Understanding the F&A Costs of Federally Sponsored University Research

June 19, 2017

(Excerpted from a presentation prepared by Duke University School of Medicine Dean Nancy Andrews)

Facilities and administrative (F&A) costs – also referred to as “indirect costs” – are essential costs of conducting research. The federal government’s longstanding recognition and payment of these costs have helped U.S colleges and universities build and support the required research infrastructure that has made the American research enterprise the best in the world.

The total cost of federally sponsored research is a combination of both direct and F&A costs.  Both types of expenditures are critical to an institution’s ability to conduct innovative research. F&A consists of the construction and maintenance costs of laboratories and high-tech facilities, energy and utility expenses, and safety, security, and other government-mandated expenses.  These costs are real and research cannot be conducted without them.

The partnership between the National Institutes of Health (NIH) and universities has been enormously successful, with the U.S. leading the world in biomedical research. The NIH dollars help universities support critical infrastructure to protect U.S. citizens against threats from health issues and bioterrorism, and to build capacity, supporting nearly 380,000 high-quality jobs directly, and 7 million additional biotech, pharma, and other jobs building on NIH work.

However, there is a very real possibility that there will be a cap on F&A reimbursement related to NIH grants before the end of the calendar year. This cap is being proposed due largely to misconceptions about F&A. These misconceptions are understandable – F&A is an arcane topic that only administrators have had to understand before.   Many are calling this an existential crisis for research universities, and particularly for medical schools.  

What is the concern?

  • The proposed 10% flat rate cap would push much more cost to universities, leading to downsizing of academic research in just a few years
  • Contrary to increasing opportunities for early career researchers, a 10% cap on F&A would likely result in hiring freezes and layoffs
  • The School of Medicine would not be able to accept all the grants that NIH would be willing to fund – there would have to be a prioritization
  • Knowledgeable stakeholders have used words like “catastrophe” and “disaster” to describe the situation

Facts about F&A

  • Federal F&A reimbursement address a real part of research cost but, combined with direct cost, is insufficient to cover the full cost
    • Institutions must cover costs that are not allowed as either direct or F&A; this results in 30-40¢ additional university subsidy per $1 of federal direct cost
    • Research universities carry enormous fixed costs: buildings, specialized equipment, information technology, animal facilities, tenure obligations, etc.
  • F&A is reimbursement for previously incurred costs
    • The methodology is prescribed by the government – there are no kickbacks
  • Research costs are inextricably intermingled
    • This is both what makes the partnership work and what makes it confusing.


With the proposed cap, Duke would need to find a way to fund the following:

Quality and compliance

  •   sponsored research oversight
  •   human subjects protection
  •   animal welfare
  •   conflict of interest management
  •   biosecurity and safety
  •   research compliance training

Faculty support*

  • recruitment/start-up costs 
  •   salary above NIH cap
  •   bridge funding for gaps in grant funding
  •   retention costs

* Generally, the faculty support part is most expensive.


  •   computer and IT infrastructure 
  •   support of core facilities/services 
  •   data management
  •   cost of buildings, renovations (all the rest)

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