Costing in consortia and sub-contracts

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Costing in consortia and sub-contracts

  1. 1. PM 2Costing in consortia and sub-contractsChair: Fiona Sheil, Public Services Officer, NCVONational Council for Voluntary OrganisationsSustainable Funding Project
  2. 2. Dave PackwoodBusiness Development Unit,Barnardo’sNational Council for Voluntary OrganisationsSustainable Funding Project
  3. 3. John O’BrienChief Executive, CommunityAccounting PlusNational Council for Voluntary OrganisationsSustainable Funding Project
  4. 4. Costing in consortia and sub- contracts London 28th November, 2012 John O’Brien Community Accounting Plus www.caplus.org.uk
  5. 5. Costs or priceIn the old ‘voluntary sector’ we work outthe costs and ask people to cover them.In the ‘commercial sector’ we set a priceand drive down costs to make profits.In the new voluntary sector commissioningworld of consortia, we need to set a pricethat covers our costs…. most of the time. www.caplus.org.uk
  6. 6. Setting the price“‘My other piece of advice, Copperfield,’said Mr. Micawber, ‘you know. Annualincome twenty pounds, annualexpenditure nineteen pounds, nineteenand six, result happiness. Annual incometwenty pounds, annual expenditure twentypounds nought and six, result misery.”David Copperfield (1850) www.caplus.org.uk
  7. 7. Setting the priceThe price decision is complex – it can bequite painful if you get it wrong, ask MrMicawber3 types of pastaPrice confusion – size of the bag, gas bills,special offers, 10% free. www.caplus.org.uk
  8. 8. Setting the price – even more complex in a consortiumHow open should you be with yourpartners?Are your real costs relevant to othersWho decides who is invited to the party?Often there is no neat link to the price perunit – it’s not like selling pasta www.caplus.org.uk
  9. 9. Is your price sustainable?Know your direct costs and youroverheads (support, shared, core, indirect)Think about fixed and variable costsDon’t forget non-cash items –redecoration every 5 yearsBeware marginal costing and pricingBe prepared for expansion andcontraction of services www.caplus.org.uk
  10. 10. TodayProject A B C TotalCosts direct 10 10 10 30 shared 4 4 4 12 14 14 14 42Grants 14 14 14 42Net result 0 0 0 0 www.caplus.org.uk
  11. 11. A new projectProject A B C D TotalCosts direct 10 10 10 10 40 shared 4 4 4 12 14 14 14 10 52Grants 14 14 14 10 52Net result 0 0 0 0 0 www.caplus.org.uk
  12. 12. Project B comes to an endProject A B C D TotalCosts direct 10 0 10 10 30 shared 4 0 4 4 12 14 0 14 14 42Grants 14 0 14 10 38Net result 0 0 0 (4) (4) www.caplus.org.uk
  13. 13. What should you have charged D?D has only paid for ‘marginal’ costTotal support costs were £12 before project D.They didn’t go up.The ‘average’ cost of project D could, andshould, have included an amount for supportcosts.At £4, with project D, the group wins. When Bcloses, the group survives.At £3, with project D, the group wins, but when Bcloses, the group still dies. www.caplus.org.uk
  14. 14. Some theory perhaps… www.caplus.org.uk
  15. 15. And finallyIf in doubt, call it £45 an hour jo’brien@caplus.org.uk www.caplus.org.uk

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