On April 11, the U.S. Department of Energy (DOE) announced a 15% cap on overhead recovery for its research contracts. DOE will start to terminate all existing grants to institutions of higher education that recover more than the new 15% benchmark. This policy does not apply to DOE research grants to labs unaffiliated with universities.
DOE explains that its grant program “provides over $2.5 billion annually to more than 300 colleges and universities to support Department-sanctioned research. A portion of the funding goes to ‘indirect costs’, which include both facilities and administration costs.” Typically a university will negotiate an overhead recovery rate with either the National Institute of Health (NIH) or the Department of Defense’s Office of Naval Research. DOE and other federal grant makers have honored the overhead recovery rates negotiated by NIH or Naval Research. Cornell’s overhead rate is 64%, which covers electricity, janitors, animal care workers, and lab building costs. So, the DOE’s cut would reduce Cornell’s overhead recovery to about 1/4th of its current level.
Of the $636.5 million in federal research funding that Cornell received in 2022, 4% or $24.8 million was DOE grants. This includes grants to research ground source heating for the Cornell campus. The amount at issue on $24.8 million in grants would be $12.15 million per year.
In February, when the NIH adopted a similar overhead cap, Cornell joined 11 other research universities to sue to block the cap. A federal district court granted a preliminary injunction against the NIH rate cap on March 5.
On April 14, a group of universities including Cornell, Brown, California Institute of Technology, University of Illinois, MIT, University of Michigan, Michigan State, Princeton, University of Rochester, the Association of American Universities, the American Council on Education and the Association of Public and Land-Grant Universities filed a lawsuit challenging the DOE overhead cap. The legal complaint estimated Cornell’s projected loss on 2025 DOE overhead recovery at approximately $8 million.
In addition, last week, a coalition of ten academic and research organizations, including the Council on Governmental Relations, the Association of American Universities and the Association of American Medical Colleges, announced a plan “to spur the development of a more efficient and transparent model for funding indirect costs on federal research grants,” according to a joint statement.
“Despite the historical success of the current F&A cost reimbursement model, it is not without limitations that unnecessarily complicate the indirect costs structure, lead to confusion and misunderstanding, and increase administrative burdens,” the statement said. Though the details of the effort launched last week aren’t yet clear, the coalition “seeks to identify and reduce or eliminate regulatory barriers, produce a simple and easily explained model, and increase transparency, all in service of a singular goal: to ensure that taxpayer dollars continue to be used effectively to advance research that benefits all Americans.”
