Dr. Kelvin K. Droegemeier's testimony provides a thorough historical and analytical overview of facilities and administrative (F&A) costs—also known as indirect costs or overhead—in the context of NIH-funded research at U.S. academic institutions. He explains that both direct and F&A costs are essential and real costs associated with university-based research. The F&A framework, which evolved over eighty years, reflects logical variations between institutions due to factors such as infrastructure, maintenance, research type, and geographic location, and is governed by rigorous cost accounting and federal negotiations. Despite the perception that overhead costs might divert funds from research, Droegemeier underscores that these costs are fundamental to sustaining research infrastructure, compliance with regulations, and administrative support. Notably, he highlights that universities often under-recover F&A costs relative to their federally-negotiated rates, increasingly subsidizing research with their own funds, and bearing a growing administrative burden unaccounted for due to capped rates.
Droegemeier situates the contemporary debate within its historical roots, especially the post-WWII academic-government partnership which emphasized mutual benefits and the shared financial responsibility of conducting research for the public good. He details how past and present caps on F&A rates, mandates for cost sharing, and policy shifts have shaped the current environment, with universities now investing substantial institutional resources due to unreimbursed costs and compliance mandates. He argues that there is no substantive evidence justifying dramatic changes to the existing balance between direct and F&A costs, noting that ratios have held steady over two decades even as research costs and regulatory requirements have increased. Proposals to cap F&A rates further—such as the suggested 10% for all NIH grants—would, he warns, threaten the viability of many institutions to participate in federally-funded research, undermine the diversity and capacity of the national research enterprise, and particularly harm states and regions less able to absorb such financial shifts. In conclusion, Droegemeier emphasizes the importance of carefully weighing any reform to F&A cost structures, as abrupt changes would risk critical aspects of U.S. research competitiveness and the longstanding public-private partnership at the heart of American scientific advancement.
