IU KSOB/VPF Costing Tool

Special consideration must be taken when setting the cost of core services if a facility receives funds from the US government. Specifically, the price of a core service must reflect the actual cost of delivering the service for institutions charging a Facilities and Administrative Costs fee (commonly referred to as "indirects" costs). This requirement is mandated in the US Office of Management and Budget A21 Circular, "Principles for Determining Costs Applicable to Grants, Contracts, and Other Agreements with Educational Institution". For services such as clinical gene therapy vectors, establishing the actual cost of manufacture is complex. When determining personnel time, consideration must be given to the actual hands-on work with a specific vector product, facility maintenance to maintain the Good Manufacturing Practices (GMP) environment, and ongoing training to document competency in existing and new methodologies. Hundreds of supplies may be required for a single product, and the facility costs to operate a cleanroom environment is substantial. Cost calculations are further complicated if investigators are requesting core services in a grant application, since the grant may not be funded for one or more years from the time the estimate is provided. Therefore, accurately estimating the cost of core services is important to maintaining the financial viability of a core as well as a key compliance issue.

In an effort to facilitate cost determination, the Indiana University Vector Production Facility (IU VPF) participated in a core improvement program offered through the Indiana Clinical and Translational Science Institute. The program teamed Masters of Business Administration faculty and students from the Indiana University Kelley School of Business (KSOB) with IU VPF staff. The tool was created in Microsoft Excel so that it can be shared with other facilities and adapted to their unique personnel, supply and facility costs. Two versions are available on this website, an unpopulated version to be adapted to the users individual needs, and a version populated with a theoretical retroviral vector production as an example of how the tool can be used.

Information on the use of the tool is provided in the Instructions tab of the Excel file. It is important only to provide data into colored cells as cells in white are locked to protect the cost calculation formulae.

When completing the tool users first can input information for up to three different batch sizes into the Supply tab. Other operating expenses are entered in the Personnel, Facility, and Service Expenses tabs. The tool allows cost comparisons that are represented graphically and with actual dollar values in the Summary page.

The tool estimates costs using annual personnel and facility costs. Therefore, the critical information to be entered into the Summary Page are the predicted number of campaigns per year; the number of days the facility will be available for production, the number of days the facility will be unavailable due to recertification activities, and the estimated campaign failure rate. There are also nine tabs representing each of the three models with the three different batch sizes. Cells within these nine tabs should not be altered. Data in these nine tabs are derived from the Personnel, Facility, and Service Expenses tabs and are used to generate the data provided in the Summary page.

The tool also allow the user to compare three different costing methods; the Campaign, Day Rate and Hybrid models. Each model uses the actual cost of supplies but the models differ in how they allocate personnel and facility costs to individual production runs. Facility and personnel costs are considered in two categories; costs when the facility is in active production and costs when the facility is down for FDA required recertification. The campaign model treats all productions as requiring equal time so the cost of personnel and facility are divided equally among campaigns (the tool does have a batch size multiplier that allows for some general modifications for larger or smaller productions). Recertification costs are also divided equally. The Day Rate model calculates the cost of facility and personnel based on the specific number of days the facility will be in use; and the recertification costs are directly proportional to the days the facility is in use. The Campaign model predicts that all costs are accounted for, as long as the predicted number of campaigns are performed in the year. For the facility to match expenses and income in the Day Use model, the facility must not only conduct the number of predicted campaigns but the total number of days in production must equal the predicted number of days in production. To mitigate some of the risk in the Day Use model, we also evaluated a Hybrid model that allocates facility and personnel costs for production on a day use rate, while sharing the cost of the recertification activities equally among campaigns. The user can use the tool to compare the financial implications of each model and then select the most appropriate method for their facility.

More details about the use of the tool, the rational behind the various models, and the associated financial risk with each model can be found in the manuscript "Vector Production in An Academic Environment: A Tool to Assess Production Costs" (Human Gene Therapy Methods 24:49-57, 2013) currently in press in Human Gene Therapy Methods. The manuscript also provides interesting insight into the cost saving when vector is generated in larger batches.

The tool was developed by MBA students Aaron Boeke, Patrick Doumas, and Kyle McClurg, and Associate Professor Mohan Tatikonda of the Kelley School of Business in Indianapolis. IU VPF personnel that contributed to the tool development were Lilith Reeves, Daniela Bischof, Lina Sego, Alisha Auberry, and Kenneth Cornetta. Support for this work was provided by the Indiana Clinical and Translational Sciences Institute (UL1 TR000006), the NHLBI Gene Therapy Resource Program (HHSN2680001), and the NHLBI National Gene Vector Biorepository (P40HL11621).

IU KSOB/VPF Costing Tool

IU KSOB/VPF Costing Tool with Simulation (the tool is pre-populated with theoretical costs for a retroviral vector production)

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HORNGREN CT. (1967). Process costing in perspective: Forget FIFO. The Accounting Review 42, 593-96.