Indirect costs are research costs

I am disappointed to read comments from people who have been PIs on NIH and NSF grants for years, sometimes decades, and they don’t understand what indirect costs pay for. They’re not necessarily endorsing the cuts recently announced, they just don’t seem to have an idea of what indirect costs are for.

It’s not a difficult concept. You need a lab to do your research: that takes a building, maintenance to keep it running, power, water, janitors, IT, etc. None of that is free, none of that can be paid for by direct costs. You also need to keep in compliance with federal requirements for safety, lab animals, accounting, reporting, and human resources. All of that is also not free, it takes a ton of people, and their salaries are not allowable on direct costs.

People sometimes wring their hands that they can’t get a list of charges to indirect costs like they can for direct costs for a project. That is exactly their nature, and it’s right there in the name “indirect costs”. The power goes to the whole building. Calculating exactly how much power went to one lab, and even one project in one lab, is a waste of time. So we don’t bother itemizing like that because we are smart people who are trying to be frugal with the money.

It is critical for people to understand that:

(1) The indirect portion of the grant does not cover all of the indirect costs. Institutions have to make up the difference– it’s about a 50/50 split. When Vannevar Bush set up the plans for the National Science Foundation, he picked an indirect cost rate that was about half of what industry charged at the time. That’s about right where it remains today. No one gets rich doing research for the NIH. Quite the opposite, in fact. Institutions lose money, and make up the difference with income from medical centers, donations, or other sources. When other charities pay less than the federal indirect cost rate, then the institutions lose even more money. So that money has to come from somewhere to make up the difference. Even at MIT, scientists have to get special permission to even apply for grants that pay less than the federal indirect rate. They have to figure out where the other money will come from.

(2) All of this information is available and constantly audited. There is nothing secret about it. Much of it is already publicly available and anything that isn’t already public is subject to FOIA requests, which are very often done by private citizens and businesses. To set the indirect rate for an institution, the government comes in and looks at their books, in a ton of detail, to come to a “fair” indirect rate. Which, again, does not pay for all of it (see point 1 above). And how the institution actually spends the money is subject to scrutiny as well. There is no profit allowed (unlike with private companies who take federal grants).

This is why it doesn’t make sense to argue that shifting money from indirects to directs will increase money available to researchers. Someone has to pay for the infrastructure.

Federally funded research has enjoyed broad bipartisan support for decades because the money spent generates massive economic returns – about triple what is spent on it. It also gives the US a highly trained technical workforce. The research the NIH and NSF funds enables the US to be a leader in science, technology, engineering, and medicine.

I support investigating ways to support research more efficiently, and that takes rigorous, thoughtful work by informed and professional people. And guess what, exactly that is done regularly by exactly those kinds of excellent people. Here’s an example from the Government Accountability Office.