Thank you very much for the update. I'm encouraged to hear that universities are developing some kind of coordinated response to the T administration's attack on science. We can't allow the magnificent edifice of American science to be destroyed!
The reporting on "NSF cuts overhead..." is plainly wrong... and the nonsense is coming from both sides. When you negotiate a contract with the USG, there are "direct" costs and "indirect" costs. The main "direct" cost is labor dedicated to performing the contract. Travel related to the contract is another "direct" cost. Examples of "indirect" costs are things like information technology resources, office space, utilities, etc. where the work is done. Where an organization has multiple contracts, these resources are used across the contracts. Negotiating any one of the contracts includes identifying allowed indirect costs and the percentage of these costs which can be allocated to the contract.
As an example, if my company has a subscription to Microsoft Office 365, those resources might be used across multiple contracts. Let's say I have 10 contracts. Ideally, the subscription will be included as a reimbursable indirect cost across all 10 contracts and the rate will wash out to 10% on each contract.
Understanding this, it should be apparent that it is possible for an indirect cost to be over-reimbursed across multiple contracts if attention is not paid to the specific item being reimbursed and the rates allowed on other contracts for that item.
What has happened here is where indirect costs are identified as reimbursable on a contract, they can only be reimbursable up to 15%. For a larger organization with numerous contracts, that is a very generous indirect reimbursement rate. When an indirect cost can be allocated at a rate like 15% or higher it becomes far more likely the line item will be reimbursed in excess of 100% across all contracts allowing that item to be charged to it.
When reading reports on this, also note that some outlets are reporting on invoices where 50% of the invoice is for indirect reimbursement. That does not mean the indirect rate is 50%. In fact, it is entirely possible that costs incurred on an annual basis which are reimbursable on multiple contracts as an indirect may be invoiced all at once on a single invoice. You might have an invoice for items on 10 contracts, each of which allows only 10% of indirect costs, but where the invoice itself is only for those aggregated indirects. For that invoice, 100% of the invoiced amount is for indirects. That does not change the fact that the indirect rate for each contract is still 10%.
But again, bottom line: An indirect rate of 15%, in most cases, is a very generous rate for a larger entity with numerous contracts.
Thank you very much for the update. I'm encouraged to hear that universities are developing some kind of coordinated response to the T administration's attack on science. We can't allow the magnificent edifice of American science to be destroyed!
Wonderful, needed assessment and call for courage among institutional leaders and all of us. Thank you, Holden!
Congratulations Holden on the award. And thank you for your voice on these matters.
Your perspective is valuable to all of us who deeply value higher education and care that science AND the humanities may flourish. Thank you
The reporting on "NSF cuts overhead..." is plainly wrong... and the nonsense is coming from both sides. When you negotiate a contract with the USG, there are "direct" costs and "indirect" costs. The main "direct" cost is labor dedicated to performing the contract. Travel related to the contract is another "direct" cost. Examples of "indirect" costs are things like information technology resources, office space, utilities, etc. where the work is done. Where an organization has multiple contracts, these resources are used across the contracts. Negotiating any one of the contracts includes identifying allowed indirect costs and the percentage of these costs which can be allocated to the contract.
As an example, if my company has a subscription to Microsoft Office 365, those resources might be used across multiple contracts. Let's say I have 10 contracts. Ideally, the subscription will be included as a reimbursable indirect cost across all 10 contracts and the rate will wash out to 10% on each contract.
Understanding this, it should be apparent that it is possible for an indirect cost to be over-reimbursed across multiple contracts if attention is not paid to the specific item being reimbursed and the rates allowed on other contracts for that item.
What has happened here is where indirect costs are identified as reimbursable on a contract, they can only be reimbursable up to 15%. For a larger organization with numerous contracts, that is a very generous indirect reimbursement rate. When an indirect cost can be allocated at a rate like 15% or higher it becomes far more likely the line item will be reimbursed in excess of 100% across all contracts allowing that item to be charged to it.
When reading reports on this, also note that some outlets are reporting on invoices where 50% of the invoice is for indirect reimbursement. That does not mean the indirect rate is 50%. In fact, it is entirely possible that costs incurred on an annual basis which are reimbursable on multiple contracts as an indirect may be invoiced all at once on a single invoice. You might have an invoice for items on 10 contracts, each of which allows only 10% of indirect costs, but where the invoice itself is only for those aggregated indirects. For that invoice, 100% of the invoiced amount is for indirects. That does not change the fact that the indirect rate for each contract is still 10%.
But again, bottom line: An indirect rate of 15%, in most cases, is a very generous rate for a larger entity with numerous contracts.