University of Minnesota

Internal / External Sales

Rate Development Process

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Introduction to Staff

Keith Jansen – Manager of Internal / External Sales kkjansen@umn.edu (612) 624-5540

Mary Kosowski – Compliance Officer - Internal Sales kosowski@umn.edu (612) 624-7892

Jeff Kurland – Compliance Officer - External Sales kurl0001@umn.edu (612) 625-5605

E-mail address: extsales @umn.edu

Located at :

Internal Sales EFS website:

http://www.finsys.umn.edu/sales/int.html

Administrative Procedure Establishing Internal Rates:

http://policy.umn.edu/Policies/Finance/Accounting/INTERNALSALES_PROC03.html

Internal Sales Training Module:

http://www.finsys.umn.edu/sales/iso.html

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Internal Sales Rate Development Procedure and Website

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Principles for Internal Sales

• Billing rates should be reviewed and updated each year.• Rates charged to internal University customers must be set to break

even. • Rates must be consistent for all internal customers.• The University is subject to periodic audit by the federal government

to assure the federal government receives the lowest University, or internal rate for similar goods and services purchased at the University.

• Document subsidizes.

Steps to developing an Internal Sales rate:

• Determine the measurable unit for goods and services

• Determine annual output or expected level of activity

• Determine annual estimated costs

• Determine the breakeven

• Exclude unallowable costs

• Determine the appropriate classification and include or exclude overhead costs (Recharge or Specialized Service)

• Determine the activity per-unit rate

• Rates should be reviewed, updated and submitted to Internal Sales each year

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Internal Sales Rate Development

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Internal Sales Rate TemplateSAMPLE RATE SHEET - CONSULTING PER HOUR - Internal Sale

To use this spredsheet, please fill in the fields that are highlighted in YELLOW

What is the annual salary for consultant 1 (Civil Service)? -$

What is the annual salary for consultant 2 (Faculty / P&A)? -$

+ Salaries

Civil Service

P&A Supervisor

Grad Assistant

What is the annual salary for consultant 3 (Grad Assistant)? -$

Civil Service Consultant (per hour) - P&A Supervisor (per hour) - Grad Assistant (per hour) -

Use appropriate fringe rate for each job class + Fringe See website at: www.umn.edu/ohr/payroll Civil Service Consultant (per hour) - 40.1% * salary from above (2010 Rates) P&A Supervisor (per hour) - 33.3% * salary from aboveGrad Assistant (per hour) - 25% * salary from above

+ Supplies (estimated per hour) - - -

= Total Service Costs - - -

+ Equipment Use Costs (estimated) - - - Per hour depreciation, maintenance, etcallocated based on total usage

= Total Costs - - -

Estimated volume of work 0 0 0

= Total Price Charged to Customer -$ -$ -$

(Per hour)

Located at :

External Sales EFS website:

http://www.finsys.umn.edu/sales/ext.html

Administrative Procedure Establishing Internal Rates:

http://policy.umn.edu/Policies/Finance/Accounting/ExternalSALES_PROC03.html

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External Sales Rate Procedure and Website

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Principles for External Sales

• Billing rates should be reviewed and updated each fiscal year. • Rates charged to external non-University customers should

include overhead costs.• Rates charged to external customers should be greater than rates

charged to internal customers for the same good and services.• Rates charged to external customers should be greater than rates

charged to the government. • Rates should not compete unfairly will businesses. • All rates are reviewed by External Sales.• Document subsidies.

Steps to setting an External Sales price:

• If you have an ISO, start with Internal Sales rate.– Add unallowable costs for internal sales

• If no ISO activity, determine actual cost of external sales activity.

• Add the University’s actual overhead rate (currently 63%).

• Add profit to bring the price in line with the same or similar good or service in the public market.

• Determine the market rate using one of the methods in the market driven pricing model.

• Submit rate with initial application form and with every subsequent contract.

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External Sales Rate Development

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External Sales Rate TemplateSAMPLE RATE SHEET - CONSULTING PER HOUR

To use this spredsheet, please fill in the fields that are highlighted in YELLOW

What is the annual salary for consultant 1 (Civil Service)? -$

What is the annual salary for consultant 2 (Faculty / P&A)? -$

+ Salaries

Civil Service

P&A Supervisor

Grad Assistant

What is the annual salary for consultant 3 (Grad Assistant)? -$

Civil Service Consultant (per hour) - P&A Supervisor (per hour) - Grad Assistant (per hour) -

Use appropriate fringe rate for each job class + Fringe See website at: www.umn.edu/ohr/payroll Civil Service Consultant (per hour) - 40.1% * salary from above (2010 Rates) P&A Supervisor (per hour) - 33.3% * salary from aboveGrad Assistant (per hour) - 25% * salary from above

+ Supplies (estimated per hour) - - -

= Total Service Costs - - - (Subject to overhead charges)

+ Overhead - - - Actual University overhead rate is 63%(Total service costs * Overhead rate)

+ Equipment Use Costs (estimated) - - - Per hour depreciation, maintenance, etcallocated based on total usage

= Total Costs (per hour) - - -

+ Profit (to bring price to market rate) - - -

= Total Price Charged to Customer -$ -$ -$

(Per hour)

Market Rate Comparison -$ -$ -$

Source of Market Rate Comparison

(ie, bls.gov, competitor's quote, etc.)

The following methods should be used to price based on market:

• Compare price to a similar good or service from an outside vendor used by your department or another department at the University.

• Call and request a quote from an outside vendor.

• If activity is not available outside of the University, determine a similar effort with similar skill levels and request quote from an outside vendor.

• Request information about pricing from the University of Minnesota Purchasing Department.

• Incorporate industry standards into pricing model (i.e.,bls.gov)

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Market Driven Pricing

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