The document, authored by David Kennedy for the Council on Governmental Relations (COGR), critically examines the process by which Facilities & Administrative (F&A) rates—also known as indirect cost rates—are established between U.S. research universities and the federal government. Representing over 180 leading research institutions, COGR underscores inconsistencies and perceived inequities within the current rate-setting procedures dictated by two main federal agencies: the Department of Health and Human Services (HHS) and the Department of Defense (DOD). Drawing on findings from a Government Accountability Office (GAO) report, the discussion highlights how differences in agency approaches contribute to variable rate outcomes, with particular concern for inconsistent application, opacity, and arbitrary limitations during negotiations—issues that often lead to significant under-recovery of costs for universities.
The paper recommends a series of reforms to improve transparency, predictability, and fairness in F&A rate negotiations. Key suggestions include promoting regular policy consultations among federal agencies and research institutions, establishing clear and standardized documentation for proposed rates and adjustments, eliminating artificial caps on rate increases, ensuring objective methodologies in rate calculations, and enhancing central leadership’s role in resolving disputes. Additionally, the paper advocates for extending a 1.3% Utility Cost Adjustment to all eligible institutions to address existing inequities. Implementing these recommendations, the document argues, would strengthen the federal-university partnership, foster equitable reimbursement of research infrastructure costs, and align the F&A rate-setting process more closely with principles of fairness and accountability.
to view the Policy Paper.
