How should funding agencies pay open-access fees?

At the recent Berlin 9 conference, there was much talk about the role of funding agencies in open-access publication, both through funding-agency-operated journals like the new eLife journal and through direct reimbursement of publication fees. I've written in the past about the importance of universities underwriting open-access publication fees, but only tangentially about the role of funding agencies. To correct that oversight, I provide in this post my thoughts on how best to organize a funding agency's open-access underwriting system.

The motivation for underwriting publication fees is simple: Publishers provide valuable services to authors: management of peer review; production (copy-editing and typesetting); filtering, branding, and imprimatur. Although access to scholarly articles can now be provided at essentially zero marginal cost through digital networks, some means for paying for these so-called first-copy costs needs to be found in order to preserve these services. The natural business model is the open-access journal funded by article processing fees. (Although most current open-access journals charge no article processing fees, I will abuse the term "open-access journal" for this model.) Open-access (OA) journals are no longer an oddity, a fringe phenomenon. The largest scholarly journal on earth, PLoS ONE, is an OA journal. Major publishers — Springer, Elsevier, SAGE, Nature Publishing Group — are now publishing OA journals.

However, OA journals are currently at a significant disadvantage with respect to subscription journals, because universities and funding agencies subsidize the costs of subscription journals in such a way that authors do not need to trade off money used for the subsidy against money used for other purchases. In particular, subscription fees are paid by universities through their library budgets and by funding agencies through their overhead payments that fund those libraries. Authors do not see, let alone attend to, these costs. In such a situation, an author is inclined to publish in a subscription journal, where they do not need to use any moneys that could otherwise be applied to other uses, rather than an OA journal that requires payment of a publication fee. And if authors are unwilling to publish in open-access journals because of the fees, publishers — even those interested and motivated to switch to an OA revenue model — are unable to do so.

The solution is clear: universities and funding agencies should underwrite reasonable OA publication fees just as they do subscription fees. But how should this be done? Each kind of institution needs to provide its fair share of support.

As I've written about before, universities can underwrite processing fees on behalf of their faculty, and do so in a way that does not reintroduce a moral hazard, by reimbursing faculty for OA publication fees up to a fixed cap per year. Since these funds can only be used for open access fees, they can't be traded off against other purchases, so they don't provide a disincentive against open access journals. On the other hand, since these funds are limited (capped), they provide a market signal to motivate choosing among open access journals so that the economic incentives will militate toward low-cost high-service open access journals.

This is the argument for the Compact for Open-Access Publishing Equity (COPE), a commitment by universities to establish mechanisms for underwriting OA publication fees. COPE has grown well beyond its initial five signatories and is supported by a wide range of institutions and people. Harvard and other COPE signatories have already set up such OA funds, which work in just this way.

Many COPE-compliant OA funds don't underwrite articles that were developed under research grants, under the view that such funding is the responsibility of the granting institutions. COPE calls for universities to do their fair share of paying OA fees, no less, but no more. Funding agencies need to underwrite their share of OA fees as well, and crucially should do so in a way that respects several important criteria:

1. They level the playing field completely, at least for cost-efficient OA journals.
2. They recognize that publication of research results often occurs after grants have ended.
3. They provide incentive for publishers to switch revenue model to the OA publication fee model, or at least provide no disincentive.
4. They avoid the moral hazard of insulating authors from the costs of their publishing.
5. They don't place an undue burden on funders that would require reducing the impact of research they fund.

Of course, many funders already allow grantees to pay for OA publication fees from their grants. But this method falls afoul of some of these criteria. With respect to criterion (1), grantees are forced to trade off uses of grant moneys to pay OA fees against uses to pay for other research expenses, providing incentive to publish in subscription-fee journals where these costs are hidden. This approach maintains the tilted playing field against OA journals. With respect to criterion (2), because the funds must be expended during the granting period, grantees must predict ahead of time how many articles they will be publishing in OA journals, where they will be publishing them, and those articles must be completed and accepted for publication by the end of the granting period.

The mechanism that satisfies these criteria is for funding agencies to provide non-fungible funds specifically for OA publication fees, funds that are not usable for purchasing other grant-related materials. Funders would establish a policy that grantees could be reimbursed for OA publication fees for articles based on grant-funded research at any time during or after the period of the grant. This satisfies criterion (1) because grantees would no longer have to pay publication fees out of pocket or from grant funds that could be used otherwise. It satisfies criterion (2) because payments can be provided after the end of the grant. (If desired, the delay after the grant ends can be limited to, say, a year or two.) A reasonable requirement for reimbursement of publication fees would be that the article explicitly acknowledge the grant as a source of research funding.

Wellcome Trust already uses a similar incremental funding system. However, they (inadvisably in my mind) allow the funds to apply to so-called hybrid publication fees, where an additional fee can be paid to make a single article available open access. These reimbursements should be limited to publication fees for true OA journals, not hybrid fees for subscription journals. Willingness to pay hybrid fees provides an incentive for a publisher to maintain the subscription revenue model for a journal, because the publisher can acquire these funds without converting the journal as a whole to open access. Eschewing hybrid fees is necessary to satisfy criterion (3).

If funders were willing to pay arbitrary amounts for publication fees without limit, a new moral hazard would be introduced into the publishing market. Authors would become price-insensitive and hyperinflation of publication fees would be possible. To retain a functioning market in publication fees, we must be careful in designing the reimbursement scheme for OA journals; we need to make sure that there is still some scarce resource that authors must manage. This can be achieved in a couple of ways, by capping reimbursements or by copayments. First, reimbursement of OA publication fees can be offered only up to a fixed percentage of the grant amount. By way of example, if an average NIH grant is $300,000 (excluding overhead^[1]), a cap of, say, 2% would provide up to $6,000 available for OA fees. (Robert Kiley, Head of Digital Services at the Wellcome Trust, estimates that at present rates all funded papers of the Wellcome Trust could be underwritten for about 1.25% of their total granted funds. In the short run, nowhere near that level of underwriting is necessary, since the number of publication-fee-charging OA journals is so small. In the long run, as competition in the publication fee market increases, this number may well go down.) That would cover two PLoS Biology papers, three BMC papers, four or five PLoS ONE papers, eight or so Hindawi papers. A grantee would apply separately for these funds to reimburse reasonable OA fees. Some grantees might use all of these funds, some none, with most falling in the middle (and currently at the low end); but in any case they would not be usable for other purposes. Since these funds can only be used for OA publication fees, they can't be traded off against other purchases, so there is no disincentive against selecting OA journals. On the other hand, since these funds are limited (capped), they provide a market signal to motivate choosing among open access journals so that the economic incentives will militate toward low-cost high-service OA journals.  (This can't be repeated often enough.)

Alternatively, a copayment approach can be used to provide economic pressure to keep publication fees down. Reimbursement would cover only part of the fee, at least at the expensive end of such fees. It is important (criterion 1) that for cost-efficient OA journals, authors should not be out of pocket for any fees. Thus, reimbursement should be at 100% for journals charging less than some threshold amount, say, $1,500. (As publishers become more efficient, this threshold can and should be reduced over time.) Above that level, the funder might pay only a proportion of the fee, say, 50%, so that grantees have some "skin in the game" and are motivated to trade off publication fees against quality of publisher services. With these parameters, the payment schedule would provide for the following kinds of payments:

Publication fee	Funder pays	Author copays	Examples
$700	$700	$0	typical Hindawi journal, SAGE Open
$1350	$1350	$0	PLoS ONE, Scientific Reports
$2000	$1750	$250	typical BMC journal
$2900	$2200	$700	PLoS Biology

(What the right parameters of such an approach are may depend on field and may change over time. I don't propose these as the correct values, but merely provide an example of the workings of such a system.)

These two approaches are complementary. A policy could involve both a per-article copayment and a maximum per-grant outlay.

Finally, criterion (5) calls for implementing such an underwriting scheme as cost-effectively as possible, so that a funder's research impact is not lessened by paying for publication fees. Indeed, one might expect that impact would be increased by such a move, given that the tiny percentage of funds going to OA fees would mean that those research results were freely and openly available to readers and to machine analysis throughout the world. I would think (and I recall a claim to this effect at Berlin 9) that the impact benefit of providing open access to a funder's research results is greater than the impact of the marginal funded research grant. To the extent that this is so, it behooves funders to underwrite OA fees even at the expense of funding the incremental research. Nonetheless, there may be no need to forego funding research just to pay OA fees. Suppose that on the average grant incremental funds of $200 are used to pay OA publication fees. (With current availability and usage of OA journals, this is likely an overestimate of current demand for OA fees.) Where would this money come from? To the extent that faculty are publishing in OA journals, funders should not need to underwrite subscription journals, so that their overhead rates can be reduced accordingly. An overhead rate of 67% (Harvard's current rate) would need to be reduced by a minuscule 0.067% to compensate. (This is not a typo. The number really is 0.067%, not 6.7%.) This constitutes a percentage reduction in overhead of one part in a thousand, a drop in the bucket. In the longer term over several years if usage of the funds rises to, say, $1000 per grant, the overhead rate would need to be reduced by a still tiny 0.33% for cost neutrality. As more OA journals become available and more funds are used, the overhead rate would be adjusted accordingly. If hypothetically all journals became OA, and all articles incurred these charges, the cost per grant might rise higher to Wellcome Trust's predicted 1.25% (though by this point competition may have substantially reduced the fees), but then, larger reductions in overhead rates would be met by reduced university costs, since libraries would no longer need to pay subscription fees.

One of the nice properties of this approach is that it doesn't require synchronization of the many actors involved. Each funding agency can unilaterally start providing OA fee reimbursement along these lines. Until a critical mass do so, the costs would be minimal. Once a critical mass is obtained, and journals feel confident enough that a sufficient proportion of their author pool will be covered by such a fund to switch to an open-access revenue model, subscription fees to libraries will drop, allowing for overhead rates to be reduced commensurately to cover the increasing underwriting costs. Each actor — author, funder, publisher, university, library — acts independently, with a market mechanism to move all towards a system based on open access.

It is time for funding agencies to take on the responsibility not only to fund research but its optimal distribution. Part of that responsibility is putting in place an economically sustainable system of underwriting open-access publication fees.

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^[1]The NIH Data Book reports average grant size for 2010 as around $450,000, which corresponds to something like $270,000 assuming a 67% overhead rate. $300,000 is thus likely on the high side.