Indirect research costs include building maintenance and compliance with patient safety regulations.
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After multiple government agencies moved to unilaterally cap indirect research costs—claiming that the current structure allows universities to waste government funds—a coalition of 10 research advocacy organizations unveiled an alternative plan Friday.
The Joint Associations Group (JAG), which includes the Association of American Universities, the Association of Public and Land-grant Universities, and the Association of American Medical Colleges, are calling the plan the Fiscal Accountability in Research, or FAIR, model. The goal is to “increase transparency, accountability, and clarity in how federal research funding is spent,” according to a summary explaining how the new model would work.
Although lawmakers rejected Trump’s proposal to cap indirect costs in 2017 and wrote provisions to safeguard the old model, the current Congress—which is also weighing Trump’s proposals to make sweeping cuts to federal research budgets—has called for changes to indirect costs calculations.
In response, JAG has spent the past few months developing the new plan based on input from the academic research community and private research funders, as well as some lawmakers and federal administrators. To gather more feedback on the finalized FAIR plan released Friday, the group will present its plan at a town hall Tuesday. From there, the hope is that either Congress or the Office of Management and Budget will codify the proposal into either law or regulations and require adoption of the model in about two years.
“The key foundational issue we’re dealing with isn’t really an indirect cost model, it’s to keep America in a global leadership role in science and engineering research, and to be accountable to and transparent with taxpayers,” said Kelvin Droegemeier, the former White House Office of Science and Technology policy director who helped create the FAIR model, in an interview with Inside Higher Ed. “This is simply one mechanism to help make that happen.”
When university researchers get grants from federal agencies, such as the National Institutes of Health or the National Science Foundation, they incur both direct and indirect costs. While direct costs are line items directly related to a particular research project, such as a scientist’s salary, indirect costs cover expenses that support multiple different projects, including building maintenance, utilities and compliance with patient safety regulations.
For decades, universities have used a complex formula to periodically negotiate individual indirect cost reimbursement rates with the federal government, which are dependent on factors like geographic cost differences and facilities maintenance schedules. While some universities have negotiated reimbursement rates higher than 50 percent, the average institution is reimbursed at 28 percent.
“The current model has been around for a long time and it’s served us well, but we’re in 2025 and we can do things a lot differently,” Droegemeier said. “There are some shortcomings to that model we thought we could address.”
One of those shortcomings has included difficulty explaining how the model works and what it pays for.
Although universities say indirect reimbursements are crucial pieces of their research budgets, the Trump administration has characterized indirect costs as an example of higher education institutions’ frivolous use of taxpayer money.
Over the past several months the NIH, NSF, Department of Defense and Department of Energy have all tried to cap reimbursement rates at 15 percent to free up more money for “legitimate scientific research.” All of those plans, which were blocked by the courts, sparked widespread backlash from the research community—including from the organizations that have since developed the FAIR model—which said that capping indirect costs would stifle lifesaving research and devastate university budgets, among other consequences.
The court orders only apply to the current fiscal year, and research groups are under pressure to come up with a new, long-term plan to calculate research costs.
In June, JAG released two options for changing the research funding formula, which the group described as “bookends.” The final model released Friday is a hybrid of those two plans.
In an effort to more clearly communicate the purpose of indirect costs, the FAIR model would recategorize—and rename—research costs into three new components: Direct costs would now be known as Research Performance Costs (RPC); indirect costs would become known as Essential Research Performance Support (ERPS) and would represent costs that are “necessary for carrying out research and that can be linked explicitly to a given project,” according to the JAG memo. Expenses that fall under ERPS would then fall into one of four subcategories: regulatory compliance; award monitoring, oversight and reporting; research information services; and essential research performance facilities.
Any costs that don’t fit into an ERPS subcategory would fall under the third and final research cost component—General Research Operations, including human resources, procurement and general services.
The FAIR model would also give universities two different options to calculate the research expenses that fall under the ERPS category, formerly known as indirect costs.
The first is the expanded option, which would require universities to break out all the costs as line items. That option is likely more resource-intensive for institutions. For those that don’t have the resources, the proposed base option might be a better approach as some of the EPOS and GRO funds would be calculated as a fixed percentage of the total project’s budget.
“Both options make it very clear where the indirect cost reimbursement goes, where the money is spent for facilities and how much they cost. All of it is right there,” Droegemeier said. “It’s much more accessible to people who want to see the details.”
