Research Reporter: November 2007
Research Information from the University of Michigan

Washington Update

Congress caps indirect cost rates for Dept. of Defense basic research

By Sarah Walkling
Director of Federal Relations for Research & Assistant Director of the UM Washington, D.C. office

The FY08 Defense Appropriations bill will include a one-year cap on indirect costs of Department of Defense (DOD) sponsored basic research.

Powerful House Appropriations Subcommittee Chairman John Murtha (D-PA) added the provision in response to concerns expressed by one of his constituents about the indirect costs related to funds the constituent received from DOD

Originally, Rep. Murtha called for a 20 percent cap on the negotiated indirect cost rate. Universities throughout the country and DOD officials led a vigorous campaign against this cap. U-M President Coleman, Vice President for Research Stephen Forrest, Vice President for Government Relations CynthiaWilbanks and several other members of the U-M community were actively engaged in this effort.

Over the course of several weeks of negotiations, they briefed Senator Carl Levin and Rep. John Dingell, and other members and staff of the Michigan Congressional delegation and advised them as they reached out to Rep. Murtha about the serious consequences of this arbitrary cap.

This DOD/higher education community-led campaign resulted in a change to the proposed cap. The final language calls for a 35 percent cap on the total research award. The cap is on total costs, including both direct and indirect costs.

An example of how this cap is likely to be applied is as follows. Using a $100,000 award as an example, an exact conversion of the DOD cap, assuming all direct costs would be eligible to have facilities and administrative (F&A) costs applied to them, is: $35,000 allowable as indirect / $65,000 charged as direct = 53.8462 percent. Therefore, a university that has a negotiated F&A rate of 53.8 percent, or less, is likely to be unaffected by this new cap. U-M's most recently negotiated indirect cost rate is 52 percent.

The University of Michigan remains deeply concerned about the impact of Congressman Murtha's actions on university-based research. The final cap is less restrictive than the originally proposed cap on the negotiated rate, yet it is still arbitrary and sets a dangerous precedent.

In the coming months, the short-term effect of this cap depends largely on how the Pentagon implements it.

In the long-term, however, this cap is likely to be the first step in many that Rep. Murtha plans to take to address what he perceives as unfair research funding practices by universities.

Despite a tough battle fought within the conference, Rep. Murtha remains adamant in his belief that the indirect costs paid by the federal government to universities for research purposes were too high.

In 2008, he reportedly is planning to hold Congressional hearings on the topic of indirect costs. U-M federal relations officers have already started working with Congressional staff to address this in the next year.

Sarah Walkling can be reached in Washington at (202) 554-0578. Her e-mail address is: skwa@umich.edu

November 2007

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