Daniels: Proposed cap on indirect costs could have devastating effect on university research

Johns Hopkins University president says provision buried in proposed FY18 federal budget would deal 'staggering blow to the nation's vital interest'

A proposed cap on indirect costs associated with federally funded research projects would threaten a longstanding partnership between research universities and the federal government and force universities across the country to dramatically reduce their research activities, Johns Hopkins University President Ronald J. Daniels writes in the forthcoming Winter 2018 edition of Issues in Science and Technology.

President Donald Trump's proposed fiscal year 2018 budget includes a provision capping the National Institutes of Health allowance for indirect costs at 10% of total research costs, well below current levels. Congress has repeatedly blocked that cap—while also rejecting cuts to NIH funding in general—but the potential remains for it to be revived in the future, Daniels says.

That limit would imperil "an essential component of the biomedical research partnership between the federal government and universities," Daniels writes, reducing by nearly two-thirds the amount of funding universities receive to offset indirect costs on federal research grants.

A recent review found that if Johns Hopkins, for example, were subject to the proposed cap on the reimbursement of indirect costs, the result would be a nearly 75% reduction in the university's federally funded research portfolio, Daniels notes.

Direct costs are those incurred by a principal investigator for the research proposed in a grant application—salaries and stipends for scientists, the costs of lab supplies and equipment, and travel for conducting research and sharing results.

Indirect costs—also known as facilities and administrative, or F&A, costs—are those incurred by the university across multiple projects, including for:

  • The construction and maintenance of labs
  • Secure data storage and high-speed data processing
  • Utilities such as ventilation, heat, and lighting
  • Libraries and other research facilities
  • Radiation and chemical safety and hazardous waste disposal
  • Administrative staff to support research and ensure compliance with safety and other rules
  • Advanced technology and lab equipment that can be optimized for repeated use across many grants

In 2015, Daniels says, universities contributed $4.9 billion of their own funds to support the indirect costs of federally funded research.

Those who argue in support of further limiting indirect cost reimbursement say the current arrangement creates an incentive to overbuild new research facilities and/or to hire unneeded administrators. Daniels counters that criticism by noting that there are formal checks in place that serve as a disincentive to abuse.

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In all, the proposed cap would result in a staggering blow to the nation's vital interest. Universities would be forced to retrench by downscaling a research enterprise that has been a vital force in advancing discovery and human health. The impact might fall most heavily on early career investigators, who find themselves on fewer and smaller grants and are among the most vulnerable to funding contractions.

The economic consequences of these cuts would also reverberate across the United States, confined not only to the biomedical and pharmaceutical sectors, but affecting the many upstream and downstream industries that are connected to them, and the jobs and communities they support. Simply, the proposal would amount to a deep and inextricable cut to the private-public partnership and the foundation of the nation's biomedical research enterprise.