Implementation of a 15% Indirect Cost Cap on Assistance Awards to Institutions of Higher Education

Not in effect.  AAU v. DOD:  The District Court held that it had subject matter jurisdiction over the case and granted summary judgement in favor of the plaintiffs.  The District Court declared that the DOD’s Rate Cap Policy was invalid, contrary to law, and arbitrary and capricious.  The memorandum from the Secretary of Defense announces the immediate implementation of a 15% cap on indirect cost rates for all new Department of Defense (DoD) financial assistance awards to institutions of higher education. This policy, grounded in existing federal regulations, is intended to enhance fiscal discipline, accountability, and efficiency within the DoD’s budgetary practices. The anticipated outcome is an annual savings of up to $900 million, with the explicit goal of reallocating these funds toward core defense priorities, such as innovation, operational capability, and strategic deterrence. To enforce this measure, the Under Secretary of Defense for Research and Engineering is directed to notify relevant federal offices, develop comprehensive policy guidance, and ensure the integration of the cap into all forthcoming grant processes within 21 days. Additionally, the memorandum instructs a vigorous effort to renegotiate the indirect cost rates on current awards, with a view to achieving further savings, either through bilateral agreement or, if necessary, by terminating and reissuing awards under the new terms, all within a 180-day timeframe. The directive underscores the commitment to maximizing the value of defense funds by minimizing administrative overhead, thereby strengthening the military’s operational effectiveness and fulfilling the Department’s stewardship responsibilities.