Introduction

Indirect costs are a surcharge on research grants (direct costs) for the administrative costs of housing a research program. Federal agencies pay indirect costs on federal research grants at rates that are 4-5 times higher (50% to 90% of direct costs) than those paid by peer countries’ national research programs. These charges, which also place upward pressure on the indirect costs that universities charge to state and private foundation grants, far exceed legitimate reimbursements for administrative overhead. They divert money intended for scientific research to university administration and deform scientific research by subordinating free inquiry to the search for funding for academic administrators’ salaries.

Our model bill caps indirect costs charges at a maximum of 10% of the direct costs of the program. It further stipulates that if a research institution charges any grantor an indirect cost rate less than 10% of the direct costs of the program, the federal agency may only fund a grant if that research institution charges the federal agency an indirect cost rate equal to the lowest indirect cost rate it charges any grantor.

Our model bill refers to the {National Science Foundation}. The bill should be adjusted by policymakers to refer to some or all individual federal agencies funding science grants. Similar references to the {Director of the National Science Foundation}, the {Executive Branch Office}, the {Senate Committee}, and the {House Committee} also should be adjusted appropriately by policymakers.

Model Legislative Text

1. Indirect Costs. The {National Science Foundation} may only fund grants, including categorical grants, discretionary grants, formula grants, and research grants, in which a maximum of 10% of the direct costs of the program, at each research institution, is allowed for indirect costs.
2. Lowest Costs. The {National Science Foundation} may only fund institutions which declare the indirect cost rate they charge to all grantors.
   1. If a research institution charges any grantor an indirect cost rate less than 10% of the direct costs of the program, the {National Science Foundation} may only fund a grant if that research institution charges the {National Science Foundation} an indirect cost rate equal to the lowest indirect cost rate it charges any grantor.
3. The {Director of the National Science Foundation} will establish procedures to audit grantee research institutions.
4. Waivers. The {Director of the National Science Foundation} may provide an individual waiver for subsections (1) and (2) if:
   1. on an annual basis, starting no later than {Month Day, Year}, he submits to the {Executive Branch Office}, the {Senate Committee}, and the {House Committee} a report cataloguing, describing, and explaining each waiver granted under his authority in subsection (4); and
   2. he creates within one year of {Month Day, Year} a set and detailed procedure to allow private individuals and organizations to challenge each waiver granted under his authority in subsections (1) and (2).
5. Severability. If any provision of this chapter, or the application of any provision to any person or circumstance, is held to be invalid, the remainder of this chapter and the application of its provisions to any other person or circumstance shall not be affected thereby.