of audio, video, graphic and photographic resources

X

X

ICT

Desktop Refresh program

X

MFD Refresh Program

X

Telephony usage - (Cost Recovery)

X

Campus Services

Motor vehicle hire

X

Despatch of Learning Resources and Assignments

X

X

Financial & Business Services

Business Unit Accounting Services

X

# Additional analysis and discussion is needed relating to Commercialisation of IP income for 2012

8 References

Nil.

9 Policy Information

Subordinate Schedules

Accountable Officer

Chief Financial Officer

Policy Type

Regulated Policy and Procedure

Approved Date

10/10/2011

Effective Date

10/10/2011

Review Date

Relevant Legislation

Related Policies

Procurement and Purchasing Policy and Procedure

Code of Conduct Policy

Outside Employment Undertaken by USQ Employees Policy and Procedure

Departmental User Charging, Consultancy and Income Policy

Carry Forward Balance Policy

Schedule of Council Delegations

Related Procedures

Related forms, publications and websites

Financial Management Practice Manual

2011 Meeting Schedule

Definitions

Terms defined in the Definitions Dictionary

Definitions that relate to this policy only

Altruistic Activities

Refer 5.5 point 4

Business case

A business case must at a minimum capture the reasoning for initiating a project / transaction / activity, the risks and opportunities involved and must detail the rationale and logic for seeking approval. Business cases are to be presented in a structured written document, and where applicable include the costing detail.

Contract Research

In general, Contract Research means an arrangement whereby USQ enters into a legally enforceable agreement which binds USQ to deliver a specific set of services or outcomes. Contract research embraces government (Commonwealth, State or Local) and non-government agreements. Commonwealth arrangements frequently have non-negotiable terms which relate inter alia to Pricing and Costing and which, if accepted, might be deemed to over-ride some of the principles of this policy.

Cost, Costing

Cost can be regarded as the expenditure or consumption of something, such as time or labour, materials or facilities necessary for the delivery and support of an activity or carrying out of a process and includes depreciation. Costing is the gathering together of all the activities or processes associated with a Good or Service and the collation of their costs into one composite financial figure, the full economic cost of the Good or Service.

Cost, volume profit analysis

This technique recognises different cost behaviours: fixed and variable and when fixed and variable costs interact with volume growth, these different behavioural characteristics have an implication for unit Cost. Comparing unit Cost with unit Price at different volumes indicates many things: break-even and level of actual or predicted surplus or deficit among them.

Distribution Rules

Clause 5.6 deals with the distribution of income, Schedule C deals with the distribution of Overhead. Lead organisational units and University Corporate may have lower level Distribution Rules designed to appropriately affect behaviours in pursuit of strategic priorities. These rules are outside the scope of this policy.

Full Economic Cost

The Full Economic Cost is an expression intended to convey (a) the completeness of the cost and (b) its limitation to only those things to which a cost can be attributed. Essentially this definition distinguishes “historic cost”, an objective measure, from “value” placed upon it from a subjective viewpoint.

Fully Absorbed Costing methodology or approach

This methodology is based on a comprehensive analysis of all the Costs of the University and the behavioural characteristics of different types of Cost. It defines a Cost object: a Good (for example, a selection of readings in print format) or a Service (the delivery of a short course to an industry group) and attributes Cost to the Cost object in a variety of ways (Direct Cost, Indirect Cost and overheads) and by reference to a variety of drivers (EFTSL, contact hours etc). The “Fully” and “Absorbed” aspect refers to the basis of the methodology that all Costs are traced to their drivers and thereby the aggregate of all Costings for all Specific Client Groups ensures that in conjunction with Cost-plus pricing all the University's Costs are fully and appropriately absorbed into the pricing decision

Goods and Services

Goods and Services is a broad definition intended to capture the swathe of activities for which the University is obliged to charge or has a right to charge Third Parties. Although related, this paper does not deal with disposal of surplus assets, so the underlying linking factor for Goods and Services is that they are the things for which the University was established and all matters reasonably incidental to them. Examples of the first are lecture and seminars, courses and programs, award-bearing or not, research and consultancy. Examples of the second are the residential colleges, counselling services, sports facilities and the Printery etc.

Marginal Markets

Refer 5.5 point 5

Net Financial Benefit

Net Financial Benefit is the residual funds or profit after removing all direct, indirect and overheads from the net income.

Overheads

Overhead is the value that quantifies the indirect support from the University's corporate functions. Overheads are also referred to as “General Allowance” or in terms of internal / departmental charging can be referred to as “Corporate Contribution”.

Price, Pricing

Price and Pricing activities should always be based on considerations of “what the market will bear”. This coincides with Principle 4.2 above. USQ deploys a Cost-plus pricing approach (see 5.2 point 4) in the absence of any other compelling rationale.

Research, Consultancy

In the broadest sense of the word, the definition of research includes any gathering of data, information and facts for the advancement of knowledge. Read more: http://www.experiment-resources.com/definition-of-research.html#ixzz1CffI169m

In practice, consultancy is sometimes more difficult to differentiate from research than would at first appear. For block funding purposes, it may be to USQ's advantage to categorise activities at the margin as research.

As a general guide, consultancy can be regarded as the practice of giving expert advice within a particular field; "a business management consultancy". Read more: wordnetweb.princeton.edu/perl/webwn

Specific Client Group

The notion of a Client Group suggests that individual Third Parties who receive Goods and Services from USQ, its controlled entities or joint ventures will share common attributes: they may be from different social economic status background but they are all for example studying Nursing. This grouping approach is a fundamental building block of costing but does recognise that grouping may not always be possible and that costing may need to take place at the level of a single Client.

The concept of a “Specific” Client Group picks up on a significant difference(s) within a Client Group which affect their Costing and Pricing and either ought to be or is to be reflected in the Cost or Price. An example of this would be UG Nursing students (Client Group) studying on- or off- shore (Specific Client Groups). As above, a Specific Client Group could be a single Client.

Terms of Trade

This phrase is intended to encapsulate the multiplicity of things which can and sometimes should be included in USQ's relationship with a Specific Client or Client Group. Examples include, when payment is due, how it is to be made, exit clauses, penalties for non-performance etc.

Third Parties

As an organisational entity, USQ is defined as the legal entity of the University plus its controlled entities (USQ owned or controlled companies) and joint ventures. Legally, the University, its controlled entities and joint ventures are regarded as a separate entity from the people, staff and students, and companies that work and/or study at the University at any one time. Under this definition, staff, students, the general public, government departments and agencies and non-USQ companies are Third Parties. For the avoidance of doubt, Third Parties include USQ staff when using University facilities/resources for authorised Private Outside Employment & Consultancies.

Keywords

Pricing, Costing, Income Distribution

TRIM Record No

13/400PL

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