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COST-SHARING ARRANGEMENTS IN INTERNATIONAL SCIENCE AND TECHNOLOGY COOPERATION: THE CRDF EXPERIENCE Eric J. Novotny, U.S. Civilian Research & Development Foundation One major challenge in an international cooperative partnership is to ensure that the participants in the project have a sufficient stake in its successful outcome. A proven method for keeping cooperative projects on a successful track is to employ cost-sharing or co-financing arrangements among the partners. This method can be applied to bilateral programs or to joint projects in a third country. The U.S. Civilian Research & Development Foundation (CRDF) has used cost-sharing arrangements over the last decade in successful engagements for non- proliferation programs, for higher education reforms, for collaborative research grants, for seed- stage commercialization activities, and for centers of shared equipment usage. BACKGROUND CRDF was created in 1992 through an Act of Congress and established operations in 1995 to engage former weapons scientists and institutions in the newly independent states of the former Soviet Union. CRDF provided an alternative to emigration for scientists in these countries and identified technologies that could be developed for the mutual advantage of the U.S. and the countries of Eurasia.136 CRDF remains actively engaged in Eurasian countries and has extended its activities to other regions, including the Middle East and North Africa. It has expanded its mission to include strengthening university research and education in science and engineering. Major programs with the Russian Federation and other Eurasian countries continue in all areas of science and higher education cooperation. In addition, CRDF maintains an active mechanism for ensuring project accounting, funds transfers, payments, customs clearances, and other award administration support services. All CRDF programs engage other organizations, including the U.S. and host governments, private corporations, and the scientific communities in many countries. A number of these programs, such as the Freedom Support Act, are public-private partnerships, engaging governments, private institutions, and individual scientists. Increasingly, CRDF relies on cost- 136 For further information regarding the Civilian Research and Development Foundation, see http://www.crdf.org/; accessed May 1, 2008. 105
sharing arrangements with its international partners to leverage U.S. funds more effectively. Other tangible benefits accrue from these arrangements. PROGRAM COST-SHARES Funds for cost-sharing are either administered through CRDF or are given directly from the sponsor to the project. Typically, each partner will have project costs that are allocated either directly in the grant award to the recipient or that reflect internal administrative support costs. This practice allows the size and number of grants or other direct program costs to be projected accurately as the sum of contributions from each side. It also allows each partner to assume and control its own support costs without interference or disclosure. The partners generally do not verify the value of cost shares that they do not contribute directly, so the exact scale of support provided by partners is not measured precisely. Both the U.S. Office of Management and Budget and the U.S. National Science Foundation publish helpful, detailed guidelines on cost- sharing procedures and accounting.137 TYPES OF COST-SHARES Combining the value of the funds CRDF does administer with that reported by CRDFâs partners, reveals a significant cumulative total of funds provided for cost-shares, as shown in Table 1. Almost half of the total distribution of cost-sharing arrangements is direct, host-country contributions. While a small percentage of these contributions are in-kind, most all are cash contributions that accrue to the project or grant award. The total amounts available for grantees are typically agreed in advance by CRDF and its funding partner as a matter of eligibility, not as a matter of an applicantâs review. The applicant under a grant program can be required to verify matching funds from the host institution, along side the matches from CRDF and an overall international partner. In-kind support can also be pledged by host institutions when they provide laboratory facilities, office space, or other similar contributions that factor into whether the prospective grantee has the ability to perform as proposed. Together, these levels of support embrace most of the cost-sharing funds. In a small number of cases, CRDF is asked to administer all grant or project funds where the partner or host institution requests such assistance. 137 National Science Foundation (NSF), âInitial Implementation Guidance Regarding Implementation of the Revised NSF Cost Sharing Policy,â October 19, 2004; and U.S. Office of Management and Budget (OMB), âRevised Cost Principles for Educational Institutions,â Circular No. A-21, revised August 8, 2000. 106
TABLE 1 Distribution of CRDFâs International Cost Share Funds 1996-2006138 Host country support, not administered by 45.8% CRDF (cash & in-kind) U.S. recipient organization in-kind support 25.1% Foreign recipient organization in-kind 21.2% support Recipient organization (U.S. and foreign) 6.2% cash cost shares, administered by CRDF Third party support, not administered by 1.4% CRDF (cash & in-kind) Third party cash cost share, administered 0.4% by CRDF TOTAL: 100.0% Cost sharing with partners is an important way for a program to achieve its goals while offering added value to the funding organizations. Although arranging cost shares can make project implementation more difficult, the resulting increase in resources available to meet project goals generally offsets the extra attention required. Cost sharing demonstrates the value that others put on CRDFâs activities. CRDF has a large collection of anecdotal evidence expressing appreciation, but cost shares are tangible evidence of how highly other organizations value CRDFâs work. No sponsoring organization can offer to fund specific programs in perpetuity. To assure that its work makes a lasting contribution beyond the terms of the program, CRDF assists its grantees in finding support for the future. Cost shares are a first step (and in some cases the only step needed) to secure permanent support from the host government or other indigenous sources. Like CRDF, other organizations value cost shares as a way to increase the impact of their work. The ability to attract funding from other sources adds to the value we provide our current funders and makes a compelling case for other organizations to engage CRDF to leverage their funding. 138 Data collected in the table are from original research conducted by the author, using CRDFâs archival information. 107
CRDF COST-SHARING EXAMPLES Matching funds for the sample of CRDFâs programs below have come from a wide variety of sources. Among the most significant examples of successful cost-shares are as follows. In the Basic Research and Higher Education program in the Russian Federation, each Research Education Center project has included a combined fifty percent cost-sharing from the Russian Ministry of Education and Science (MES) and from local Russian sources. As a clear example of how cost sharing can lead to sustainability, MES has adopted this model and is now funding its own programs, independently of CRDF. The Russian Federal Agency for Scientific Innovation (FASI) has shared costs on two large projects: 1) An HIV/AIDS Public Health Center of Excellence for which FASI committed fifty percent, fully matching CRDFâs contribution to the project, and; 2) A Research Innovation Center in Pushchino where FASI and the Russian Academy of Sciences provided over twenty percent funding for CRDFâs program under the Freedom Support Act. The CRDF âFirst and Next Steps to Marketâ programs received over $2.5 million in cash cost shares from U.S. private corporations, approximately 25 percent of the total cost for 149 technology transfer projects. The Russian Foundation for Basic Research has been a steady co-funding partner for the Cooperative Grants Programs research competitions. These programs fully match CRDFâs contributions that go directly to grantees for basic research projects in a wide variety of scientific disciplines. In Ukraine, CRDF has responded to an initiative from the Ukrainian Ministry of Education and Science (MESU), called Cooperation in Research and Education in Science and Technology (CREST). MESU approached CRDF with the opportunity to share costs on a fifty-fifty basis for establishing resource centers in Ukrainian universities that better integrate graduate education and applied research. CRDF has solicited contributions from both U.S. government and private sector sources. Up to six CREST centers are planned under this program. In the south Caucasus (Armenia, Azerbaijan, and Georgia) and in Moldova, the respective governments have provided fifty percent support for CRDFâs institution building and Science and Technology Entrepreneurship Program. In Azerbaijan, a cost-sharing proposal has led to the single largest cooperative research grant program in the countryâs history, administered by CRDF. Funds are matched fully by a special appropriation to the Academy of Sciences. Successful involvement of both international and local sources has led directly to the establishment of an even larger national science fund, which will become operational in 2008. CONCLUSIONS Cost-sharing arrangements establish each partner as a significant stakeholder in the projectâs outcomes. As each makes a significant investment in the program, sharing arrangements provide explicitly declared joint funding for direct activitiesâgrants, awards, facilities, equipment, etc. At the same time, each partner is accountable only to itself for 108
controlling its administrative and support costs, providing incentives to keep costs under control. Arrangements of this type make it more difficult for one partner to shift costs to another partner if the program encounters difficulties. Second, cost-sharing can establish a sense of interdependence and equity among the partners, as each contributor must rely on the other to meet its obligations in pursuing a joint goal. In this way, projects are approached more in the spirit of cooperation among equals and less in a donor-client relationship. Each partner will bring its own capabilities, skills, and resources to accomplish the goals of the program. Cost sharing provides a way to measure these contributions and to align the tasks in the project with the organization most well suited to carry them out. Cost sharing is also most effective in circumstances where the partners have had cooperative activities in the past. Where the partners have built up a level of trust and confidence from past activities, cost sharing proposals will be easier to justify. In cases where cost shares from various organizations are combined to produce a national share (for example a government ministry and a local university or institute) with a foreign partner, the experience of a lead national champion (e.g., a government ministry) can be crucial in obtaining the support of other organizations with less experience. CRDFâs experience also cautions that the process of securing cost shares be started early in the negotiations for the program. Clearly this is an obvious requirement to scale the project properly, but also experience shows that a valid commitment and the actual cash in the bank account do not always materialize simultaneously. The project must take into account potential delays due to approvals for contributions, especially through government agencies. Clear rules for such contingencies are crucial to avoid misunderstandings in the course of a programâs implementation. These understandings need to be negotiated as early as possible in the process in an agreement that establishes the objectives of the joint program and the obligations of the parties. Particularly useful are agreements that establish these rules of the road for a broad cooperative effort, to be then amended by specific protocols for each successive program. In the case of one such agreement, CRDF and its international partner have amended the general agreement thirty-four times in adding successive program elements. As personnel change over time, this procedure has been invaluable in ensuring the continuity of basic principles among the partners.139 139 The following sources were used in the background preparation of this paper: NSF, Initial Implementation Guidance Regarding Implementation of the Revised NSF Cost Sharing Policy, October 19 2004; NSF, Proposal and Award Policies and Procedures Guide, April, 2007, Effective June 1, 2007, NSF 07-140, OMB Control Number: 3145-0058; OMB, Revised Cost Principles for Educational Institutions, Circular No. A-21, Revised August 8, 2000; OMB, Uniform Administrative Requirements for Grants and Agreements With Institutions of Higher Education, Hospitals, and Other Non-Profit Organizations, Circular No. A-110, Revised November 19, 1993, and further amended September 30, 1999; U.S. National Academies (NAS), Committee on Strengthening U.S. and Russian Cooperative Nuclear Non-proliferation, Strengthening U.S-Russian Cooperation on Nuclear Non-proliferation: Recommendations for Action, National Academies Press (NAP), 2005; NAS and Russian Academy of Sciencesâ, Joint Committee on U.S.-Russian Cooperation on Nuclear Non-Proliferation, Overcoming Impediments to U.S.- Russian Cooperation on Nuclear Non-Proliferation: Report of a Joint Workshop, NAP, 2004. 109