The other day I talked about bid writing being a part of my job. So a big part of this part of my job is to estimate the cost of a project and to accurately break it down in paper. For this to be done, full economic costing is essential.
What is Full Economic Costing?
It sounds complicated but it actually makes sense. Let me give an example. If a member of staff in any organization gets an annual gross salary of £30,000, this amount is just one part of what the employee actually costs the organization. While employed in the organization, the person will make extensive use of all sorts of resources –estates, facilities, technological and office equipment, energy, stationery etc. If all these costs are taken together and are added to the employee’s annual salary, the total amount will be as astonishing as a six-figure sum. So Full Economic Costing is a formula that has been developed to estimate the total costs associated with any kind of work carried out within the organization.
Why is it useful?
Most people tend to forget about the indirect costs associated with labour, but this doesn’t mean that they’re not there. So when money for a project is awarded, the amount is intended to cover the overall costs that the project will mean to the organization, and not solely the staff’s rates. For this reason, when applying for external funding, it is of the essence that total costs are worked out and included in the bid, or the University will be at a loss should the money is only sufficient to cover parts of the expenses. The bad thing about doing full economic costing is that the estimated amounts hardly ever match the staff’s original expectations, which means that concessions often need to be made in order not to surpass the maximum amount offered by the funding body.