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Higher education institutions should capitalise on the results of the research assessment exercise when negotiating external contracts, a financial consultant advised this week.

Melanie Burdett, a director of JM Consulting Ltd, addressing the British University Finance Directors Group at Aberdeen University, said that proven quality could justify a higher price, but was not used as a strong negotiating point.

Ms Burdett, who was acting finance director in a new university for six months last year, said that any finance director with a background outside education would be astonished by the embryonic state of costing and pricing.

As universities tended to be driven by academic rather than financial aims, contract research was often seen as desirable but marginal. There was also resistance from sponsors, particularly Government, to cover overheads.

Universities might also be avoiding recovering their overheads fully because they feared a neighbouring institution might charge less and win the contract, but this meant customers were often subsidised out of teaching funds.

In a survey of almost 40 higher education institutions, JM Consultants found more than a third did not calculate full costs at all.