Flat rate is a price per unit (unit rate) which remains constant regardless of the number of units purchased. An example could be the amount of indirect costs eligible in a project co-financed by EuropeAid, being always defined as maximum 7% of the direct costs. The rate and definition of direct costs is established ex ante, and the percentage of indirect costs remains fix irrespective of the amount of direct costs paid. No supporting documents are required to justify the amount of indirect costs. Per diems, for instance, are set by EuropeAid as flat rates.

Scale of unit cost is a payment based on quantified activities/outputs/outcomes. An example could be the amount paid per hour per trainee for the delivery of a training (i.e. X €/hour per trainee). The organisation shall justify the quantities, the cost itself and the choice of the scale of unit.

The lump sum is a single payment for the total amount due. It can be considered as a unit itself as it annuls the number of units (i.e. number of units would equal 1 in case of a lump some payment). Lump sums are amounts generally based on cost estimates, established ex ante by drafting a detailed budget per activity/output/outcome. The organisation shall not justify the actual costs incurred but it shall prove that the objectives were reached and shall justify the ex ante calculation of the lump sum. The cost of a certain service could be expressed in terms of lump sum and budgeted as single payment. Note however that the use of lump sums in EuropeAid-funded projects is highly unwelcome.

Date: 07/12/2009