Editor’s Note: This article originally appeared on ECG’s website.
The NIH announced an immediate cap on the indirect cost rate for all NIH grants, setting the standard rate at 15%. The change is effective for all new awards as of the release of the guidance and also applies to all existing NIH grants to institutions of higher education (IHEs) for expenses from February 10, 2025, and forward. The move is anticipated to result in total federal savings of greater than $4 billion.
While the guidance only pertains to NIH awards, the negotiated federal indirect cost rate for each organization is used by other federal agencies, and similar changes could be made to other grant programs in the future.
What is the Research Indirect Cost Rate?
Research indirect costs are generally broken into two components: facilities and administration (F&A). The facilities component may include:
- Laboratory buildings.
- Shared equipment.
- Capital depreciation.
- Facility operations and maintenance.
Administration generally encompasses:
- Regulatory and compliance personnel.
- Accounting.
- Human subjects protection programs.
- Other personnel necessary for supporting research.
Each research entity calculates its indirect costs as a basis for negotiation of an organization-specific indirect cost or F&A rate. Existing limitations and the negotiation process often result in a lower F&A rate than the actual expenses incurred by academic medical centers (AMCs) and IHEs to conduct biomedical research. Click here to continue>>
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