How "15%" Has Quickly Gone from Boon to Bad for Grantees
People are fickle, but sometimes they have good reason to be. For example, the same football fans that cheered the newly acquired star quarterback early in the season may rain boos on that same quarterback months later after suffering through a season of numerous sacks and multiple interceptions. Right now for the grants community, that quarterback is wearing number 15%.
To better explain, when we attended conferences this time last year, we heard grant recipients literally applauding the Office of Management and Budget when it brought up the number 15%, because under the 2024 revisions to the uniform guidance, the de minimis indirect (F&A) cost rate level was raised from 10% to up to 15% of modified total direct costs (§200.414). This was a welcome change, as many entities and organizations had clamored for a higher de minimis indirect cost rate to reduce burden.
One year later, many in the grants community now cringe when hearing the term 15%. Three federal agencies — the National Institutes of Health (NIH), the Department of Energy (DOE) and, most recently, the National Science Foundation (NSF) — have changed their indirect cost policies to establish an indirect cost rate limit at 15%, a rate that will prove extremely detrimental for a multitude of research institutions that traditionally have negotiated higher indirect cost rates with the feds and need the funding to conduct their work. According to Matt Owens, president of the Council on Governmental Relations, an organization supporting the administrative needs of research institutions, “This is a surefire way to cripple lifesaving research and innovation. The funding is part and parcel of the total costs of conducting world class research. America’s competitors will relish this self-inflicted wound.”
Other groups, such as the Federation of American Societies for Experimental Biology (FASEB), have stated that a flat 15% F&A rate represents a minimum 50% decrease in funds that support the facilities where research is conducted. These funds cover maintenance of shared equipment and resources, compliance with measures to ensure patient privacy and research security, and utilities, such as appropriate management of biohazardous materials. “These are real costs that will stymie the pursuit of research and also risk the safety of those working in or with research facilities,” according to FASEB.
The administration’s efforts to cap the 15% indirect cost rate have been brought to court. On April 4, a permanent injunction and final judgment was issued enjoining the NIH from implementing the policy change. The federal government is appealing the decision to the U.S. Court of Appeals for the First Circuit, and a hearing was scheduled on the appeal for later this week. Lawsuits also have been filed in response to the DOE F&A cap, and only time will tell to see if the same occurs in response to NSF’s policy change.
It's even more concerning that these agency statements calling for the 15% F&A cap, in each case, did not follow the Administrative Procedures Act, which requires that they would be submitted for public notice and comment. Strict immediate deadlines were established concerning these caps, giving recipients no time to prepare.
We will continue to watch to see how developments play out in the courts related to the 15% indirect cost limit and whether other agencies will join NIH, DOE and NSF in establishing such caps. Stay tuned – the game’s not over…
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