Since overhead rates are negotiated with a separate federal entity, federal law requires NIH to follow negotiated rates. If they don’t want to, they have to justify their reasoning[1]. It’s remarkable that the reasoning they give in this notice cites rates paid to large foundations. The foundations have demanded low overhead bc the federal government has backstopped keeping the lights on. Without that backstop, the model will necessarily transition to researchers having to pay rent for lab space, electricity, supplies like compressed air, salaries for administrative assistants and the like. It’s unclear whether these things can be budgeted on a grant due to other rules. Remarkable that the administration in one go is trying to gut NIH. I would have thought that there would be more congressional resistance. More broadly, I wonder if we can look forward to more rules being published on Friday afternoons as a strategy…
[1] https://www.ecfr.gov/current/title-2/subtitle-A/chapter-II/p...
https://newscience.org/nih/ suggests that the higher indirect rates at private research institutions may occur because "universities do subsidize research out of their own pockets."
This will have a really big impact on NIH research at academic hospitals and a much greater impact on non-profit biomedical research institutes (e.g., Salk).
The way these grants work varies across Federal granting agencies, but generally each university/hospital/organization negotiates with the federal government to figure out its indirect rate, which can vary widely across these organizations. For example, at some universities the indirect rate is around 40% whereas at other places, e.g., The Salk Institute, it is around 90%. So now, NIH is saying it is capped at 15% for _new_ NIH grants.
Note that NIH handles indirect costs differently than NSF. Each grant usually has a maximum amount one can ask for.
For NSF, that maximum amount _includes_ indirects. So a NSF grant capped at $1M will include direct costs (salary, equipment, stipends, etc.) and indirect costs. So if the indirect rate is lower at an organization, there is more money to spend on research.
In contrast, NIH grants have a maximum on _direct_ costs, so for an organization with an indirect rate of 40% would actually receive $1.4M whereas an organization with an indirect rate of 90% would actually receive $1.9M for the same proposal. For future grants, they would both receive $1.15M.
It has never really made sense to me why indirect rates should be negotiated and vary across organizations. That negotiation actually inhibits the creation of new non-profit research organizations, because it takes about 1 year to get everything set up with the federal government for a non-profit and then another year to do the negotiation stuff, before it can apply for a grant. Only then can the non-profit submit a proposal (with success rates of 10% in many cases). Then, it takes a year for the money to arrive due to the slow review process, if the grant proposal is successful. So if one wants to set up a non-profit research organization, best case scenario would be getting grant dollars about 3 years after founding.