Game-changing EU rules on co-funding of R&D activities

co-funding
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#1

Horizon 2020 seems to be much more approachable for small organizations than former Framework Programmes. Here’s why: the EU has decided to get rid of co-funding requirements for direct R&D costs.

Suppose you want to develop some new tech. And suppose that, for some kind of miracle, you actually get your project approved for funding. For some types of organizations, the EU will cover 100% of your direct costs and 25% of your indirect costs:

"Universities and research and technology organisations will receive one hundred per cent of eligible costs for all projects, as well as a flat rate of twenty five per cent to cover indirect costs.
Industry participants and SMEs will receive one hundred per cent reimbursement for eligible costs of R&D activities and twenty five per cent of their indirect costs, but only seventy per cent of direct costs for close to market or co-funded activities, plus twenty five per cent indirect costs. (source)"
Let's make an example. Suppose the simplest case: you want to build some new software. You use only free and open source resources, so that your direct costs consist entirely of paying a developer. Suppose the developer costs €100 to the organization (gross of taxes and social security). 
Normally, the cost model used by the EU with smaller organization is simple: they assume that indirect costs (offices, secretaries, paper clips, accountants...) are 60% of direct costs. So, in our example, you would have:
Direct costs = €100
Indirect costs = 60% x 100 = €60
Total costs = 100 + 60 = €160
EU contribution = (100% x 100) + (25% x 60) = €115
The preference for direct costs over indirect ones is new in EU funding. It has the advantage that it removes the incentive to underpay researchers, since now their salaries are completely covered. It actually intriduces, if anything, an incentive to overpay them, so that the "fat" associated to the indirect costs can go up a bit.