EU Parliament challenges Horizon 2020 funding rates

Influential Members of the European Parliament want a reimbursement model for Horizon 2020 that is more in line with the current Framework Programme 7 (FP7), decrying the European Commission’s proposal for one flat rate, as an “oversimplification,” which would favour industry over universities and discourage mixed research and innovation projects.

The Commission is proposing to replace FP7’s many reimbursement rates with two flat rates, one for research and one for innovative, close to market, activities, regardless of the type of participant and not taking into account indirect costs. “We don’t see the Commission’s proposal as a simplification – we see it as a very political move, to just show one cost model,” Christian Ehler MEP (EPP) told Science|Business.

Ehler, who is the rapporteur in charge of guiding the Horizon 2020 Rules of Participation through the European Parliament, says he suggested a different model in his draft report because the Commission didn’t provide enough backup for its flat rate proposal, “We didn’t have sufficient empirical evidence yet [when we issued the report], which was also the problem for the Council, it was pretty much a black box: it sounded nice – but it was a very political proposal. But now, the devil is in the details.”

“We need more discussion and more empirical evidence from the Commission to find out what the strategy is behind their proposal,” Ehler stressed.

Two flat rates

Under the European Commission proposal, a university, research institute or company would get one hundred per cent of eligible direct costs for a Horizon 2020 research project reimbursed. On top of that, participants would receive a flat rate of twenty per cent of the total eligible direct costs, to finance any indirect costs.

The rate for innovative projects would be set at seventy per cent of eligible direct costs, and again twenty percent of that as a flat rate for indirect costs.

“It is more a simplification for the Commission, than it is a simplification for the participants,” said Ehler. In comparison to FP7, the Commission’s proposal would benefit industry by doubling the reimbursement for its direct project costs, says Ehler. But any participant with large R&D facilities facing high indirect costs will lose funding, compared to FP7.

In his report, Ehler argues that while the Commission’s proposal would lead to a 7.2 per cent overall increase of the total EU contribution per project when compared to FP7, the extra money would mainly go to industry. Reimbursement rates for industry participants would rise by 46.8 per cent, and for SMEs by 7.7 per cent, while slightly reducing the rates for universities and research institutes.

The Commission’s proposal to increase industry funding, states Ehler, would merely provide a “cosmetic boost” to industry participation in the EU’s research programmes, while failing to address the “real needs of industry participants” such as a shorter period between applying and receiving an EU research grant.

Full cost

The model Ehler is proposing instead would mean that rather than two maximum rates, Horizon 2020 would have twelve separate funding rates – much to the horror of the Commission. “All of a sudden, just by proposing this, we see the figures coming out of the Commission,” said Ehler, satisfied by the impact of his report, and pointing to the “empirical evidence” the Commission had initially failed to provide.

Ehler’s scheme, which he says is still simpler than FP7’s model, is based on whether a participant is a university or research institute, an SME or an industry participant, while suggesting different rates based on whether actual indirect costs are reimbursed or the Commission’s proposed fixed amount is used to cover indirect costs.

“All big research universities in Europe advocate a full cost model, as does the majority of industry,” says Ehler, whose model contains higher reimbursement rates for funding universities and research institutes than for SMEs and industry participants.

Ehler also proposed raising the level of funding for innovative close to market projects, in a move to encourage research centres and universities to mix research and innovation activities – something that would be discouraged under the Commission’s Horizon 2020 proposal, Ehler said.

Alternative

While Ehler indicated that Parliament’s final proposal – to be determined after the summer – is likely to be different from his initial twelve rates scheme, Kent Johansson MEP (ALDE) has put forward an alternative scheme, aiming for a model somewhere between the Commission’s proposal and Ehler’s idea.

Johansson, who serves on the ITRE committee as ALDE’s shadow rapporteur for the Horizon 2020 package, told Science|Business that he would propose Horizon 2020 keeps two funding rates, but would want to differentiate based on participant type, rather than activity type – scrapping the difference between research and innovative activities and introducing two new rates, one for universities and SMEs, and one for industry participants. Johansson proposes a higher indirect costs flat rate for universities and research institutes instead of reimbursing actual indirect costs, like Ehler.

Johansson believes it makes sense to hold off discussing actual reimbursement percentages at the moment, as the amount of funding that will be available for Horizon 2020 is still unclear. Joking that there currently seems to be “a competition between the rapporteurs about who can create the best rules of participation,” Johansson said his proposal is, “to start talking about what the funding model should achieve.”