Sneak Preview: DOD Limits Indirect Costs Reimbursement to IHEs
(The following is excerpted from a recent Thompson Grants Compliance Expert article.) In a memorandum posted May 14 and effective immediately, the Department of Defense (DOD) announced that it would “pursue a lower cap on indirect cost rates for all new financial assistance awards” to institutions of higher education (IHEs). DOD said the change “position[s] the DOD to save up to $900M per year on a go-forward basis.”
In issuing this notice, DOD joins the National Institutes of Health (NIH), the Department of Energy (DOE) and the National Science Foundation (NSF) in announcing recent policies to cap indirect costs reimbursement at 15% on research grants to IHEs (see “NSF Adopts 15% Indirect Costs Cap”). Stakeholders are currently challenging the caps imposed by NIH and DOE in court, where injunctions/retraining orders have been issued (see “Permanent Injunction on NIH F&A Cap Issued April 4”; “DOE Announces 15% Cap on Indirect Costs; TRO Issued”).
DOD said that its intent in issuing the policy “is not only to save money, but to repurpose those funds — toward applied innovation, operational capability and strategic deterrence. We owe it to our service members, and we owe it to the American people.”
DOD is issuing this policy change pursuant to §200.414(c) of the uniform guidance, which it notes provides “an avenue to deviate from institutionally negotiated indirect cost rates when it determines such deviation is necessary and justified. We seek to exercise that authority now.”
Under the policy, no later than 21 days from May 14, the Under Secretary of Defense for Research and Engineering (USD(R&E)) is directed to notify the Office of Management and Budget of DOD’s intent to cap indirect cost rates at 15% or lower for all new financial assistance awards to IHEs, in accordance with regulatory requirements. USD(R&E) also is instructed to develop formal policy guidance — “including procedures, decision criteria and justifications” — that will govern all DOD deviations from negotiated rates and ensure that the guidance is publicly available and integrated into all “upcoming” grant solicitations.
(The full version of this story has now been made available to all for a limited time here.)
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