The National Institutes of Health (NIH) has revealed plans to reduce billions in overhead costs associated with federally funded research grants as part of a broader effort by the Trump administration to curb wasteful spending. In a recent announcement, the agency disclosed that in fiscal year 2023, approximately $35 billion was allocated across 50,000 grants to research institutions like universities and hospitals. Of this amount, $9 billion was designated for 'indirect costs,' covering expenses such as building depreciation, equipment, capital improvements, debt interest, and operational maintenance.
Traditionally, a percentage above the research funding is allocated to the facility hosting the work to cover these indirect costs. The historical percentage has been around 27 to 28% per grant, but a new directive has set a 15% threshold unless otherwise negotiated.
The NIH highlighted that many private foundations funding research offer significantly lower indirect cost rates compared to the federal government. For instance, the Bill and Melinda Gates Foundation has a maximum indirect cost rate of 15%, with some institutions of higher education receiving only 10% for indirect costs.
Some universities have expressed concerns over the new indirect cost cap. The University of Wisconsin-Madison stated that it could disrupt vital research activities and impact student research opportunities. Meanwhile, the University of Michigan, with a current negotiated indirect cost rate of 56%, emphasized uncertainty regarding the policy's implementation and its potential effects on existing grants.
Dr. Francis P. Wilson, an associate professor at Yale, criticized the move, describing it as part of an indiscriminate cost-cutting approach by the current administration. The Department of Government Efficiency, led by Elon Musk, praised the NIH's initiative, citing annual savings of over $4 billion in grant administrative costs.
