Report of the Senate Committee on University Planning (SCUP)

Senate Agenda EXHIBIT IV October 17, 1997


Policy on Overhead on Contract Research

Recommended: That the policy on overhead on contract research be increased from a standard 30% of direct costs and distributed as set out below:

Overhead on Contract Research

  1. The standard overhead rate on contract research shall be 40%, distributed as follows:

    Dean of Faculty 12%
    Contracting department or unit 5%
    Contracting laboratory 5%
    Corporate UWO 9%
    Research Promotion Fund 9%
    Total 40% of direct costs

  2. Exceptions to the standard rate of 40% may be made as required by negotiated agreements with government or through negotiations with the Industry Liaison Office.


All Canadian universities have policies to enable the recovery of indirect costs associated with research carried out under contract. The recovery of these costs ("overhead") is essential; without it universities would effectively be using their own resources to subsidize the R&D activities of industrial partners, governments, and other organizations that enter into contracts to gain access to university expertise and facilities.

A systematic study, conducted in the early 1990s by a consortium of Vice-Presidents (Research), concluded that indirect costs are typically in the range of 45-50% of the direct costs. The cost centres that contribute to these indirect costs were identified as follows:

Type of Cost


Provision and maintenance of utilities and building services to space.

Building Use
Utility derived from buildings.

Central Administration
Contract services, purchasing, human resources, accounting, payroll, research services, industry liaison

Library operations, excluding library books and periodicals, which are capitalized and amortized through "equipment and furnishings."

Capital Expenditures
Equipment and furnishings provided, including computing equipment and library books and periodicals

Indirect Technical Costs
Technical services and similar indirect costs.

Faculty/Department Administration
Services provided for research activities within the Faculties, Departments, and other academic or research units

[Source: Group of Ten Vice-Presidents (Research), 1993]

Most universities in Canada of comparable size and research strength as Western have policies to recover 40% indirect costs. Most also have policies for reduced overhead (10-15%) on grants in aid of research from private sources. At Western, the policy has been to recover 30% overhead on contracts only. Despite the fact that Western's overhead recovery is less than the norm, many researchers oppose the concept of overhead and see it as a grab on research funds by the University. One remedy for this difficulty is for researchers to involve the University's Industry Liaison Officers early in the contract negotiation stage to ensure that overhead is properly budgeted in addition to direct costs. Another remedy, one that would directly benefit the researchers, would involve a revision of the standard overhead rate and distribution.

The The current distribution of overhead on research contracts is:

Dean of Faculty 15%
Corporate UWO 9%
Research Promotion Fund 6%
Total 30% of Direct Costs

The revised rate and distribution would have the following benefits:

It is important to note that this policy, if adopted, would be the standard from which exceptions may be necessary. For example, Government of Canada contracts now provide for 65% overhead on the salary component only. The new contract between the Government of Ontario and the Ontario Centres of Excellence will likely provide for 30% overhead on all direct costs.

This proposal has been reviewed and approved by the University Research Board and SCUP.


SUPAD Membership

Professor D. Vincent of the Department of Economics has been appointed Alternate to Professor J. Knight who is on sabbatical leave until June 30, 1998.