Co-operative research projects for Small and Medium-sized Enterprises CRAFT. Co-operative Research Action for Technology

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1 Co-operative research projects for Small and Medium-sized Enterprises CRAFT Co-operative Research Action for Technology under the 6 th Framework Programme of the European Community for research, technological development and demonstration activities Toolbox Developed by Members of TAFTIE The Association for Technology Implementation in Europe April TAFTIE MEMBERS ANVAR France, CDTI Spain, ENEA Italy, FFF Austria, IWT Belgium, VINNOVA Sweden, RCN Norway, SENTER Netherlands, B.E.A. Brussels, TEKES Finland, TTGV Turkey, VDE/VDI-IT Germany, ENTERPRISE IRELAND Ireland, ENTERPRISE Estonia

2 FOREWORD To facilitate the participation of Small and Medium sized Enterprises (SMEs) in the Framework Programmes of European Community for research, technological development and demonstration activities (FP), the European Commission conducts its CRAFT Programme. SMEs are major customers of the TAFTIE Member organisations ( (The Association for Technology Implementation in Europe). TAFTIE Members have many years experience of assisting companies to participate in CRAFT projects. Because of this experience, the European Commission (DG Research "SMEs unit") awarded in 1998 a contract to TAFTIE 1 to develop a toolbox, suitable for SMEs and intermediates, on how to participate in CRAFT projects. This toolbox is a second version drafted by the Brussels Enterprise Agency, formerly known as Technopol, (TAFTIE member and SME NCP in FP6) which has been adapted according to the rules, guidelines and procedures available until 16 April 2003 of the new framework programme 2 - FP 6. The toolbox is a detailed guide for SMEs and intermediates on participation in CRAFT projects. It covers important topics such as preparation of a proposal, financial conditions, consortium agreement, contract negotiations, project management and exploitation of results. For the convenience of the reader, each chapter starts with a short summary. TAFTIE Members have included many tips from their own experience of assisting SMEs in CRAFT projects. These will help SMEs and intermediates to avoid pitfalls and to save time and money as participants in CRAFT. The aim of this CRAFT Toolbox This Toolbox is mainly addressed to SMEs, as well as to intermediaries and other organisations working with SMEs, willing to: Assess whether CRAFT is a possibility to them for participating in the FP 6, Find more information and assistance, Understand step by step the priorities of a CRAFT proposal, Understand how to prepare a project proposal, Have a clear view on how managing and running a project, Identify ways, opportunities and methodologies for exploiting the project results. The authors are not responsible for the use that might be made of the information contained in this toolbox. Although this document contains relevant information updated up to 16 April 2003, the authors strongly encourage the reader to closely follow the information sources of the European Commission as important developments regarding the CRAFT instrument will be available soon. The final pages contain a glossary that deals with concepts that are central in this Toolbox. 1 ANVAR, France, Edouard Bourgeois ; CDTI, Spain, ; ENEA, Italy, Maria Paola Breghi ; FFF, Austria, ; IWT, Flanders, Belgium, Freddy D Hulster ; Enterprise Ireland, Kenneth O Reilly ; NUTEK, Sweden, Staffan Håkansson, chair ; OMFB, Hungary, ; RCN, Norway, Ole Andreas Flagstad ; Scottish Enterprise, Scotland, ; Senter, Netherlands, Nienke Tigchelaar ; Technopol Brussels, Brussels Belgium, Jacques Evrard ; Tekes, Finland, Marku Sjostedt ; TTGV, Turkey, ; VDI/VDE-IT, Germany, Thomas Heimer. 2 Decision n 1513/2002/EC of the European Parliament and of the Council of 27 June 2002 concerning the sixth framework programme of the European Community for research, technological development and demonstration activities (Official Journal of the European Union L 232/1, 29 August 2002, p. 1 to 33) 2

3 Contents 1 Introduction 4 1. CRAFT a general description CRAFT objectives and technical areas General conditions for CRAFT What SMEs can participate? Who are the RTD Performers? What is the typical consortium for a CRAFT project? Financial conditions Who is the owner of the project results? What SMEs are the most suitable for participation? How can an SME be a partner in a CRAFT Project? 10 2 How to prepare and write a CRAFT proposal under the FP The proposal procedure How to form a consortium How to write the proposal Where to find more information 16 3 General financial conditions Financial rules for a CRAFT Project Principles of EU financing for different costs 18 4 Proposal evaluation Receiving the project proposals The Eligibility check Selection of external experts Proposal evaluation, rating and selection Evaluation Rating Thresholds and weightings Selection 27 5 The Consortium Agreement and Intellectual Property Rights (IPR) Why a Consortium Agreement? Protection and exploitation of knowledge and IPR Definitions and general terms in the Agreement Check-list for Consortium Agreements 32 6 Contract negotiations with the European Commission EC Contract Steps to be taken between submission of proposal and Start of Project 37 7 Project management The importance of project management Key role of the Co-ordinator Management tools Strategic management Scientific management Administrative management What can go wrong and how to deal with it 43 8 Final results - exploitation and factors for success Risk & Success factors Why exploit the results? Exploitation of intellectual property (IP) Technology Implementation Plan (TIP) Dissemination 51 9 Glossary 52 3

4 Introduction In order to implement the Sixth Framework Programme ( ) of the European Community for research, technological development and demonstration activities, a series of instruments have been established to contribute to the creation of the European Research Area. These instruments are available to any legal entity fulfilling the conditions stated in the rules for the participation 3 and are willing to benefit from the research activities carried out at European level. For the purposes of this toolbox, attention will be focussed on SMEs and how they can take part in the Sixth Framework Programme. SMEs are considered by the European Commission as the backbone of the economy at European level: Of 19 million enterprises in EU, over 99% are SMEs They provide 66% of the jobs in Europe They generate 55% of the region s turnover. They are twice more innovative than larger companies and they are faster in reacting to increasing competitive pressure. Their participation in the Sixth Framework Programme is considered as of outmost importance and highly recommended. The European Commission places special emphasis on the SMEs involvement within the Priority Thematic Areas and through the new instruments (the Integrated Projects and, possibly, the Networks of Excellence). Under these instruments, at least 15% of the funding allocated to the Priority Thematic Areas is foreseen for SMEs. The Sixth Framework Programme (FP 6) contains specific schemes for SMEs in the form of Horizontal Research activities: Co-operative Research Collective Research This toolbox will focus on the Co-operative Research - CRAFT Why should SMEs take part in a CRAFT project? They have an idea for a project They have a technical or technological need/problem to solve concerning product and process development They have research skills to exploit They may wish to have access to foreign markets They wish to remain competitive and/or acquire new technologies 3 Regulation EC n 2321/2002 of 16 December 2002 (Official Journal of the European Union, L 355/23 of ) 4

5 They wish to share the risks and costs of research They would like to work together with European partners They wish to create new contacts and networks They would benefit from financing opportunities The CRAFT scheme Co-operative Research Action for Technology is intended to deal with all this. 5

6 Are your company and your project idea suitable for CRAFT? Does the market lack the technological NO Contact your local IRC for assistance solution you need? in finding the technology YES The intention is to develop new, innovative products and processes which do not exist The technology we need exists but NO Contact your local IRC for assistance needs adaptations in finding the technology YES This is acceptable as long as product or process development or research is needed to reach the results Finding the technological solution is a NO Consider using your own funds or taking part of our long-term strategy a bank loan YES CRAFT is long-term - about 2 4 years from project start to final implementation Our company and the project itself will benefit NO Apply for regional or national funding from international co-operation schemes YES CRAFT projects include participants from at least three countries and thus give opportunities for international collaboration The technological solution needed is Especially interesting to SMEs NO Try other schemes such as EUREKA YES CRAFT is intended to help SMEs. Large companies can also participate if it improves the chances for a successful project The intended project satisfies all the eligibility criteria NO Try other schemes such as EUREKA YES Consider all your possibilities with CRAFT and start preparing the proposal! 6

7 1. CRAFT a general description CRAFT is a scheme whereby a given number of SMEs from different countries, having common specific problems or needs, or with a common interest in developing or using new products, processes and technologies, assigns a significant part of the required scientific and technological research to third parties (RDT performers). In all cases the SMEs retain the ownership of the results. SMEs may not have sufficient research means and skills internally and therefore need help from other parties, to be able to carry out the required research activities. The project work is then carried out in the form of a consortium joining together SMEs and RTD performers. 1.1 CRAFT objectives and technical areas A CRAFT Project is always carried out jointly by SMEs, together with RTD Performers. The co-operative research project may address any research topic across the whole field of science and technology, so long as that it complies with company s needs and real purposes. The typical CRAFT approach is bottom-up (based on real company s needs) and not topdown (proposed by the Commission). A CRAFT project is based on the needs of a group of SMEs the SME Proposers. The research work carried out on their behalf is performed by a group of researchers the RTD Performers. 1.2 General conditions for CRAFT What SMEs can participate? CRAFT is open to all SMEs established in the Member States and Associated States of the EU 4. For the purposes of the first call 5, an eligible SME is an enterprise which: 1. has no more than 250 employees, 2. has either an annual turnover not exceeding 40 million or an annual balance-sheet total not exceeding 27 million, 4 Companies from other countries can participate under special conditions (see Information Package - foot note n 13). 5 The definition provided by the European Commission Recommendation of 03 April 1996 (Official Journal of the European Union, L 107, 30 April 1996, p ) may be revised during the course of FP6 and could affect future calls. If so, the Commission will modify the future Information Pacakges for SMEs (including the Guide for Proposers, the Work Programme, etc) accordingly. 7

8 3. is not owned for 25% or more of the capital or the voting rights by one enterprise or jointly by several enterprises falling outside the definition of an SME. This threshold may be exceeded in the following two cases: a) The SME is held by public investment corporation, venture capital companies or institutional investors, provided no control is exercised either individually or jointly, or b) If the capital is spread in such a way that it is not possible to determine by whom it is held and if the SME declares that it can be legitimately presume that it is not owned as to 25% or more by one enterprise, or jointly by several enterprises, falling outside the definition of an SME. The company is not a research centre, research institute, contract research organisation or a consultancy company Who are the RTD Performers? The RTD Performers are any organisation with RTD means adequate to carry out the research activities requested by the SME participants. RTD Performers can then be universities, research centres, research organisations, and industrial companies and SMEs having suitable RTD means. 1.3 What is the typical consortium for a CRAFT project? In a CRAFT project, the consortium must at least involve: and 3 independent SME participants, established in 2 different Member States 6 or Associated States 7, of which at least one shall be established in a Member State or Associated Candidate State 8, 2 RDT performers, independent from any other participant and established in 2 different Member States or Associated States, of which at least one shall be established in a Member State or Associated Candidate State. Within the consortium overall, participants must be established in at least three (3) different EU Member States or Associated States, of which at least two (2) must be EU Member States or Associated Candidate Countries. In addition, other companies and end-users may participate in the project by contributing to its costs, under conditions ensuring they do not assume a dominant role and if they have a particular interest in solving specific problems or needs of the SMEs involved. These enterprises and end-users must be independent from any SME participant or RTD performer. 6 EU Member States are : Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Spain, Sweeden, Portugal and United Kingdom. 7 Associated States means a State that is party to an international agreement with the Community, under the terms or based on which it makes a financial contribution to all or part of the 6 PCRD. These States are currently : Iceland, Israel, Liechtenstein, Norway and Switzerland. 8 Associated Candidate Country means a State which is acknowledged by the Community as a candidate for accession to the European Union. These States are : Bulgaria, Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Romania, Slovakia, Slovenia and Turkey. 8

9 The co-ordinator of a CRAFT must be either one of the SME participants or one of the RTD performers. If the minimum requirements are fulfilled, the consortium can be constructed with great flexibility depending on what is needed for the project. The following is an example of how projects in previous programmes have been constructed: Number of SMEs: 4-20 (7 on average). You should have at least 5 in case one of them drops out. Average number of research performers: 3 Horizontal (several SMEs in the same sector) or vertical (suppliers-manufacturers-users) consortia. 1.4 Financial conditions When participating in a CRAFT Project, SMEs get research work carried out for them mainly by RTD Performers (SMEs may as well participate in research activities). The total project cost should be between and The EC financial contribution represents 50% of the total costs of the project (which means between and ). The RTD performers must account for at least 40% of the total eligible costs for research and innovation-related activities of the project. For further information on financial conditions, see chapter Who is the owner of the project results? A CRAFT Project has always to be based on the needs of the SMEs participating in the project (bottom-up approach) since it aims to support SMEs in need of specific scientific and technological research. Consequently, the SMEs of a CRAFT are the owners of the project results. The RDT performers and the other companies or end-users will not have the ownership of the Intellectual Property Rights derived from the project but may benefit from early access to and preferential use of the results, in accordance with the rules for participation (for further information on these issues, please see chapter 5). 1.6 What SMEs are the most suitable for participation? CRAFT is most suitable for SMEs that: Have a clear interest in international collaboration beyond the R&D project and its immediate results, Have a well-established business strategy and/or business plan, Have a good knowledge of their own market and those of competitors, 9

10 Have limited or no research and development resources, Are already exporting or looking for new business opportunities, Have the ability to communicate in English, For the Co-ordinator it is important to have enough resources and experience for the management of the project. 1.7 How can an SME be a partner in a CRAFT Project? There are many ways for an SME to become a partner in a CRAFT Project: By contacting the SME National contact points (NCP) ( By using the EU database CORDIS for analysing the partner search and/or submitting its own profile, By contacting the SME Help-desk ( By contacting the local IRC Innovation Relay Centre ( 10

11 2 How to prepare and write a CRAFT proposal under the FP 6 When preparing a CRAFT proposal: Verify that the project does address the priorities and objectives described in the current Workprogramme on Horizontal Research Activities involving SMEs 9, Be sure that the proposal addresses each of the evaluation criteria which will be used by the evaluators 10, Check the deadlines indicated in the Call for CRAFT proposals for the submission of the project 11, Verify the novelty of the project and the potential market (if necessary, make preliminary laboratory tests, etc.), Write a short project outline, Consult with expert organisations 12, search for partners, Start writing the proposal!!! 2.1 The proposal procedure When a CRAFT proposal is submitted, most details of the intended project have to be ready. The consortium must be established, the market potential evaluated, the project management selected, etc How to verify the eligibility of a CRAFT project Before starting the preparations for a project, it is important to know all the objectives, conditions, and evaluation criteria foreseen for a CRAFT scheme. Apart from reading this toolbox, the Information Package 13 must be consulted. 2.2 How to form a consortium Forming a consortium is one of the most important activities when preparing a CRAFT Project. The partners must be complementary to each other, they must be strongly committed, and they must have the necessary skills for carrying out the project and exploiting the results. The most important partner in a project is usually an end user, since this partner will put the right demands on the results from the beginning of the project. Types of partners There are two types of obligatory partners for forming a CRAFT consortium: 9 This document is available at the following address : 10 These evaluation criteria are defined in Annex B of the above mentioned Workprogramme 11 The first Call for CRAFT proposals (published on the Official Journal of the European Union on , C 315/42) foresees two closure dates : 29 April and 27 November 2003, at 17'00 h. (Brussels local time). 12 Such as National Contact Points for SMEs ( 13 The Information Package for CRAFT ( comprises mainly :. The current Workprogramme on Horizontal Research Activities involving SMEs. The call for Proposals as published in the Official Journal of the European Union. The guide for proposers. The guidelines on proposal evaluation procedure. The guidelines for evaluators. The model contract ( 11

12 SMEs are the participants who will own and benefit from the project results. RTD Performers are organisations needed by the SMEs to carry out most of the research and development work in the project. Some other enterprises and end-users who have a particular interest in solving specific problems or needs of the SMEs involved may participate in the project by making a contribution to its costs, under conditions ensuring they do not assume a dominant role. These enterprises and end-users must be independent from any SME participant or RTD performer. Partnership roles The project participants have different formal roles in the project: SME Participants: are all the eligible SMEs that form the consortium together with the RTD Performers. SMEs are the owners of the project results. RTD Performers: an RTD Performer conducts R&D work on behalf of the SMEs and is fully paid for this work. An RTD Performer should have: Research and development capacity and expertise in the required field, Capability to transfer the results of the project to the SME Proposers, Capacity for dissemination of project results. Co-ordinator: either one of the SME Participant or one of the RTD Performers. The Coordinator signs the contract with the EC on behalf of the SME Proposers and the RTD performers and is responsible for the project management, contacts with the Commission, etc. The Coordination can not be subcontracted to a third party. 12

13 Example of a CRAFT consortium C o n d i t i o n s SME 1 SME 2 SME 3 results C o n d i t i o n s RTD-P 1 RTD-P 2 CRAFT EC A CRAFT project with the minimum number of participants A CRAFT project with many participants SMEs with limited research capability and common research needs... SME Participants (conditions) RESULTS High-tech CRAFT EC SMEs... RTD Performers Research centers, universities etc... (conditions)... Other enterprises and end-users (conditions) Other interested parties RTD P : RTD perfomer EC : European Commission SME : Small and medium sized enterprise 13

14 Finding partners Consider the following in evaluating a potential partner: Good partners offer complementary assets without creating conflicts of interest. For CRAFT projects to work, good personal relations are necessary. Pay attention to managers' feelings about potential partners. Big differences in management style, values and priorities can be problematic. Good partners typically have experience of other similar ventures. Here, industry reputation is an important indicator. Study their past performance (CORDIS can help you with this). Good partners are enthusiastic and committed. However, to overcome fears and hesitations regarding joint ventures, an active selling effort may be required to convince them of the potential benefits of a co-operation. Good partners will allocate sufficient authority to the venture management, giving it the autonomy and flexibility needed for efficient implementation. If a potential partner is too dissimilar from your own company, maybe a looser form of co-operation is preferable. To find SME partners it is considered best to: Use your existing relationships and networks. It is easier to co-operate with someone you already know. Contact other organisations 14 that offer services in partner search. Search in databases 15 or attend partnering events, seminars and conferences. To find R&D partners it is considered best to make a selection based on their competencies, experience of SMEs and how much they charge. They can be selected from institutes, research facilities, universities and SMEs offering technological services to industrial companies. Clear objectives and plans for the project as well as agreements on exploitation and ownership of the Intellectual Property Rights (IPR) should be set up between the partners (for further information, see chapter 5). 2.3 How to write the proposal Writing a proposal to the European Commission is not as difficult as it may seem. The Commission gives exact instructions about the contents and a large part of them are very useful for the future running of the project. To make sure that a good proposal is submitted, it might be worth using external help. When writing the text, remember the following: The evaluator might not have English as his/her mother language 16 ; he/she is short of time and follows exact checklists and instructions. 14 Like the National Contact Point Network ( 15 Like CORDIS Database ( 14

15 Quantify!!! Since the members of the Commission have a limited budget, they want to establish which projects give the best value for their money. Quantifying is also a sign of having made thorough preparations. Write simply and use the expressions and headings specified in the Information Package. This makes it easier for the evaluators to check that the criteria are fulfilled. Be realistic when setting the budget, estimating the market potential, and describing technical features. This gives the proposal a serious impression. Graphical descriptions are very important as they can make a complex context more comprehensible. What the proposal has to explain There are six (6) main evaluation criteria in the proposal. None of them should be neglected in the description or left out. Otherwise, the proposal is considered incomplete. The criteria are: Relevance to the objectives of co-operative research Scientific/Technical (S & T) quality and innovation - Potential impact (on the competitiveness of European SMEs, added value at European level, optima use of the project results, etc.) - Quality of the consortium Quality of the management - Mobilisation of resources The evaluation criteria are further described in Annex B of the Work Programme on Horizontal Research Activites involving SMEs and in the CRAFT Guidelines for Evaluators ( Submitting the proposal All details on how the proposal should be submitted to the European Commission can be found in the Guide for CRAFT Proposers. It is necessary to follow these instructions exactly. Proposals may be submitted online via the Internet (EPSS) 17, or may be sent on electronic media (CD-ROM, diskette) or on paper to the address indicated in the Call for proposals. Submitting it in good time before the date of evaluation increases the chance of achieving an eligible proposal, as the Commission has time to get back to the Co-ordinator and advise on changes, if necessary. Incomplete proposals will not be evaluated. 16 It is possible to submit the CRAFT application in any of the 11 official languages of the European Union. If the proposal is not in English, a translation of the full proposal would be of assistance to the evaluators, and an English translation of the abstract must be included in Part B of the proposal. 17 See At the time of writing this Toolbox, the EPSS system was not available for CRAFT first call for proposal 15

16 Procedural stages of a CRAFT project THE PROPOSAL STAGE Call for proposals the parties PROPOSAL evaluation EC negotiation consortium the SMEs results Contract Modifications IMPLEMENTATION 2.4 Where to find more information There are several ways to find more information about CRAFT Projects. It is advisable, however, to start by contacting your National Contact Point (NCP). For downloading application forms or for a look at previous European RTD projects, the SME Co-ordination Unit and CORDIS database are very useful. The National Contact Point. Each country has a contact point with expertise on CRAFT. Contact details are found on the following home page: The SME Helpdesk. All relevant documents needed for an application can be downloaded together with plenty of other useful information. Contact details are found on the following home page: The CORDIS database. Here it is possible to check whether there are similar ongoing European projects. It is also possible to search for completed projects and possible partners. The home page address is: 16

17 3 General financial conditions The total costs chargeable to a CRAFT Project are between and million. The European Commission finances 50% of the total cost of the project. RTD Performers are fully paid for their research and innovation related work. SMEs are reimbursed for 50% of those of their costs related to research and innovation activities. Management activities are paid 100% (however this amount cannot exceed 7% of the total Community financial contribution to the project as a whole). The financial report to the Commission is based on costs per activity (research-innovation and management). The Commission will ask for verifications of all reported cost through an audit certificate for each individual partner of the consortium. 3.1 Financial rules for a CRAFT Project The final budget for a CRAFT Project is drawn up during the contract negotiations. The total costs chargeable to a project should be between and The estimated budget is broken down per partner and different costs per activities. It is possible to transfer costs between partners and different cost categories as long as the objective of the project is not fundamentally modified. The EC Contract is based on the principle that the European Commission finances a maximum of 50 % of the total cost of a project. The RTD Performers receive 100 % funding from their research activities 18. The amount of work performed by the RTD Performers for the SMEs must account for at least 40 % of the total eligible costs for research and innovation-related activities of the project. An individual SME Participant can be reimbursed for a maximum of 50% of costs incurred in research activities. The Commission pays the financial contribution to the Co-ordinator of the project who then transfers it to the RTD Performers and SMEs. The payment is made according to the following steps: - Advance payment: within 45 days after the entry into force of the contract an amount up to 80% 19 of the total contribution is paid. - Outstanding balance : within 45 days following the approval by the Commission of the reports 20 (this payment shall be considered as final, subject to the results of any audit or review) % from the Commission if the RTD performers use the additional costs with indirect flat rate costs (AC) ; 50% from the Commission and 50% from SMEs participants and/or other companies and end-users if the RTD performers use the full cost with actual indirect costs (FC) or the full cost with indirect flat rate costs (FCF). The cost models are explained in point 3.2 of this Chapter. 19 Up to 85% if a bank guarantee is provided by each contractor 20 These reports will cover : the activity report (work, objectives, results, conclusions), the plan for using and disseminating the results, the management report (financial costs) and the distribution report of the Community financial contribution. 17

18 3.2 Principles of EU financing for different costs Cost categories Contrary to what was used in FP 5, there will be no cost categories and subsequently no cost statements for projects selected for funding under FP 6. FP 6 allows costs for activities that will be calculated when submitting the proposals; in a CRAFT proposal two sort of activities will be eligible: Activities related to research and innovation (commission rate s of intervention 50%) Management related activities (commission rate s of intervention 100 %, but the amount cannot exceed 7% of the total EU contribution to the project as a whole) Under research and innovation activities, the following direct costs will be accepted: Staff and personnel costs - directly related to the project (details on page 19) Computing costs Equipment costs (durable) Consumables if and when identified Subcontracting Travel and subsistence Protection of knowledge Cost of any premium the contractor must pay for a bank guarantee Indirect costs will also be accepted (see later model costs used by the contractor), but indirect cost will always be a percentage applied to all direct eligible costs minus the cost of sub-contracts. Eligible and non-eligible a costs for partners of a CRAFT Project (see Annex II of the EC Contract) 21 Eligible costs for a CRAFT Project are the contractors actual necessary costs for carrying out the project and that fulfil the following conditions: They must be actual, economic, and necessary for the implementation of the project; and they must be determined in accordance with the usual accounting principles of the contractor. They must be incurred during the contract period. They must be recorded in the accounts of the contractor that incurred them, not later than at the date of the establishment of the audit certificate that will be required by the commission. Ineligible costs include: Any identifiable indirect taxes, including VAT or duties Interest owed Provisions for future losses or charges Exchange losses Costs declared, incurred or reimbursed in respect of another Community project 21 Annexes I, II and III are an intergral part of the core contract with the Commission 18

19 Return on capital Debt and debt service charges Excessive or reckless expenditure Any cost that does not meet the conditions established in the Annex II of the EC Contract (art II.19.1). Cost basis There are different types of cost models that are possible to use in a CRAFT Project. Which one you should use depends on your company s accounting system. Full cost with actual indirect costs (FC): in this model, the contractors charge eligible direct and indirect costs. For legal entities, having an accounting system is essential to allocate direct and indirect costs to a project. Full cost, with indirect flat rate costs (FCF): eligible costs and a flat rate for indirect costs are charges (for legal entities unable to identify indirect costs through the accounting system). The flat rate for indirect costs is of 20% of all direct eligible costs minus the cost of sub-contractors. Additional costs with indirect flat rate costs (AC): eligible direct additional costs and a flat rate for indirect costs are charged. The flat rate for indirect costs is of 20% of all direct additional costs minus the cost of sub-contracts. SMEs have the choice between the FC and FCF model. For RTD performers, the access to a cost model depends on the type of legal entity concerned: - Physical persons are obliged to use the AC model, - SMEs participating as RTDs performers have the choice between the FC and FCF model, - Non commercial (as universities) or non-profit organisations established under public law or private law and international organisations may choose one of the FC, FCF or AC models. Personnel costs Personnel costs are generally expressed in per person-day. You can charge actual hours worked by persons directly carrying out scientific and technical work under the project. Expenses for administrative and secretarial staff are to be included in the overhead costs (see below). 22 An exception is the costs incurred in management activities by contractors (the management costs are accepted up to a maximum of 7% of the total Community financial contribution). Staff expenses include all direct costs related to salaries (social charges, pension schemes, unemployment compensation, etc.). It is also possible to use an average employment cost if this does not differ considerably from the actual employment cost. All hours reported for work on the project must be recorded by using e.g. time records. The Coordinator or another senior person should also certified them at least every month. For an example of time records, see the end of this chapter. 22 It is sometimes said that the European Commission uses recommended rates. This is not true. Use instead your actual cost for personnel. 19

20 The cost for a full-time person is based on 12 person-months per year. It is recommended that 135 productive hours per month be expended. This following example shows how the cost for staff should be calculated: Personnel costs per month: Number of productive hours per month: 135 hours Labour rate per hour: 45 Average yearly inflation rate (applied to salaries): 5 % Labour rate with inflation: 6,075 x 1.05 = The cost per man-hour is Durable equipment Equipment needed for the project can be purchased or leased. If it is hired, it should be classified as cost for subcontracting. The equipment has to be leased or purchased within six months before the start of the project. Depreciation costs for equipment bought under a previous RTD Contract signed with the Commission are also allowable costs. Type of eligible equipment is: Data processing equipment 23 Other equipment for general use Specific equipment The amount to be reimbursed is based on the following formula: A/B x C x D where A = number of months during which the equipment will be used for the project after invoicing B = depreciation period of 60 months (36 months for computer equipment costing less than ) C = cost of the equipment D = percentage of use of the equipment for the project. An example of how to calculate for computer equipment: Computer equipment 36 months depreciation 60 months depreciation Cost of equipment 24,000 26,000 Date of purchase February Year 1 February Year 1 No. of months used in project 24 months 24 months Project start April Year 1 February Year 1 Project completion April Year 3 April Year 3 Project duration 24 months 24 months Project allocation 80 % 80 % Allowable cost 24 x 24,000 x 80% = 12, x 26,000 x 80 % = 8, Remaining for future EU 12 x 24,000 x D 36 x 26,000 x D 23 This equipment has to be specific for the actual project. Computer equipment for e.g. word processing is not an eligible cost. 20

21 contract An example of how to calculate for durable equipment: Microscope cost 150,000 Date of purchase September Year 1 Date of delivery October Year 1 No. of months used in project 18 months Project start April Year 1 Project completion April Year 3 Project duration 24 months Project allocation 80 % Allowable cost 18 x 150,000 x 80 % = 36, Remaining for future EU Contract 42 x 150,000 x D 60 Subcontracting Contractors shall ensure that the work to be performed (according to the description of work in Annex I) can be carried out by them. However, where it is necessary to subcontract certain elements of the work, this should be clearly identified in Annex I. During the implementation of the project, contractors may subcontract other minor services, which do not represent core elements of the project work, which cannot be directly assumed by them and where this proves necessary for the performance of their work. Any subcontract must be awarded following competitive tender to the subcontractor offering best value for money under conditions of transparency and equal treatment. Travel and subsistence Travel expenses necessary for the project are generally allowable. For travelling outside the EU, prior approval by the Commission is necessary. Consumables Costs for consumables, including particularly software licences, which are bought especially for the project are allowable. Costs which are usually included in the overheads are not allowed, e.g. pencils, paper, electricity, etc. Computing Computer costs can be included in the overheads. If they represent an important amount, they can instead be charged as direct costs. If so, proper invoices should verify the costs and the computer usage should be recorded. Protection of knowledge Costs for protection of knowledge generated in the project are allowable. Prior approval by the Commission is necessary. The costs can for example include the cost related to the filing of an application for the granting of an industrial property right. Costs to be excluded are e.g translation costs. 21

22 Other specific costs This item covers expenditures, e.g. prototypes, manufactured equipment, use of large testing equipment and simulators or direct costs for setting up financial guarantees requested by the Commission. Prior approval must be obtained from the Commission. An example of how to calculate for special equipment : Special equipment cost 150,000 Scrap value 5,000 Date of purchase October Year 1 Project starting date April Year 1 Project completion April Year 3 Project duration 24 months Project allocation 100 % Allowable cost 150,000-5,000= 145,000 Remaining for future EU 0 contract Restriction Commission s approval needed Administrative and financial co-ordination Any participant contractor involved in the management can charge administrative and financial costs. The costs related to the management activities of the consortium will obviously include the costs incurred for producing the independent financial audit certificate requested by the commission, it is foreseen one certificate per partner and normally one during the life of a two year project at the end. Indirect costs - overhead costs Indirect costs (overhead costs) related to the project are those than cannot be identified by the contractor as being directly attributed to the project but which can be identified and justified by its accounting system as being incurred in direct relationship with eligible direct costs attributed to the project. Audit certificates For those familiars to FP 5, each contractor had to submit a cost statement; the procedures used in FP 6 are now different. For each period for which an audit certificate is required (this is determined in the consortium agreement but for a Craft project of a duration of 2 years, it is expected to work on the basis of one period), each contractor shall provide an audit certificate prepared and certified by an external auditor, certifying that the costs incurred during that period meet the conditions required by this contract. The certificate should expressly state the amounts that were subject to verification. The cost of this audit certificate is a cost eligible under the activity relating to Management of the consortium. Each contractor is free to appoint any qualified external auditor, including its usual external auditor, provided that: 22

23 1) The external auditor must be independent from the contractor 2) The external auditor must be qualified to perform statutory audits of accounting documents A contractor that is a public body (university RTD centre) may opt for a competent public officer to provide an audit certificate, provided that the relevant national authorities have established the legal capacity of that competent public officer to audit that public body. 23

24 EC PROJECT TIME RECORD EC contract N :... Name of employee:... Period accounted for:... Date Total: Actual hours worked on the EC project* *) Out of a total of hours/day. Date:... / Sick-leave or Vacation Signature:... (Project manager / Authorised senior employee) 24

25 4 Proposal evaluation After submitting a proposal, the project Co-ordinator receives an Acknowledgement of Receipt confirming that the Commission has received the proposal. Each proposal is sent to a select group of external experts who will carry out an unbiased and confidential evaluation according to a basic set of criteria. Each criterion will give a 0-5 rating and an Evaluation Summary Report is sent to the Co-ordinator stating whether the proposal should be recommended for funding or not. 4.1 Receiving the project proposals For details on the proposals submission, please refer to the Guide for Proposers for the Co-operative Research. In this occasion, we just remind that it is possible to prepare and submit a proposal using the Electronic Proposal and Submission System (EPSS) 24 or by downloading electronic forms and submitting them on paper 25. It comes to the proposers responsibility to check whether the electronic submission is possible or not 26. When the Commission has received and registered a complete project proposal, an Acknowledgement of Receipt form is either returned electronically in case of electronic submission, or dispatched to the proposal co-ordinator in case of paper (CD-ROM/diskette) submission 27. This is the official confirmation that the proposal has been received, but does not imply that the proposal has been accepted as eligible for evaluation. The Acknowledgement of Receipt contains: Proposal title, acronym and unique proposal identifier (proposal number), Name of the programme and/or activity/research area and call identifier to which the proposal was addressed, Date and time of receipt. The next step for the Commission is to examine each proposal and eliminate those that do not fulfil the minimum criteria, such as SME eligibility, number of partners, budget conditions, etc. If a proposal is rejected at this stage, the Project Co-ordinator is informed as soon as possible. 4.2 The Eligibility check 28 The eligibility check is performed on all project proposals submitted and arrived in duly time at the Commission offices. It is aimed at verifying that the proposals meet all the eligibility criteria referred to in the call. If one or more of the eligibility criteria have not been fulfilled, the proposal is declared ineligible and withdrawn from any other examination. The eligibility criteria are: Receipt of proposal by the Commission on or before the deadline date and time established At the time of writing this Toolbox, the EPSS system was not available for CRAFT first call for proposal 26 The electronic message given by the EPSS system after electronic submission does not consitute the official Acknowledgement of Receipt 27 Do not forget to ask such acknowledgement of receipt in case you submit it in person!!! 28 For further details, please refer to the Guidelines on Proposal Evaluation and Selection Procedures ( 25

26 in the call, if applicable. Minimum number of participants, as referred to in the call for proposal Completeness of the proposal, i.e. the presence of all requested administrative forms and the proposal description. 4.3 Selection of external experts In order to match each proposal with competent external evaluators, the Commission s personnel read the summaries and group the proposals according to their technical contents. Once the proposals have been filed, evaluators can start their work. It is important to note that the Commission s staff does not evaluate the scientific and technical contents of any proposal. External independent experts 29 are chosen by the Commission from a list of contacts provided by national members of the Programme Committees. To avoid having the same experts for each evaluation, experts are interchanged regularly. The role of the Commission official in the evaluation process is to prepare and co-ordinate the work to be carried out by the experts selected. The role of the experts is to evaluate the scientific, technical and economic content of the project proposals. To select the most suitable evaluators for the evaluation, Commission relies on: a) Calls for applications from individuals published in the Official Journal of the European Union, b) Calls addressed to research institutions with a view to establishing lists of suitable candidates The Commission may at any time select, if it deems appropriate, any individual with the appropriate skills from outside the list obtained through the above-mentioned calls. Experts having any links with the proposers are automatically excluded. The complete list of potential experts is maintained in a central database and made available to the relevant Programme Committee but is never made public. All experts have to sign a confidentiality agreement before they are allowed to start working. 4.4 Proposal evaluation, rating and selection Evaluation The proposal evaluation is confidential and is carried out by a panel of independent experts. Several experts, who fill in individual evaluation forms, giving marks and providing comments, evaluate each proposal against the applicable criteria independently. For each proposal, a consensus report is prepared; the report faithfully reflects the views of the independent experts. A panel discussion may be convened, if necessary, to examine and compare the consensus reports and marks in a given area, to review the proposal with respect to each other, etc. During the evaluation process, copies of each proposal are kept confidential. After the evaluation is concluded, the copies of rejected proposals are destroyed. In order to compare different proposals and to make the evaluation process as fair and impartial as possible, the experts are given a basic set of criteria for evaluating, examining and rating the proposals. 29 An independent expert is an expert who is working in a personal capacity and in performing the work, does not represent any organisation. For instruments other than Integrated Projects and Networks of Excellence, the Commission appoints independent experts with skills and knowledge appropriate to the tasks assigned to them. 26

27 The basic set of criteria is as follows 30 : Relevance to the objectives of co-operation research S&T excellence Potential impact Quality of the consortium Quality of the management Mobilisation of resources In addition to them, the following issues are also addressed for all proposals: Gender issues Ethical and / or safety aspects When appropriate, the following additional issues may also be taken into account during the evaluation: Rating Societal implication of the proposed work Synergies with education Third countries participation Each criterion will give a rating on a 0 5 scale, where 5 is excellent and 0 is the proposal failing to address the issue under examination or due to missing or incomplete information. The score indicates the following with respect to the block under examination: 0 - the proposal fails to address the issue under examination or can not be judged against the criterion due to the missing or incomplete information 1 - poor 2 - fair 3 - good 4 - very good 5 - excellent Thresholds and weightings Thresholds may be set for some or all of the blocks of criteria; the thresholds to be applied to each block, as well as any overall threshold are set out in the call. Moreover, according to the specific nature of the instruments and of the call, it may be decided to weight the blocks of criteria. The weightings to be applied to each block are set out in the call Selection Based on the evaluation, the ratings, the recommendations and where applicable consultations with the Programme Committee, the Commission makes a final decision on whether the proposal should be recommended for funding or not. This is summarised in an Evaluation Summary Report. 30 For further details, please refer to Guidelines on Proposal Evaluation and Selection Procedures ( 27