Origin of the “new” Lump Sum

To understand the very logic of the Lump Sum we need to go back to its origins, to the reason why the Lump Sum was introduced in the system of EU direct grants.

Even thou we started dealing with the current Lump Sum model only during the last two or three years, the legal basis of this new form of cost is rooted in the Financial Regulation 2018/1046, art. 125 letter a) “Financing not linked to project costs of the relevant operations”.   In the substance, the Regulation 2018/1046 replaced the previous Financial Regulation, and in particular, the Article 123 defining the Forms of Costs for EU grants.  Next, and above, the typical form Actual, Unit, Flat Rate and Lump Sum, the new “Financing not linked to project costs of the relevant operations” was introduced, contributing to the efforts in the simplifications of the financial management of EU actions, strongly “recommended” by the European Court of Auditors since many years, to contrast the very high level of Error Rate in the Expenditure related to grants.

Between 2018 and 2020, therefore under Horizon 2020, the “new” Lump Sum” was piloted on a number of calls for proposals in order to test the effectiveness of the new mechanism, the simplification produced, and the effect on the implementation of the projects by the beneficiaries.  The results of the pilot experience were published by the EC in October 2021 with the title “Assessment of the Lump Sum Pilot 2018 – 2020 – Analysis of qualitative and quantitative feedback” [1].  Based on the positive feedback received from the participants to the piloted calls, the EC confirmed the intention to continue and increase the use of the new Lump Sum in Horizon Europe.

However, the pilot experience revealed some weaknesses and inconsistencies of the initial mechanism (…Rome wasn’t built in a day…) and the EC services improved the model in order to meet the needs expressed by the stakeholders.  The result is the new model of Lump Sum, that will be used for a limited number of calls for proposals ahead, with the aim of simplifying the financial management of the relevant actions, and to reduce the overall Programme error rate.

Lump Sum impact on the preparation of proposals

Even if, from the technical point of view (i.e the Research or Innovation project is not affected per-se) the Lump Sum does not imply a game-changing approach to the preparation of a proposal, a number of elements need to be taken into account when starting the design and preparation of the project proposal.

For example, as pointed-out in the guidance published by the EC [2] in October 2022, “the design of the work plan is essentially the same as in any proposal, except that work packages with a long duration (e.g., management, communication, dissemination and exploitation, etc) may be split along the reporting periods”.  In fact, as one of the main novelties introduced with the Lump Sum is that payments are triggered by the completion of a work package (by all partners involved in it), and they don’t depend by the costs actually incurred, horizontal work packages were in principle to be paid only at the end of the project (e.g. completion of work package for Coordination and Management).  By splitting horizontal WPs into pieces corresponding to the duration of Reporting Periods, the relevant activities can be paid at the end of each reporting period. This is extremely relevant for the project cash flow.

[1] https://research-and-innovation.ec.europa.eu/document/download/acd39d69-99db-4ddd-b788-7c36397b22dd_en?filename=assessment_of_the_lump_sum_pilot_2018-2020_report

[2] https://ec.europa.eu/info/funding-tenders/opportunities/docs/2021-2027/common/guidance/how-to-manage-your-lump-sum-grants_en.pdf

A second important aspect to take into account when preparing a Lump Sum proposal, especially when the Lump Sum is type 2, is that you must provide realistic cost estimations for each cost category (personnel costs, subcontracting costs, purchase costs, other cost categories) per beneficiary and affiliated entity (if any), and per work package.

Even if the grant will be a Lump Sum, the budget estimation must be an approximation of your actual costs. In other words, the baseline to estimate your costs (e.g. average monthly salary of a researcher) must be in line with your normal practices, be reasonable and not excessive, and must be in line with and necessary for the activities proposed.  In fact, during the evaluation, the evaluators will assess whether the cost estimations are reasonable and non-excessive and whether the resources proposed, and the budget-split of lump sum shares will allow completing the activities as described in the proposal. Any clear overestimation (or underestimation) may lead to a lower score affecting the award criterion concerned.

Next calls using the Lump Sum

Now it is time to look for your next funding opportunity.  If you are planning to submit a proposal in the frame of the following Programme parts, please note that the upcoming calls below will make use of the Lump Sum.

Cluster 2, Culture, creativity and inclusive society

• Network for innovative solutions for the future of democracy
• A culture and creativity driven European innovation ecosystem – a collaborative platform
• Knowledge platform and network for social impact assessment of green transition policies

Cluster 3, Civil Security for Society

• Public spaces are protected while respecting privacy and avoiding mass surveillance
• Nature-based Solutions integrated to protect local infrastructure
• Autonomous systems used for infrastructure protection
• Increased foresight capacity for security
• Knowledge Networks for security Research & Innovation
• Stronger grounds for pre-commercial procurement of innovative security technologies

Cluster 5, Climate, Energy and Mobility

• Efficient and circular artificial photosynthesis
• Development of algal and renewable fuels of non-biological origin
• Development of digital solutions for existing hydropower operation and maintenance
• Recycling end of life PV modules
• Designs, materials and solutions to improve resilience, preparedness & responsiveness of the built environment for climate adaptation (Built4People)

European Innovation Ecosystems

• Expanding Investments Ecosystems

ERC

• ERC Proof of Concept Grant2

Europe’ Rail Joint Undertaking

• Network management planning and control & Mobility Management in a multimodal environment and Digital Enablers
• Digital & automated up to Autonomous Train Operations
• Intelligent & Integrated asset management
• A sustainable and green rail system
• Sustainable Competitive Digital Green Rail Freight Services
• Regional rail services / Innovative rail services to revitalise capillary lines

This Lump Sum topic is included in our financial and administrative project management trainings. We can also support you if you have to secure your expenditures reporting. Contact us.

Source: EFMC
Picture: Pexels