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Federal government grants for research consist of two main components: direct costs and indirect costs. Direct costs are allocated for essential research activities, covering salaries, equipment, and materials such as chemicals and enzymes. On the other hand, indirect costs are designed to support the research institutions themselves, addressing expenses related to the maintenance of lab facilities, utilities, administrative functions, and human resources.
The indirect cost rates are usually negotiated individually with each research institution, with averages approaching 30 percent of the total grant amount. Some institutions have reported indirect cost rates that can be as high as 50 percent of the grant’s value.
Recently, the National Institutes of Health (NIH) issued a statement indicating a significant alteration in how indirect costs will be calculated. The NIH announced that the previously negotiated indirect cost rates will be eliminated, and a flat rate of 15 percent will be instituted for all existing and future grants. This sudden policy change, lacking prior warning, poses a severe financial threat to the operations of numerous biomedical research institutions.
Impact of the Policy Change
This new directive is outlined in a supplemental guidance document that revises the 2024 grant policy statement. The document references federal regulations that give NIH the authority to apply different indirect cost rates than those previously agreed upon with research institutions. This authority extends to a category of federal awards or individual awards but mandates that the NIH must provide justification for such actions. Notably, the document discusses lower indirect cost rates typically associated with charitable foundations, contrasting sharply with NIH’s previous reimbursement strategies.
Under the new regime, the revised indirect cost reimbursement rate will affect all new grants and will also be applied retroactively to existing grants as of the notice’s issuance. The retroactive application of this policy may prompt legal challenges, given the cited federal regulations that require clarity concerning indirect cost rate policies within funding opportunity notices. Moving forward, the implications of this decision could significantly restrict the scope and viability of biomedical research initiatives across the United States.
Source
arstechnica.com