Since a lot of people on HN don't know how indirect costs work, especially for the NIH:
Grant proposals don't cover things that don't directly cover the project. Journal subscriptions, facilities, copy paper, administrative staff, etc. all aren't eligible, and so get rolled into the vague notion of indirect rates.
When an NIH grant is awarded for a particular direct cost amount, the indirect rate is then added on. So for my institution, if I get a $100,000 grant, my institution gets $153,000, because we have a 53% indirect rate. These are periodically renegotiated with the Federal government, and used widely.
Private research companies can and do just tuck this into their costs, but universities aren't allowed to do that.
A 15% rate is, to be blunt, catastrophic. It's "Every University in the U.S. Loses Money on Every Single NIH Grant" levels of bad.
And yes, this is the rate a lot of foundations charge. That's not because it's a reasonable rate - it's because it's a charitable foundation, and we all sort of indulge them because of their missions, and their own need to be efficient. But they're also a minuscule amount of the funding landscape, and often small grants. We tell ourselves its find - they're worthy causes, and loss leaders, etc. But applying that to the NIH will be a massive blow to biomedical research in the United States.
Your comments are quite good and accurate. I would add that funding from private foundations is in many cases only viable because NIH overhead is paying for the supporting infrastructure. Very few biomedical researchers are supported solely by private funding (including the building and lab facilities).
These changes also directly impact research hospitals, not just universities.
That doesn't mean indirect costs shouldn't be reformed. This is just simply the most disruptive possible way to do it.
Yep. I worked in a biomedical research department. Getting funding was always difficult, requiring 2 full-time grant writers for the government stuff and the dept chair who split their time between raising from private individuals, corporations, and all other sources. Government has strict rules about what money can and can't be spent on. Take equipment given by the government: often times, it would gather dust and couldn't be disposed of, despite being obsolete and replaced by something else, because of government red tape. Getting grants is very competitive and there's rarely enough money to cover all of the ordinary functions like salaries of an admin person, office supplies, or other overhead things needed for students, faculty, and staff to operate a functional department.
The losers of this will be patients of the entire world, the slow down of advancements in medicine and STEM fields of all kinds, and the sucking sound of brains leaving for other countries.
Yeah, this will hit research hospitals, organizations like RTI, etc.
And yeah, the rates private foundations pay is enabled by the NIH rates, and also that the NIH makes up the bulk of the funding in the first place. There's an argument - that I'm sympathetic to - that they shouldn't get a discount and the rate is the rate, but that's a very different reform than what we're seeing now.
This is a huge cut. Back of the envelope calculations for UCLA (a big research university with public finance information): $200M cut in operating revenue.
In 2023, UCLA had $270M in indirect costs [1] and they negotiated a rate of 57% with the NIH [2]. So, they had about $473M in direct costs. The new rate would be 15%, which is ~$71M. $270M-$71M = $200M.
"From what I hear from multiple people in the space, the latest NIH indirect costs for medical research grants will basically mean the end most academic medical centers"
This is a pointlessly destructive move that will save insignificant amounts of money, while grossly hampering important research in the US. If we're looking for "efficiencies" in government take a look at healthcare, look at what insurance companies are allowed to charge, what hospitals charge insurance in turn. It's a bonanza of cash that's justified in vague free market terms, while the taxpayer is stuck with a bill in the trillions. Far more than education or NIH grants, more than military spending, healthcare in this country simply robs people blind. The focus is often on bankrupted, uninsured people, but the truth is that far more is just skimmed off the top.
The worst part is that it is immediate and retroactive to ongoing grants. This will immediately cause every single academic and medical research center to have an unsustainable deficit. It will simply cost too much to actually have researchers do the grants. They might return money to NIH and lay off faculty annd grad students.
I anm almost certain this will get a TRO from a federal judge while it’s litigated given how insane this is.
For any new grant issued, and for all existing grants to IHEs retroactive to the date of issuance of this Supplemental Guidance, award recipients are subject to a 15 percent indirect cost rate. This rate will allow grant recipients a reasonable and realistic recovery of indirect costs while helping NIH ensure that grant funds are, to the maximum extent possible, spent on furthering its mission. This policy shall be applied to all current grants for go forward expenses from February 10, 2025 forward as well as for all new grants issued. We will not be applying this cap retroactively back to the initial date of issuance of current grants to IHEs, although we believe we would have the authority to do so under 45 CFR 75.414(c).
Are you familiar with how organizations have annual budgets? Doing it with zero notice in the middle of a fiscal year will be chaos. This is purely an attack.
Notice how no one is going after the F&A (indirect) rates for DOD R&D contractors…
The overhead being charged at a lot of these places was obscene (and variable- it all depended on the specific institution). A fixed rate of 15% seems low, but reasonable. I expect the admin especially at places that charge a premium will be furious.
I think this very much depends on the field. The researchers I know are describing it as devastating because the type of research they do depends on things like animal facilities which aren’t cheap. Fortunately, we don’t need any biomedical research since drinking raw milk will solve everything.
Often, when you look at those animal facilities run by universities through indirect costs, they are often not efficient. And NIH provides granting mechanisms that last for several years and allow for capital building. Ideally (although I wouldn't expect this to happen with the current admin) NIH could give more money to investigators. But I would argue that in many cases, things like animal facilities should be centralized and housed in only a few locations.
It's a complicated situation and I can't speak for every scientist, but I certainly saw tons of waste (closet clusters that were "free" for the investigator because the university paid for it... through overhead... adminned by grad students since they were "paid for" by training grants.) Similar complaints about wet labs. After working in that environment and moving to industry, I've seen what infrastructure built around efficiency can achieve.
A lot of the inefficiency comes from being an educational institution.
Mentoring grad students is inefficient. Giving research opportunities to undergrads is even more inefficient. Universities would be far more efficient if they would only hire researchers with PhDs and professional support staff. But then they wouldn't be educational institutions.
This. I had someone try to claim once that having three undergrads in my lab meant a lot of research would be done. I had to explain that they were all net negatives - worthwhile ones, but not productive.
Yes, I don’t want to say there isn’t room for improvement but this is like deciding you need to lose weight and concluding the fastest way involves a chainsaw. I would much prefer to live in the alternate universe where there was a serious program to rethink infrastructure efficiency.
Maybe big private institutions will do fine. But this will be devastating for smaller institutions – especially public ones – that have had to deal with declining enrollment for years.
I work at a small state access university, without a meaningful endowment, that has traditionally had ~48% indirects. The majority of those go to research administration (e.g. research integrity, human subjects protection) and department general funds. Don't worry about facilities: we will literally be trying to figure out whether to cut journal subscriptions or startup funds for new hires, since we can't touch compliance.
Of course, it's not as if Team Red cared that much about universities anyway, or medicine, or biology...
When I was an academic, I did all my work in the cloud. I didn't use copy paper, or even really need to be in the office (it had slower networking, and less comfortable chairs). The university had a multi-billion dollar endowment and got billions from the state to run its educational mission. Why should I be raising 50% on top of my money (which was so high, NIH often wanted to give money to people at "cheaper" universities).
It's very unclear to me how you seem to expect medical research to be done in the cloud. Overhead is crucial to create and maintain research infrastructure necessary to advance medicine and science.
I work in pharma and we do tons of medical research in the cloud and it was done before in academia; it typically wasn't my own university that developed (on its own from direct funding) the necessary infrastructure, but universities under contract, or NIH itself, or a consortia funded through grants. The university IT department itself struggled with just keeping wifi up, or giving us 10BT networks on a hub in an age when gigabit switches were common.
Note: I was not typical. I set up as a digital nomad a long time ago. A scientist with a lab on campus who pulls power, AC, and other resources from central services, must have some way of compensating the university, and you could argue that instead of a prenegotiated (and amortized) overhead, it could instead be a cost center billing (scientist gets contract, uses campus resources, gets billed directly for their consumption). Don't forget also that because of Bayh Dole, the university gets monetize the IP generated by their scientists (who typically do not see any direct revenue; instead, they have to make a startup that licenses the tech from the university).
My experience with overheads showed that the universities I worked at had the highest (50-75%) while less prestigious regional universities were more like 30%.
Oh! This is new: I just looked up Berkeley's rates now and they explicitly have an off-campus rate that is 25%, while the on-campus is 60%. Apparently the federal government was already capping off-campus at 25%! I also see that funding agencies like Gates, Chan-Zuckerberg, etc, already cap at around 10-15%. Man, the deans must be furious
The rules for off campus rates are pretty strict, and not just “I’m not in my office.” They get used for Extension, stuff like that.
Ironically, prohibiting “breaks” to Gates, Chan-Zuckerberg, etc. and saying the rate they get is the same as your NIH rate would probably go over well. Most people I know in research admin are perpetually annoyed that private foundations act like being subsidized is their right.
> I just looked up Berkeley's rates now and they explicitly have an off-campus rate that is 25%, while the on-campus is 60%. Apparently the federal government was already capping off-campus at 25%!
Off-campus is capped because the grant is then paying for rent on the lab space from the private landlord. Universities don't charge research labs for power, cooling, rent, janitorial, Internet, etc. Maybe they will start now.
A 50% indirect rate both isn't particularly high. The idea that "You're raising" an extra 50% isn't really fair either - the effort into writing a grant is the same regardless of the indirect rate.
There are arguments to be made that university budgets are too high (I don't agree, but they exist). So renegotiate indirect rates. There's a framework for doing this.
An across the board, utterly devoid of context arbitrary cut to 15% isn't a sane policy.
Your institution might have a large endowment. Mine is a rural state school.
It is made up: nobody sat down and did the analysis to see whether the existing levels are reasonable or how best to restructure things, they’re trying to cut even pre-approved funding to an arbitrary number.
Some private foundations do charge less, but they’re usually not providing the bulk of the funding for a given lab. There are generations of researchers and American industries based on the model where NIH/NSF provide a stable foundation for research, and while that can change it’s incredibly disruptive to try to break existing agreements.
To put it in HN terms, do you know anyone who take lower paying non-profit work because they’re married to someone with a tech job which means they never worry about their mortgage or health insurance? This is like that spouse’s employer saying they’re getting a 30% pay cut.
Yes, but private foundations are only paying for the incremental cost of their funding, not the base cost. If you are flying a plane from LA to Chicago, the incremental cost of flying that plane on to Detroit is pretty low; a low overhead on the direct costs of that additional leg makes some sense. The private foundations are like the additional leg, they aren't paying for the fixed costs of running the airline.
When looking at the whole system it clearly becomes woefully inadeqate. To extend the example, the only direct costs of an airplane flight are the crew, the fuel/food, and any airport fees. Could you run the rest of an airline (training, ground staff, scheduling, booking, IT, maintenance) on 15% of the crew+fuel costs? Not even close.
If you look at federal contractors and other companies, the overhead on staff is probably closer to 100-200%, so 50-60% is very defensible.
Is it possible that this is being done to increase private influence over public research? Private entities could simply raise their cap on indirect costs...if conditions are met.
"Having 50% of their grant leeched off" is not how indirects work.
You know what's a much bigger problem for people doing research? That the budget for a non-modular R01 from the NIH hasn't changed since the Clinton administration.
When the government hires a consultant, the rate charged is usually 2-3x the salary of that consultant; 50% is well below the 100-200+% rates you see all the time in business.
Grant proposals don't cover things that don't directly cover the project. Journal subscriptions, facilities, copy paper, administrative staff, etc. all aren't eligible, and so get rolled into the vague notion of indirect rates.
When an NIH grant is awarded for a particular direct cost amount, the indirect rate is then added on. So for my institution, if I get a $100,000 grant, my institution gets $153,000, because we have a 53% indirect rate. These are periodically renegotiated with the Federal government, and used widely.
Private research companies can and do just tuck this into their costs, but universities aren't allowed to do that.
A 15% rate is, to be blunt, catastrophic. It's "Every University in the U.S. Loses Money on Every Single NIH Grant" levels of bad.
And yes, this is the rate a lot of foundations charge. That's not because it's a reasonable rate - it's because it's a charitable foundation, and we all sort of indulge them because of their missions, and their own need to be efficient. But they're also a minuscule amount of the funding landscape, and often small grants. We tell ourselves its find - they're worthy causes, and loss leaders, etc. But applying that to the NIH will be a massive blow to biomedical research in the United States.