The document discusses setting prices for projects and services when working in consortia. It notes that in the voluntary sector, costs are calculated and funding is sought to cover them, while commercial sectors set prices and reduce costs to make profits. When working in consortia for public commissions, a price must be set that covers costs most of the time. Setting the right price is complex, as Mr. Micawber's advice in David Copperfield shows - getting the price wrong can lead to unhappiness. The document explores how to account for direct, shared, and overhead costs to establish a sustainable price, and cautions against marginal costing, noting prices must cover support costs even as projects begin and end.

1. Costing in consortia and sub-
contracts
London
28th November, 2012
John O‟Brien
Community Accounting Plus
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2. Costs or price
In the old „voluntary sector‟ we work out
the costs and ask people to cover them.
In the „commercial sector‟ we set a price
and drive down costs to make profits.
In the new voluntary sector commissioning
world of consortia, we need to set a price
that covers our costs…. most of the time.
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3. Setting the price
“„My other piece of advice, Copperfield,‟
said Mr. Micawber, „you know. Annual
income twenty pounds, annual
expenditure nineteen pounds, nineteen
and six, result happiness. Annual income
twenty pounds, annual expenditure twenty
pounds nought and six, result misery.”
David Copperfield (1850)
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4. Setting the price
The price decision is complex – it can be
quite painful if you get it wrong, ask Mr
Micawber
3 types of pasta
Price confusion – size of the bag, gas bills,
special offers, 10% free.
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5. Setting the price – even more
complex in a consortium
How open should you be with your
partners?
Are your real costs relevant to others
Who decides who is invited to the party?
Often there is no neat link to the price per
unit – it‟s not like selling pasta
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6. Is your price sustainable?
Know your direct costs and your
overheads (support, shared, core, indirect)
Think about fixed and variable costs
Don‟t forget non-cash items – redecoration
every 5 years
Beware marginal costing and pricing
Be prepared for expansion and contraction
of services
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7. Today
Project A B C Total
Costs
direct 10 10 10 30
shared 4 4 4 12
14 14 14 42
Grants 14 14 14 42
Net result 0 0 0 0
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8. A new project
Project A B C D Total
Costs
direct 10 10 10 10 40
shared 4 4 4 12
14 14 14 10 52
Grants 14 14 14 10 52
Net result 0 0 0 0 0
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9. Project B comes to an end
Project A B C D Total
Costs
direct 10 0 10 10 30
shared 4 0 4 4 12
14 0 14 14 42
Grants 14 0 14 10 38
Net result 0 0 0 (4) (4)
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10. What should you have charged D?
D has only paid for „marginal‟ cost
Total support costs were £12 before project D.
They didn‟t go up.
The „average‟ cost of project D could, and
should, have included an amount for support
costs.
At £4, with project D, the group wins. When B
closes, the group survives.
At £3, with project D, the group wins, but when B
closes, the group still dies.
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11. Some theory perhaps…
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12. And finally
If in doubt, call it £45 an hour
jo‟brien@caplus.org.uk
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