Negotiating the Indirect Cost of Research: A Review of the Process

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negotiation of indirect costs between federal funding agencies & universities

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Notes that a considerable portion of the cost of federally sponsored research is used in the reimbursement of the indirect costs of the research. The percentage of indirect costs has been increasing over the last decade. This increase has led both investigators and federal agencies to seek procedures that would reduce the share of the research budget devoted to indirect costs. Under the assumption that any attempt to achieve this goal will be enhanced by an understanding of the process, the present authors review the procedures used as the indirect costs are negotiated between representatives of the federal government and a university. Attention is drawn to those stages of the process at which investigators can assess their university's indirect cost policy. It is concluded that the evaluation should focus on the total cost bill presented by the university rather than on the so-called indirect cost rate that is used to distribute the indirect cost recovery within the university. Factors that may account for the large variability across universities in the indirect cost rate are reviewed.

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American Psychologist, v. 40, issue 7, p. 836-848