CHEMICAL & ENGINEERING
NEWS VOLUME 40, NUMBER
i9 The Chemical World This Week
MAY 7, 1962
Government Puts Squeeze on Research Costs All federal research grants to colleges and universities may contain 15% limit on indirect costs Colleges and universities face a bleak outlook on research grants from the Federal Government. The schools may have to put up more of their scarce funds to cover indirect costs which the Government refuses to reimburse under research grants. The reason for the grim outlook is that a move is under way in Congress to limit reimbursable overhead charges in research grants to colleges and universities to 15% of the direct costs. Since 1957 the annual appropriations bill for the Department of Health, Education, and Welfare has contained a clause limiting overhead charges to 15% of direct costs in H E W research
grants. This limit has remained in the H E W appropriations bill each year despite annual pleas by the Administration to remove the ceiling. Now, the Department of Defense appropriations bill, as passed by the House, contains the same limit on indirect costs. And the House Appropriations Committee has served notice that it intends to add the 15% limit to every appropriations bill reported by the committee. Appropriations bills still awaiting committee action include those for the National Science Foundation, Atomic Energy Commission, and the National Aeronautics and Space Administration.
But the weighted average indirect costs for research done by small colleges and universities amounts to 32% of direct costs, according to a survey just released by the National Science Foundation. For large schools, the figure is 28%. (The Budget Bureau defines a large school as one with federal research projects the direct costs of which total $250,000 or more.) Grants from H E W and the National Science Foundation make up the bulk of federal research grants to colleges and universities. By law H E W limits indirect costs to 15% of direct costs, and NSF administratively limits overhead to 20%. As a result, the NSF
Indirect Costs for Doing Research at Schools Top 15% by a Wide Margin LARGE COLLEGES AND UNIVERSITIES
SMALL COLLEGES AND UNIVERSITIES
% of Schools
% of Schools
Weighted average of indirect costs=28%
less than 20.0
20.0 to 24.9
25.0 to 29.9
30.0 to 34.9
35.0 to 39.9
Indirect Costs, % of Direct Costs
more than 40.0
Weighted average of indirect costs=32%
less than 20.0
20.0
25.0
30.0
35.0
to
to
to
to
24.9
29.9
34.9
39.9
more than 40.0
Indirect Costs, % of Direct Costs
Source: National Science Foundation MAY
7, 1 9 6 2
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survey says, in fiscal 1962 the schools will have to put up $36 million of their own money for indirect costs not reimbursed under federal research grants. Unfair Limit. During House debate on the Defense Department appropriations bill, the pros and cons of limiting indirect research costs were thoroughly aired. The same debate will undoubtedly take place on all future appropriations bills if the Appropriations Committee makes good its threat to put a loVc limit on indirect research costs in all such measures. Rep. George Meader (R.-Mich.) led the unsuccessful fight to strike the lor/o clause from DOD's appropriations. A flat limit on research costs which does not fully reimburse the institution is unfair, Rep. Meader says. The Government has a right to expect an adequate return on taxpayers' money spent on research at colleges and universities. But the institutions have a right to expect that they will be adequately and equitably reimbursed for undertaking government-sponsored research, even though some extraneous benefits to the schools may result from the research, he adds. What the limit on reimbursable costs does, Rep. Meader says, is to take away from the universities funds which they must get from state appropriations, tuition fees, charitable donations, or other sources for their educational programs. In effect, this subsidizes the Federal Government for the conduct of defense research. Another effect of the ceiling on costs would be to regiment accounting procedures at colleges and universities, Rep. Meader says, because a percentage ceiling is meaningful only if a universal system of accounting is established for all schools. The present lack of uniformity may stem from factors beyond the control of the management of institutions of higher learning. For example, he says, certain forms may be prescribed by the budget requirements of state legislatures, or accounting systems may have been devised to meet the particular needs of an individual school. Imposition of a uniform accounting system would be an unwarranted assumption of a federal right to interfere with and control the management of colleges and universities, he charges. And, he adds: "This might well impose a stultifying influence of federal bureaucratic procedures in an area where results can be expected only 24
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from the unfettered freedom of an inquiring mind/' Under the 15% ceiling, Rep. Meader says, universities face these alternatives: • Use funds earmarked for other purposes to cover unreimbursed overhead on research grants. • Switch items from indirect to direct costs to increase the base of direct costs to which the 15% figure applies. • Apply for research contracts instead of grants because overhead costs are negotiated for individual contracts and the ceiling does not apply. • Cut down on research sponsored by the Federal Government. Many Congressmen think it would be a mistake to force colleges and universities into taking any of these actions and fear that forcing an artificial limit on research costs could have serious effects on basic research efforts. The Other Side. "What is wrong with giving money to colleges and universities and requesting that they give defense value for defense dollars, using only 15% for overhead? The answer is that there is nothing wrong with it," says Rep. George H. Mahon (D.-Tex.). Rep. Mahon is chairman of the Appropriations Committee subcommittee handling DOD appropriations and led the fight to keep the 15% limit in the DOD bill. As Rep. Mahon sees it, DOD research grants are really aid to education through the Defense Department. In most cases of educational aid of this type, matching funds are required but the Defense Department does not require colleges to put up any money on
Rep. George Meader A subsidy for the Government
Wide World Photos
Rep. George H. Mahon 1 5 % limit is a modest control
research grants. And, he adds, the colleges won't lose any money because they are going to have the grant money given to them. The purpose of the limit on overhead, Rep. Mahon says, is to put some control on DOD's research grant program. In three years DOD's research grants have jumped from $8 million to $40 million. If we do not put a limit on overhead, he says, this situation may get out of hand. The 15% limit puts a modest degree of control on the program, he adds. But the colleges and universities may be only innocent bystanders, caught in a battle between the House Appropriations Committee and the executive branch of Government. In reality, the threat of a general 15% limit on indirect research costs may be only a device to prod the executive branch into setting a uniform policy on accounting for research costs. According to Rep. Gerald R. Ford, Jr. (R.-Mich.), a member of the subcommittee headed by Rep. Mahon, the committee put an arbitrary limit on indirect research costs out of a feeling of frustration. For a number of years the committee has been trying to get the Government to set up uniform rules and regulations on costs in research grants, but it has been conspicuously unsuccessful, he says. "I do not think there is any excuse for the delay," Rep. Ford says. "We took this action to stimulate them to some affirmative action; I hope that the House will stick with the committee so that we can get results."
