Judge overturns NSF’s 15% cap on indirect costs of research

A federal judge in Boston has rescinded the National Science Foundation’s new 15% cap on reimbursement of facility and administrative costs (F&A)—called indirect expenses—related to research grants.

Most universities that receive federal grants have negotiated rates significantly higher than 15% to cover indirect costs.

Judge Indira Talwani of the US District Court for the District of Massachusetts determined that the NSF failed to explain why a 15% cap would meet the goals the agency laid out for the new policy. This failure violates the federal law governing how the government regulates, the Administrative Procedure Act, Talwani wrote in a 52-page order issued June 20.

For instance, the NSF said the 15% cap allowed the agency and its grant awardees “to focus more on scientific progress and less on administrative overhead.”

Talwani further wrote that “NSF has not explained how it will achieve efficiency in the grant awards process. NSF is not the agency that negotiates indirect cost rates with [institutions of higher education (IHEs)]. The 15% Indirect Cost Rate does nothing to eliminate any burden on other agencies that do negotiate indirect cost rates, or on universities that must still negotiate rates with other agencies. And NSF still must negotiate indirect cost rates for organizations that are not IHEs.”

Talwani’s ruling follows moves by other federal judges to suspend efforts by the administration of President Donald J. Trump to cut indirect cost rates connected to grants from the National Institutes of Health (NIH), the Department of Energy, and the Department of Defense.

Another federal court on June 23 favored universities in their fight against grant terminations by the Trump administration. A federal judge in San Francisco issued a temporary injunction against the termination of NSF, Environmental Protection Agency, and National Endowment for the Humanities grants in the wake of Trump’s executive order to eliminate diversity, equity, and inclusion initiatives in the US government.

“The First Amendment bars the government from using federal funding to penalize private speech that promotes prohibited viewpoints,” Judge Rita F. Lin of the US District Court for the Northern District of California found.

Bringing the suit against the NSF’s cap on indirect costs were three organizations representing universities and colleges: the Association of American Universities (AAU), the Association of Public and Land-grant Universities, and the American Council on Education. Other plaintiffs are the University of California system and 12 individual universities: Arizona State University, Brown University, the California Institute of Technology, Carnegie Mellon University, the University of Chicago, Cornell University, the University of Illinois, the Massachusetts Institute of Technology, the University of Michigan, the University of Minnesota, the University of Pennsylvania, and Princeton University.

When the suit was filed, the three university organizations that led the suit issued a statement that said, “NSF has, for decades, been one of the world’s most successful research engines—and a cut to F&A is a cut to the research that helps fuel American security, global competitiveness, and prosperity.”