Simplify first, report later

Simplified cost options (SCOs) and results-based financing not linked to costs (RNCs) are reshaping the way European funds and the National Recovery and Resilience Plan (NRRP) are managed. These instruments allow the EU contribution to be calculated on the basis of rules and parameters defined ex ante, reducing the volume of documents to be produced and verified. But how does it work in practice? How is the value of one hour of training, a service delivered, or a result achieved determined? The answer is that the real complexity of SCOs does not lie in the final reporting, but in the upstream work: building sound methodologies, selecting the right data sources, and defining parameters that are fair, verifiable, and defensible under audit.
‍

Building it right upfront to simplify later

Those approaching SCOs for the first time often assume that simplification means "doing less." In reality, it means doing things differently — shifting complexity away from invoice archives and towards the initial design of reimbursement formulas and parameters.

The European Commission sets out three fundamental criteria that every SCO scheme must satisfy:

• Fair: the defined amount must reflect real and reasonable costs, not be arbitrary;

• Equitable: it must treat comparable situations consistently, without unfairly favouring or penalising certain categories of beneficiaries;

• Verifiable: it must be possible to check that the formula has been applied correctly and that the declared results have actually been achieved.

Meeting these three criteria requires reliable data, a documented methodology, and the capacity to update parameters over time without losing consistency between design, management, and reporting.
‍

SCOs and legal certainty: lower audit risk

One of the least-cited — yet most tangible — advantages of SCOs is their protection against audit risk. This is a point that public administrations and private beneficiaries feel strongly about.

Under the traditional actual-cost system, every single expenditure item and invoice is subject to verification; a cost item incorrectly attributed can result in a financial correction or, in more serious cases, in partial or total recovery of the grant. With SCOs, the audit logic changes fundamentally: once the methodology has been approved, verification focuses on outputs, not on the underlying costs.
‍

How a unit cost is built: the case of the Ministry of Agriculture

A concrete example helps to clarify the process. The Italian Ministry of Agriculture (MASAF) has developed a technical guidance document for SCOs applicable to its programmes, illustrating step by step how a standard cost is determined.

For the hourly cost of personnel engaged in research and development activities, MASAF draws on official sources such as national collective labour agreements and interministerial decrees, integrates employer social contribution rates (INPS, INAIL), applies any ISTAT revaluation adjustments, and differentiates by beneficiary category (private enterprise, university, public research body) and by cost band (high, medium, low). The result is a table of standard hourly costs, periodically updatable, which any beneficiary falling within that category can use without having to produce detailed documentation for each individual employee.

A further example is the construction of a unit cost for complex services, such as the charter of vessels for marine monitoring activities. In this case, MASAF combines the main cost components (fuel, crew, maintenance, overheads, profit margin) using market data and sector statistics, arriving at a standardised daily rate by vessel type. In both cases, the underlying logic is the same: start from existing and reliable data, build a transparent formula, and document the reasoning so that anyone can verify it.
‍

Main methods for building SCOs

The European Commission recognises four main families of methods for calculating simplified cost options:

1. Verified historical data of the beneficiary: actual costs incurred in the past for comparable activities are analysed and a representative average is derived. This is the most robust method, but requires the beneficiary to maintain orderly accounts and a sufficiently representative expenditure history;

2. Statistics and third-party data: external sources such as national statistical institutes, sector studies, market surveys, or official tables (e.g. collective agreements, public price lists) are used. This is useful when the beneficiary's historical data are unavailable or insufficiently significant;

3. Standard accounting practices: cost allocation methodologies already in use within the organisation are taken as a reference, provided they are well-established and documented;

4. Schemes already approved under other EU programmes or at national level: where an SCO scheme validated for the same type of activity already exists in another programme or Member State, that model can be adopted or adapted, substantially reducing the ex-novo design effort.

In Italian practice, many administrations are beginning to draw on nationally available tables — such as those developed by MASAF or produced by other ministries for NRRP measures — and adapting them to their own context.

RNCs: outputs vs. results — they are not the same thing

Where the starting question in SCOs is "what does this activity cost?", in RNCs it becomes: "what result do I want to achieve, and what is a reasonable amount to recognise once it has been verified?" Here it is important to distinguish between two concepts that are often conflated: outputs and outcomes.

An output is something tangible and directly measurable that the project produces: an infrastructure built, a training course delivered, a number of people trained. Some lump-sum SCOs already pay for outputs ("the bridge is completed to the agreed technical specifications"). An outcome — in the proper sense used in RNC frameworks — is the change that output generates in reality: heavy traffic reduced by 20%, the number of people finding employment within six months of training, the effective reduction of emissions in an urban area.

This distinction has significant practical consequences. Paying on an output simply requires verifying that it exists. Paying on an outcome requires measuring a real-world change, with data, monitoring methodologies and, often, counterfactual models that isolate the project's effect from other factors. This is why RNCs require impact analysis models and not just cost analysis: what is being purchased is not an activity, but a transformation.
‍

Where the system stalls in Italian public administration

The European Commission's study on the uptake of SCOs and RNCs under the Common Provisions Regulation (CPR) funds (2014–2020 and 2021–2027) clearly shows where the difficulties are concentrated. For SCOs, the main obstacles are the lack of reliable historical data — identified as a critical problem by 22% of programme authorities — and the absence of alternative sources to fill that gap. For RNCs, the problem lies even further upstream: 44% of authorities report insufficient information and experience to design and implement these schemes.

In Italy, these structural challenges are compounded by a cultural factor: many administrations remain deeply accustomed to the logic of detailed analytical reporting, and the shift to formula- and results-based methodologies requires a change in mindset before a change in tools. The practical result is that data often exist in separate silos, updates are carried out manually, and the documentation of methodological choices is fragmented.
‍

Tools and capabilities for sound SCOs (and preparing for RNCs)

Building and managing SCOs effectively, and beginning to pilot RNCs, is not merely a technical challenge — it is an organisational and process question that requires:

• Documented and updatable methodologies, not isolated spreadsheets that no one can reproduce six months later;

• Integrated and verifiable databases, enabling the chosen parameters to be justified with identifiable and traceable sources;

• Digital workflows that guide staff through the correct application of schemes, reducing errors and accelerating verification;

• Impact analysis models for defining credible indicators and targets, indispensable especially for RNCs.

OpenEconomics' public funding offer is built precisely around this need: supporting public administrations and businesses not only in identifying and managing calls for proposals, but in building robust methodologies, continuously monitoring outputs and outcomes, and ensuring accurate, risk-free reporting.