Indirect rates and biomedical research

You probably already know that many grants have, in addition to the direct component that goes to the lab, an indirect component that goes to the institution.

US institutions negotiate with the NIH to set a percentage for all awards. For example, here are Harvard’s (relatively high) indirect rates. These indirect funds are used by departments and institutions to keep the lights on, pay admin staff, cover startups, and other important things.

A recent Nature article by Paula Stephan offers this insight into one aspect of how indirect rates are set:
“A US government accounting rule called A21 means that the more debt universities have from construction, the more they can add to grants for overhead costs. If a university borrows $100 million to build a new facility and pays 4% interest, it can increase its indirect rate by including the $4-million interest payment in the calculation. ”

The article concludes with, “Perhaps it is time for deans in the biomedical sciences to rent some of that excess space to their colleagues in chemistry and physics.”

Has biomedical research grown too big? Does it need to contract? Or is it only PhD programs that need to contract? On that topic, the article also suggests making graduate students more expensive to academic labs, and staffing labs with more professional scientists.