What are indirect costs?
Indirect costs, also known as facilities and administration costs, or overhead, are funds provided to institutions to cover expenses that are not directly tied to specific research projects but are essential for their execution. Unlike direct costs, which cover salaries, supplies, and experiments, indirect costs support the overall research environment, ensuring that scientists have the necessary resources to conduct their work effectively.
Indirect costs include maintaining optimal laboratory spaces, specialized facilities providing services like imaging and gene analysis, high-speed computing, research security, patient and personnel safety, hazardous waste disposal, utilities, equipment maintenance, administrative support, regulatory compliance, information technology services, and maintenance staff to clean and supply labs and facilities.
Academic institutions conduct research on behalf of the federal government.
Research institutions that receive federal grants must comply with the rules and regulations established by the US Office of Management and Budget. These guidelines dictate the indirect cost rates of each institution.
Institutions submit proposals to federal agencies that outline the costs associated with maintaining research infrastructure. The cost allocation division of the Department of Health and Human Services reviews these proposals to ensure compliance with federal policies.
Indirect rates can range from 15 to 70 percent, with the specific level depending on the research and infrastructure needs of an institution.
Typically, institutions undergo an exacting process to renegotiate their indirect rates every four years, factoring in components such as general, departmental, and program administration, building and equipment depreciation, interest, operations and maintenance, and library expenses. Universities need to carefully justify these cost components to ensure the sustainability of research infrastructure and compliance with federal requirements.
Notably, indirect costs from grants do not cover the full cost of carrying out research at universities. In 2023, colleges and universities contributed approximately $27 billion of their own funding, such as money from their endowments, to support research. This included $6.8 billion in indirect costs that the federal government did not reimburse.
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