The College Fix

U.S. District Judge Angel Kelley recently ruled to extend a temporary restraining order blocking an attempt by the Trump administration to drastically cut NIH funding for research overhead, commonly referred to as “indirect costs.”

It’s the latest development in an ongoing tug of war over spending on indirect costs, or money added to grants to help pay for some of the day-to-day operations of a researcher’s institution.

Those who stand with Trump say they’re exorbitant, unaudited and often abused. Many in the scientific community say not so fast.

“You need to have a building to have laboratories in. You need to have utilities. You need to have all of those kinds of things,” Shefford Baker, an associate professor in the engineering department at Cornell University, told The College Fix in a telephone interview.

These types of overhead costs, Baker said, are managed separately from the more specific costs associated with a research project or an individual researcher’s lab.

On Feb. 7, NIH released supplemental guidance regarding the funding of these additional operational costs that would cap the indirect cost rate paid to universities at 15 percent, arguing it’s more in-line with the indirect cost rate often paid by private funding sources.

Previous indirect cost rates for universities, negotiated by the NIH and individual institutions, averaged 28 percent — while some institutions received indirect costs from the NIH at rates greater than 60 percent.

The attempted policy change was quickly met with multiple lawsuits followed by a temporary restraining order, as well as outcry from scientific researchers on social media and announcements from several universities including North Carolina State University, Washington State University, Virginia Tech, and Northwestern University regarding cost cutting measures they would now be considering or would soon be implementing.

An editorial in JAMA Network referred to the cap as “draconian.”

The general claim by researchers and their institutions is that payment of previously negotiated indirect cost rates by the NIH is essential for researchers to continue to operate their labs and carry on their work.

After Angel Kelley extended the temporary restraining order until she could decide whether to issue an injunction, the office of University of California Provost Katherine Newman released a statement saying, “We look forward to the judge’s ruling and maintain our position that the Administration’s misguided attempt to cut vital National Institutes of Health (NIH) funding is not only arbitrary and capricious but will stifle lifesaving biomedical research, hobble U.S. economic competitiveness and ultimately jeopardize the health of Americans who depend on cutting-edge medical science and innovation.”

However, higher education and research policy experts remain unconvinced every penny given to universities to cover the indirect costs of doing scientific research is truly essential or well spent.

Moreover, some note determining an appropriate indirect cost rate for research overhead can be rather difficult, as can finding an appropriate solution to excessive indirect cost rates and the questionable use of relevant funds.

“Indirect costs can be anything that the university says supports that research,” said Adam Kissel, a visiting fellow for higher education reform at The Heritage Foundation and former Deputy Assistant Secretary for Higher Education Programs at the U.S. Department of Education.

Subsequently, noted Kissel, in the current system universities become motivated to find every small cost that feasibly can be claimed as overhead for a grant-recipient’s work.

For example, Kissel said in a telephone interview with The College Fix, “That can be keeping the lights on in the president’s office prorated for the amount of time that the president needs to think about [a] grant.”

If a university were only trying to calculate these costs for a single grant, the task might be feasible, Kissel said. However, if a university is trying to calculate these costs for an unknown number of grants over a five-year period, one ultimately is dealing with a best guess, which is then used by the university to inform their negotiations regarding their rate for indirect costs, he said.

Once money for indirect costs attached to a grant comes in, Kissel added, there is also plenty of room for the money to be moved around or misused.

In practice, Kissel said, it is feasible that some of this money may go for a faculty club or maintaining student dorms. Citing a recently published article from Minding the Campus, he also noted several instances of indirect costs being misused by universities for things like flowers for a university president’s home, the depreciation of a yacht, and drunken parties.

A 2022 report from the Heritage Foundation argued indirect cost funds were “also contributing to the massive growth in DEI staff.”

Professor Baker, when speaking with The Fix, suggested Cornell’s engineering department’s Office of Inclusive Excellence, formerly known as “Cornell Engineering’s Office of Diversity Programs in Engineering,” might be an example of this.

Additionally, he said that in all his years working in academia, he had never seen a detailed accounting to justify a particular overhead rate for a university.

“It would not surprise me at all to discover that there’s no transparency in exactly how overhead money gets spent,” he said. “I’m going to guess that at most universities it goes into the overall university budget as income.”

“I think those of us on the physical sciences side, because we get a lot more research money than those on the social science side … just accept the fact that we generate income that’s then used across the university,” Baker said.

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Stuart Buck, executive director of the Good Science Project, told The Fix in a telephone interview he agreed university accounting when it comes to indirect costs can be “a little bit tricky.”

“In theory,” said Buck, “the law says the indirect cost reimbursement is only supposed to be based on the cost of the research facility, the buildings, etc., that are actually used by [a] federally funded researcher.”

However, he noted, “no university that I’m aware of has all of their accounting and spending openly and publicly available so that anyone could just go in and audit [it].”

Moreover, Buck said, as he detailed in a recent Substack post, one of the big problems with indirect costs is that they are driven up by excessive government regulation on scientific research.

“There’s been an explosion of government regulation and bureaucracy over the past 20-30 years and that is like a real driver of the indirect costs,” he said.

These include regulations for things ranging from conducting human and animal research to disposing of toxic materials to collaborating with colleagues in foreign countries, he said.

“There are some regulations that one might think are essential and probably other regulations that are more dispensable,” Buck said.

When asked about his thoughts on the impact of government regulations on the cost of research, Baker said that “of course there are safety regulations which you can decide…when those go overboard and when they don’t.”

But, he added, in the past he has had to also deal with some rather absurd regulations governing whether he could use computers paid for with one grant to write reports and do analyses for projects funded by other grants.

It would be really tedious, Buck said, but the real solution should be a thorough review of which regulations should stay or go. Buck added he felt this would be a more thoughtful and ultimately constructive approach than just capping indirect costs at 15 percent across the board and out of the blue.

The Trump administration’s 15 percent cap, Buck said, is “not based on any actual estimate of the cost of running a university or the cost of research. That’s just a number somebody picked out of a hat.”

As for the future of the Trump administration’s battle over indirect costs, Buck said he did not think it would go very far, noting the Trump administration tried something similar in 2017 and it clearly failed.

But Kissel said he believed the cap on indirect costs has a chance of holding, one way or another.

“I’m persuaded that in the various appropriations bills over the last several years Congress made it clear that the NIH could not spend its own dollars to create a new policy changing overhead rates in a general way,” he said.

However, Kissel noted, Congress did not limit the president’s ability to cap indirect costs through an executive order, nor did Congress limit the Office of Management and Budget from doing so through its authority to regulate grants.

Hence, added Kissel, “A court may tell NIH that this method was unlawful. That will provide clarity to NIH to what it can or can’t do for a second bite of the apple.”

“So,” he said, “it may turn out that the second bite can only be taken by OMB or the president – but let’s see what the court says.”

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IMAGE: NIH / Grok

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