Jason Owen-Smith, Ford School professor (by courtesy) and director of Institute for Research on Innovation and Science, in a piece for The Chronicle of Higher Education, explained the illogic of cutting indirect-cost (IDC) rates. Owen-Smith wrote, "The crisis is not IDC rates themselves, but the lack of confidence in how the funds they generate are spent."
"On a Friday evening in February, the National Institutes of Health announced it was dropping indirect-cost (IDC) rates on research grants to 15 percent" wrote Owen-Smith. These are also known as Facilities and Administrative (F&A) Costs, and include funding for the "human, physical, and scientific infrastructure grant-funded research requires." He then explained, "The average university rate in 2023, 57 percent of direct costs, would add $57,000 to a $100,000 project budget, bringing the total grant amount to $157,000."
"By most standards," wrote Owen-Smith, "the U.S. biomedical-research system is very successful. NIH-funded university research improves and saves lives while also generating large economic dividends." He explained that the process of NIH funding “is driven by conceptions of the public good and some sense of the direction science could or should be heading. The result is a diverse, decentralized discovery system that often anticipates the needs of the next breakthrough, even when we can’t articulate exactly what that breakthrough might be.”
Yet there are serious questions at the heart of the debate around IDC rates, namely “How much does research really cost? Are the costs universities attribute to IDCs appropriate? Who should pay for them and why?” Arguments for and against lowering the IDC rates he said can be wide ranging and “can touch on academic freedom, deficit spending, theories of innovation, the dangers of central planning, the proper role of expertise in a democracy, and even the maddening lack of pencils in the copy room.”
The solution he wrote is a “hard-nosed look at the “fragile contract” between the state and universities that has governed research since World War II,” not taking funding away from universities without further consideration.
Owen-Smith pointed out, "The policy logic is disconcerting. If the federal government holds an abiding distrust of universities, why would it leave the nation’s research infrastructure even more completely in their hands?" He then concluded that instead, leaders need to "recognize that the strength of our system lies in the joint venture to construct and sustain the kind of research infrastructure the nation needs, then negotiate ways to increase its efficiency and transparency."
