A:

We quote from the Financial Guidelines:

“(1) They can be considered as personnel costs; regardless of whether the intra-muros consultants are self-employed or employed by a third party, if the following cumulative criteria are fulfilled:

·          The contractor has a contract to engage a physical person to work for it and some of that work involves tasks to be carried out under the EC project,

·          The physical person must work under the instructions of the contractor (i.e. the work is decided, designed and supervised by the contractor),

·          The physical person must work in the premises of the contractor,

·          The result of the work belongs to the contractor

·          The costs of employing the consultant are not significantly different from the personnel costs of employees of the same category working under labour law contract for the contractor.

·          Travel and subsistence costs related to such consultants ' participation in project meetings or other travel relating to the project would have to be paid directly by the contractor in order to be eligible. Moreover only the actual costs of the consultant should be charged to the project.”

Thus in the case cited, if the R&D consultant fulfills these criteria, even if only 20% of his own time, but 100% of the time he gives to the contactor the costs can be considered personnel costs. In particular note working under control and on contractor’s office and that the IP is the contractor’s. The cost should not include any profit element or overheads for the “in-house consultant” and must be at a rate comparable to others employed in the organisation doing similar work. Presumably the task was included in the proposal with staff performing the task and a budgeted rate was established which can be shown to the auditors.

Failing this the Project Officer will need to approve the subcontract cost – see definition below:

“ They can be considered subcontracting costs if the contractor has to enter into subcontract to hire these consultants to perform part of the work to be carried out under the project and the conditions set out in the FP6 model contract, in particular in the provisions of Article II.6 of Annex II relating to subcontracting, are fulfilled. In these cases, the contractor's control over the work to be performed by the subcontractor is determined by the nature of the subcontract - the subcontractor does not usually work on the premises of the contractor and the terms of the work is not so closely carried out under the direct instruction of the contractor”

We think that the PO is likely to refuse the subcontract costs since the work seems to be a “core” element of the project.

Finally the R&D consultant could have been considered a  ”contractor” in her/his own right, or perhaps even a “third party” – but that’s another story a potential problem altogether!