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Do any of your institutions have rules or guidelines about setting external for-profit rates? Our institution allows the cores to create a percentage mark-up for these rates (ie, beyond break-even), but we are required to take into account businesses in the state who are offering the same type of service, so that we do not undercut them. What do other institutions do in these cases?

Hi Natasha,

I work at Florida State University which is part of the 12 state university system of FL. We have an auxiliary account that has both internal and external rates. Since all of our core facility personnel are salaried employees of the state, our internal rate is set to cover only consumables, repair and service cost of the equipment. Our  internal rates are set to break even (no more than 5% + or - year over year).

However, for external rates we can charge as much as market will bear (typically 3-4 times the internal rate). I checked with our budget staff and they inform me that there is no specific policy against you offering a price that is lower than another private entity in the state (you can always set a higher rate since your services are excellent!). The reasoning behind it is that you are making a good faith effort in setting a rate while operating efficiently and can't be aware of all entities that might offer the same service and may not be aware of the regular and discounted rates of those entities.

As far as the budget person was aware there were no instances where a private entity complained about our rates.

Hope this is helpful. Thanks.

Joshua, what is your inside rate for a Sanger reaction and who is your outside competition around Wisconsin?  I'm just curious as we cannot compete with outside competition in the DC/MD/VA region.  Thanks!

Hi Natasha,

We typically use 2.25*internal rate for industry/for-profit projects. We also ensure that this comparable to pricing found in our region.

Hi Natasha,

Here at CSU, our external for-profit rates are usually 2-3 times higher than our internal rates (with very little rules in terms of how high that markup can be) and we make sure they are at minimum actual cost of performing the service plus overhead (they do not benefit from internal subsidies). However, during our rate approval process, we have to demonstrate that we are not undercutting the competition in the region and perform a market analysis to justify. Some of our rates are therefore occasionally much higher than the 2-3 times internal rate. 

Hope this helps!

Karolien

Good morning Natasha,

At the three public institutions where I have worked in cores (UCLA, UW-Madison, UC Davis), external rates were required to be full cost recovery (including any salaries or other expenses subsidized by the university) PLUS the overhead rate PLUS any mark-up.  Setting external rates properly requires full-cost accounting, not just application of a multiplier to internal rates.  In my experience, once all costs are included in the rate, the price charged to external customers is rarely low enough to undercut commercial providers.  The university service is still an excellent deal for external customers seeking high-quality work.

Feel free to contact me for examples of rate calculation worksheets that support the full cost-recovery approach.