Listen to UR Ventures Tech Hustle and Buzzle Podcast Ep7 featuring Susana Marcos, UR Professor of Ophthalmology, Director of CVS, and a trailblazer in visual optics and ocular imaging. @RochesterOptics @FlaumEye @MarcoslabUr

It seems few people know what an “indirect cost” is or why it has to be 40-60%. The reason the government forced universities to raise their indirect costs up to (typically) 40-60% was to force a huge amount of regulations on the universities while also minimizing the bookkeeping to comply with those regulations. This includes the work by contract managers, compliance lawyers, accountants, safety management, etc., who are required by the government per the terms of the contract. If universities had to allocate all those categories of labor to each contract hour-by-hour it would require too much bookkeeping, which would waste money. (I’m setting aside for now the question of whether or how much the regulations are wasting money and only discussing how you bookkeep the effort to comply with the regulations.) So to save money, while also requiring universities to do these types of work, the government requires universities to roll those categories of labor into “cost pools” that must be allocated as a percent of the technical work in each of the contracts. While the actual “overhead” might be only 15%, these pooled labor charges that are required by the government are typically much more. Second, the government doesn’t allow the universities to figure out their own indirect rates. These rates are determined by the federal government through audits every couple of years. The government then sends a document telling the university what rate to use for its cost pools. For example, the University of Colorado was told by the DHHS to use 54% ( and U. Nebraska was told by DHHS to use 55.5% (. 40-60% is not only reasonable to fulfill the terms of the contract, it is the rate that the government tells the university it can charge for all the work the government requires the university to do. So if the government wants to reduce the indirect rate to 15%, then it needs to do one of these two things: Either (A) eliminate all the federal regulations that force the universities to do those categories of work (compliance, accounting, management, safety management, tracking harmful chemicals, etc.) Or, (B) stop requiring universities to pool those real costs into the “indirect cost” category and allow universities to include them in the “direct costs” of the contract. If the government chooses (A), then the safety rails have been entirely removed. (Even if the government lowers the regulations without entirely eliminating them, the costs they impose will still be real costs that probably come out to more than 15%.) Or, if it chooses (B), then the direct costs will go way up and research will actually be less efficient because all the bookkeeping, not more efficient. But if the government caps the indirect rate at 15% without doing either (A) or (B), then it will be impossible to do research for the federal government without going bankrupt. That’s the worst possible choice. It will kill research in the US. Is that what we want? I can explain it for you but I can’t understand it for you. It’s up to the reader not to be ignorant.

The indiscriminate and ill-conceived slashing of indirects by the @NIH yesterday must be amended if want to restore America’s leadership role biomedical research. 15% simply isn’t enough for institutions to provide the basic infrastructure needed to run a successful lab. I say this as someone who has been and remains deeply critical of the NIH, its funding system and of the ways universities are structured and spend money. We would all benefit from a genuine reexamination of how and to what @NIH funds are allocated, and I remain optimistic that once the dust settles and new NIH leadership is in place that this is what will happen and this hack job by people who don’t understand or care about research will be forgotten. And I’m sorry but I can’t help but laugh at the people who are demanding a full-throated defense of the current indirect levels. Nearly every PI I’ve known for my entire career has complained about excessive indirect rates. This is mostly because, despite their importance, even most PIs haven’t bothered to actually understand them, and because they don’t FEEL that universities are actually spending the money to support their research. Whether they are or not nobody really knows because in the typically Byzantine maze of university budgets it’s often very hard to figure out. There are also lots of actual shenanigans that go on especially at places with the highest indirect rates to use funds to build out the institution and increase its power rather than to directly support funded research projects. And anyone who says administrative bloat at universities isn’t real and partially fueled by indirects is either blind or part of the bloat. So let’s get organized to have an actual constructive response to this firebomb. Scientists need to advocate for what is best for research - and we have to do it ourselves because the institutions that claim to represent us - universities and scientific societies in particular - have their own goals that often do not align with ours. We also have to remember that grants are not an entitlement. We are not owed anything. If we want to continue benefiting from the public support we have always enjoyed, we have to show the public and their representatives - even ones we might not always agree with - that we’re spending their money wisely.