Research Insights
Indirect costs – the often overlooked costs of research
The cost of conducting research at a university is significant. Total costs of a sponsored project comprise indirect and direct costs. Sponsored projects are externally funded, scholarly activities whose purpose is to provide benefit to the sponsor or to the public. Many sponsored projects, particularly in STEM fields, require specialized equipment that can run into the millions of dollars, not to mention the salaries of the investigators and research staff involved, student support, technical supplies, travel to and from research sites, and other expenses directly related to the specific project.
The cost of conducting research at a university is significant. Total costs of a sponsored project comprise indirect and direct costs. Sponsored projects are externally funded, scholarly activities whose purpose is to provide benefit to the sponsor or to the public. Many sponsored projects, particularly in STEM fields, require specialized equipment that can run into the millions of dollars, not to mention the salaries of the investigators and research staff involved, student support, technical supplies, travel to and from research sites, and other expenses directly related to the specific project.
These are all direct costs, i.e. costs that are directly tied to the work of a particular project; however, importantly, there are also indirect costs, also known as IDCs or facilities & administrative (F&A) costs. IDCs are those costs necessary to conduct the general operations and business of research but are not readily identified with a specific grant, contract, or activity. That is, IDCs are shared across a large number of projects and other university functions. The costs include infrastructure and operational expenses—the cost of keeping the lights on, so to speak. Examples include personnel who support accounting or purchasing for sponsored project activities, utilities, laboratory maintenance, computing, email, etc.
As many of you know, IDCs are built into the sponsored project awards/contracts we receive from a range of different external sponsors. Indirect cost rates vary among universities and are established by the federal government for each institution on a case by case basis through a rigorous assessment of fixed costs and with the mandate that the rates will be consistently applied to all sponsored programs, whether federal, industrial, or other.
IDC rates comprise two main components: facilities and administrative costs. The rates are specific to activity type, i.e. research, instruction, or other sponsored activities, e.g. public service, and are further specified as to on-campus or off-campus. There is no cap on facilities, but in 1991, the administrative component was capped by the federal government at 26%. Since that time, over the past 31 years, the number of regulations governing federally sponsored projects has grown steadily in everything from human and animal subjects research, to export control, conflict of interest, and other areas.
Universities, including UGA, incur significant costs to meet these federal regulations – we have several units with many personnel who ensure compliance with these important regulations, for example: Office of Animal Care and Use; University Research Animal Resources; Office of Biosafety; Conflicts of Interest; Human Subjects Office; Research Integrity and Safety Support Services; Responsible Conduct of Research; Office of Research Safety; and Office of Research Security and Export Control (new website coming soon). Note that there has been no change to the administrative cap to cover the tremendous additional burden these regulations impose.
Why does this matter to you? As you build your proposal budget, you see that the project has both direct and indirect costs. Anything less than full allowable IDC recovery translates to a subsidy from the university, which represents additional UGA cost and therefore a loss in our ability to support research. With the limitation on administrative cost recovery, research is already heavily subsidized by universities.
I explained in a previous Research Insights note why we cannot afford voluntary cost-share on sponsored projects. This practice is critical to ensuring UGA recovers the cost of doing business in support of our land and sea grant research missions. We recognize we cannot recover all indirect costs because of the administrative component cap, but we must collect the fully allowable IDC rate on all our sponsored projects, both for the financial health of our research endeavors and in the interest of fairness to all investigators and funding partners.
In collaboration with our Sponsored Projects Administration executive director, Jill Tincher, I’ll be talking much more about this topic in 2022-23. In the meantime, if you have questions about IDC rates in the proposals you’re writing, please reach out to Jill and her team.
Enjoy the rest of your summer—it’s going by quickly!
Karen J. L. Burg
Vice President for Research
Harbor Lights Chair in Biomedical Research