Reforming overhead payments, somehow, is probably a good idea.
Altering the deal on existing contracts without notice is very much NOT a good idea. That they're attempting to do so is a pretty good sign of bad faith.
One of the main issues with overhead on grants is that it has nothing to do with overhead on the research itself. It’s instead a tax that a university applies to money that researchers bring in, that they use as general revenue to fund, for lack of a better term, bullshit including hiring more admin instead of professors.
A $8M grant doesn’t cost a university any more than a $1M grant for university admin in terms of “indirect costs”. The fact that they think they’re entitled to several million of it to waste on things that shouldn’t be coming from taxpayer funded NIH grant money is obscene.
> A $8M grant doesn’t cost a university any more than a $1M grant for university admin in terms of “indirect costs”. The fact that they think they’re entitled to several million of it to waste on things that shouldn’t be coming from taxpayer funded NIH grant money is obscene.
Sure it does. An 8M grant is going to have roughly 8X more researchers working under it than a 1M grant. Each of those researchers needs space, parking, IT support, HR supports, etc. There are some economies of scale, but the idea that you could increase the staffing of a business by 8x and not have to hire more HR and accounting people is silly.
Yes, I agree the overhead scales close to linear unless a grant is very heavily dependent on one type of cost such as bulk sequencing of 10,000 subjects. In that case the overhead is usually much lower or disallowed. And there is no overhead allowed on equipment.
This is such a wasteful way to think...do economies of scale not apply to universities at all? They're allowed to just bill as if there is 0 savings to be found in bulk construction and administration?
Generally, no, they don't bill at 0 savings. The rate is set on a per-institution basis. The rate setting process incorporates the documented economics of scale that that institution is achieving already. This is why schools have different rates; the more resources (instruments, facility use, computational, etc.) the university provides at no/low-cost to the researchers, the higher the rate.
If the rate wasn't set in this way, the overhead would be well above 100%, as it is in most labor-heavy businesses like consulting and law.
You don't seem to have any experience with the subject. The "overhead" in question is, for example, the person who keeps clean glassware in inventory for chemistry, or the veterinarian for animal subjects, or the ethics board.
And in the case of massive projects where service providers do the wet work, your lab primarily deals with data analysis, or you don’t even do your research with university space/equipment, they still get 30-60% just because.
This isn’t some conspiracy theory. Look at how much grant money a given university brings in annually and ask yourself if 30-60% of that number is being spent on overhead related to research. It’s not.
> Look at how much grant money a given university brings in annually and ask yourself if 30-60% of that number is being spent on overhead related to research. It’s not.
Look at a consulting company or law firm. Most will charge you 2-3x the salary cost of the consultant or lawyer you're getting. This limits universities to 1.15x.
Right - but as a consulting partner I take home that margin to spend on my boats, homes, and watches. What are universities getting? More university...
To be clear, this is not margin, it's non-direct expenses. So the consulting partners probably take home half of that multiplier as profits, and the other half goes to pay for the paralegals, AR/AP, HR, IT, office lease, janitorial .... all the things that Universities use their overhead to cover. What a surprise!
It is. The larger the institution, the higher the overhead ratio, perversely because they are more efficient scientific organizations. UCSF can get a grant to study something and 2/3rds of the costs are overhead because absolutely everything at that institution is shared.
> Many who advocate for cutting NIH’s indirect cost rate have long argued that universities are willing to accept lower rates from philanthropic foundations. Today’s NIH notice, for example, notes the Gates Foundation limits indirect costs to 10%, while the Packard Foundation sets the ceiling at 15%. But such reasoning is based on “perverse logic,” Corey says, because foundations use their funds to increase the productivity of research infrastructure already paid for by the federal government. And universities say they are often willing to accept foundation grants that carry low overhead rates because those grants amount to a relatively small fraction of their funding.
This detail is worth highlighting. NIH has traditionally borne the bulk of indirect costs, allowing non-profits to issue grants with low indirect costs. Slashing NIH’s indirect costs will force research institutions to seek funds elsewhere or become financially unviable.
They could simply stop hiring more admin and building offices for them to work in at a rate that far exceeds student population growth or hiring of professors.
Research overhead doesn't pay for that stuff. It pays for research-relevant infrastructure and staff. If a PI buys equipment, it's a waste to spend their own very expensive time to ensure purchase-tracking compliance. So you hire an inventory person. But it doesn't make sense to have one inventory person per research group. So you hire one to serve multiple projects and ensure their continued employment by averaging out the costs across those funding lines. That's the overhead cost.
“Purchase compliance” with what? Arbitrary policies set by… university admin?
Full disclosure I’ve dealt with this all first hand. The vast majority of universities contribute next to nothing to research programs except the space, utilities, and IT. And those costs do not need to be a % of incoming grant money.
And the vast majority do just take that cut and use it as slush fund general revenue.
You are right that it does not "need to be a %" - it could be a la carte, for example.
Our physics group had access to the shared LN2 tank. It was no fee, so if you needed a few liters you could just grab it. That could be replaced with a debit system which goes directly to the account. (Hmm, and who decides how much to charge?)
We got hazmat training, and the environmental safety officer was paid by the university through overhead. That could instead be billed directly to the grant. (Hmm, and who decides how much to charge, and how much training is needed?)
When we installed a projector on the ceiling we were able to get building services to install the mount through the air plenum. That service could instead be billed directly against the grant. (Hmm, and who decides how much to charge?)
We could book time in the sound studio to record voice-overs for one of our projects. That was free, but could be billed directly against the grant. (Hmm, and who decides how much to charge?)
Some relevant materials, believe it or not, are not yet digitized, but are available in the library stacks. I could just walk there and read it, because library support was part of the overhead, but you're right - it doesn't need to be that way. The library could charge per entry and book. (Hmm, and who decides how much to charge?)
I'm sure other departments have their own needs, like maintaining the herds for the ag school, or the instruments for the music department.
I don't know how you could have dealt with this all first hand and not see just how much more the university provides than "space, utilities, and IT."
Funding sources themselves, especially with capital expenditures for purchases $10K or higher. They want to make sure PIs are spending money on actual program equipment that's being used, and not just turning around and selling it on Ebay to line their pockets.
I've dealt with this first hand because I'm a PI myself. I hate having to waste my valuable time dealing with the inventory person every couple months, but we do it because our funding sources require that kind of accountability.
That’s interesting. In Canada the issue is that funding sources don’t care if you’re somewhat irresponsible with capital expenditures (though not to the point of personal enrichment), but are loathe to give you any money for personnel.
Sadly, many of those arbitrary policies are set by ... The Federal Government! As an example, NIH just added a huge new cybersecurity requirement for a bunch of their datasets.
Space, utilities and IT can be significant costs. There are also the standard costs of personnel for the people working under these grants (HR, Accounting, Purchasing, etc.) Add onto that the significant compliance requirements.
When the government hires a consultant, they usually pay 2-3x the salary of the consultant in per-hour costs. This rule limits them to 1.15x the salary of the employee.
Compliance with policies set by Congress and the relevant funding agencies, which establish standards for things like safeguarding the private health data and safety of study participants, mandating that de-identified versions of data be made available to other labs so they can both verify and build on the research, biosecurity, preventing foreign interference, lab animal welfare, hazardous waste disposal… and ironically, making sure that money is being spent appropriately by PIs.
Arbitrary policies often set by the federal and state governments. Yes sure, there is some policy at the institutional level but the intent is usually good—-to prevent fraud and abuse and get a good price. Certainly not to slow down research.
I had some administrative experience at a peripheral university and a "good" project was one generating big administrative costs - and bonuses for administrators.
Not a compelling argument. Due to federal and state policies there is a great deal bureaucracy involved in running a research project. Too much, but mandated largely by the federal government. Many institutions have to supplement even NIH grants with institutional funds. I do.
NIH does not pay full salary support for many junior and senior scientists even if they work 100% on NIH projects.
That is indirect support by the institution to NIH.
15% will kill academic medical research — the fountain head of a much or most progress we have made in preventing and treating a wide range of diseases.
Additionally, the base of the indirect calculation differs between grantors. NIH is MTDC (Modified Total Direct Costs) on top; Gates is TDC (Total Direct Costs) with their own schedule of allowable indirect costs. You have to do a line by line comparison to really evaluate the difference.
I was first surprised that NIH put indirects on top and wondered if they were done NSF style if that would help control costs more.
The original grant notice is a good thing to read. They properly justify the cuts, and I think it's something that a lot of people would agree with - why is up to 70% of grant money being sent to "administration and overhead" at giant private universities? My small LLC is currently applying for an SBIR grant, and we were capped to 40% unless we provided a big justification - which we can't, because we're too small to justify anything like that. Meanwhile, big organizations and universities can throw their weight around and bully the government into handing them more money to do who-knows-what with. Maybe build a nice shiny new sports center with.
This is a good reform - even though it will cost my LLC about $75k in indirect costs that we might have been able to bill (40% -> 15%). I'm more confident in my ability to reduce our indirect costs and compete on a level-playing field with everyone else.
Just so everyone reading this is clear, it’s not 70% of grant money, it’s an extra 70% on top of the direct costs (41% of the total awarded). A more typical number for a large state university would be somewhere around 55%, or around 35% of the total awarded funds.
Also, indirect costs are not going to building sports centers. Funding agencies and the government audit universities in detail to make sure that the money is being spent only on research activities, down to calculating the amount of square footage per building that is being used exclusively for research, as opposed to instruction or clinical work. They have absolutely come after people and institutions, and successfully obtained multimillion dollar settlements, for using federal money to cover unrelated expenses. If NIH indirects were found to be going towards something like building a rec center or a facility for college athletes, it would be actual fraud and a national scandal, potentially on the “congressional inquiry” level.
no fan if this gov but I always found the university cut if grants designated for specific things too high. In many US universtiies the professors don't get a sallary if they don't bring in grants. And with such a big overhead universiteis sure want it this way. In some Euro universiteis like ETH Zurich or Max Planck instituties the prof's get a pretty good baseline funding from the institutional funding (given top down from taxes) and inside these kind of instutitions the professors have so much more freedom to think about what experiment is the most informative.
Also a side note while bot of the named universities are top 10 world wide for research output they don't spend millions on landscaping or sports facilities most things are kinda old but functional.
Swiss universities aren’t shabby, they were building a Swiss cheese building at EPFL when I was there. But ya, landscaping was mostly done by goats (really!). American universities are pretty luxurious in comparison.
Schools are going to follow the same playbook they've been following since 2008 as state and federal funding has dried up.
They'll lean on international students first like they have for decades, but those numbers are going to be down. They'll follow that by leaning on undergrads, but those numbers are shrinking too because of cultural and demographic shifts. Then they'll cut graduate funding (again) to try and get more blood from the stone. Then they'll try cutting the "extraneous" departments that don't bring in money or grants (read: everything except engineering, medicine, law, and football) again. Then they'll cut the departments that do bring in money. Then they'll do the work to shoulder the costs directly.
If you want reform, cutting funding doesn't work. It hollows out the entire institution before it even starts addressing the administrative issues. Reform needs to come from a different direction.
The reputational damage to US scientific prestige is incalculable. And all for amounts that are tiny slivers of the federal budget for research that benefits potentially everyone.
We have a saying in Japan that goes: "Even dust piled up will make a mountain."
Considering the monies concerned here are also tax dollars, I am wholly unsympathetic to the actual monetary sums. They could be 1 cent and my feelings on this matter wouldn't change: Audit every single line item and slash anything wasteful.
Collateral damage is unavoidable, and more importantly I don't care about collateral damage since we are finally getting the audits and cuts we the people demanded for way too long.
The key issue is we're not getting audits, we're only getting indiscriminate cuts .
I understand the concerns around using funds effectively, and I agree there's a lot of waste out there, but some of that is just required in the research space to learn. If we knew what to fund to do something, it's no longer research, it's engineering.
Overhaul the grant system to ensure that there's additional scrutiny in getting funding, focus on outcomes we want, audit the past research, but burning it all down doesn't help and just wastes what's currently in flight and we'll have to rebuild eventually, duplicating effort and thus wasting money.
I understand the emotional reaction, but it would do everyone a lot of good to take a step back, take a deep breath, and approach things in a measured and focused way.
They’re not “burning it all down”, they’re cutting indirect expenses from 30%+ to 15% — and administrators who were grifting are whining because their slush funds got cut.
You are correct. I was more talking about the overall cost cutting "program" which is much closer to the burn it all down, but that isn't the case with this article and I apologize for incorrectly commenting overly broadly out of context.
Even in this narrow context, the cuts are indiscriminate in their domain. Moreover, they are rolled out aggressively, carelessly, and abruptly -- a lot of "masculine energy." Science takes years and requires long-term planning. This move just pulls the carpet out; there absolutely is no need for this degree of urgency other than political gain.
These organizations can and will adapt. But as I said in my OP, the real, lasting damage is in prestige. In the meantime, scientists all over the world thinking about working in the US will think twice. Young adults thinking about becoming research physicians and doing biomedical research will think twice. Researchers making peanuts working at universities doing this research will go work in pharma on more lucrative projects.
Midterms are coming up in less than 2 years, and the next general in less than 4. Time is of the essence to get shit done so the people can decide if they want more or a change in course.
>lasting damage is in prestige.
Pride is a deadly sin for a reason, screw pride. We make America great again by striving for greatness, not puffing ourselves up with pride.
The time for measured approaches is long gone. Any administration of the last 50 years could have done that. But they didn't. It's time to slash and burn.
This isn't a fucking game where you get to flip the table when you don't get your way, throwing a temper tantrum, this is the lives of hundreds of millions of people and the respect for basic rule of law.
Trump's tariffs if (when) enacted will adversely affect our family business, as will some of his other policies which I won't get into because of confidentiality.
I still voted for him.
Why? Because his policies are things the people have demanded for a very long time and they are things we need to do sooner or later for the better future of our country.
Even Musk admitted this will be painful in the short and possibly even mid term, but in the long term we will all be better off for it.
I think it's optimistic to think they'll be better off in the long term, personally. Other countries are ready to jump in as soon as the US appears deficient at something, even if it is a temporary deficiency. If the US ends up temporarily behind in AI research due to this, for example, it's unlikely they catch back up IMO. If you get behind, everybody is just going to start looking at whoever is ahead and the rich will get richer.
The actual constituted nations of Europe as they exist today? Aside from the UK, not long. Most of them are states that came into existence in the 20th century. Germany was the 1980's. The rest are generally 19th century.
It was good. I voted for Biden which was implicitly a vote for Kamala. I don’t think this was an actual concern given that only partisans - definitionally - vote in non competitive incumbent primaries.
Fixed that for you. Pharma companies do lots research. But the goal of that research is very narrow - to bring new therapies to the market. The Academy has very different goals - train next generation of researchers and make discoveries. IMO, expecting a pharma company to do the work of an academic institution is a recipe for failure. But that is just an opinion.
I remember my university taking 35% off the top of all grants for a lab that was 30 years old (hadnt been updated), and a sufficient but hardly cutting edge instrument room.
The university was getting far more money than if the PI rented lab space at an incubator.
That's a naive understanding of grant overheads. Only a portion of the overhead is used for facilities and services directly used by the PI and their lab. The rest are better understood as federal subsidies to research universities. The funds are allocated according to the ability of the university to win competitive grants, rather than via a political process or a rigidly specified funding model.
At my university, 44% of the overheads go to the general fund, 34% are used to support research in various ways (including startup funds for new faculty), and 22% goes to the administration. For grants with the normal 56% overhead rate, that means 16%, 12%, and 8% of the total.
Grant overheads are good for the university, because they mostly come with no strings attached. The university is free to spend them as it sees fit, rather than according to what some big important outsider says.
We're talking about schools with multi-billion dollar endowments, new sports stadiums, branded new facilities, fat tuition fees from international students and a ton of pet projects by the university.
But no, the NIH needs to "subsidize" general fund through NIH grants?
> The university is free to spend them as it sees fit, rather than according to what some big important outsider says.
That's fine, but let's not pervert the research funding mechanism by puffing up indirect costs to pay for things that have nothing to do with research.
I believe the median endowment of an R1 university is around $1 billion. That corresponds to $30 million to $40 million of sustained income a year. Enough to fund a single reasonably large academic department, or about as much as grant overheads.
Except that universities usually can't use their endowments as they see fit. Big donors often prefer funding fancy buildings and other singular things over daily operations.
Tuition fees are already too low in most public research universities. Combined with the decline of state funding over the decades, many of them are now facing major budget cuts. Take away grant overheads, and you'll start seeing tenured faculty laid off and entire departments closing.
And this is not a perversion of the research funding mechanism but deliberate policy. Back in my previous life, when I was somewhat involved in educational policy in another country, I saw a shift to a similar policy partially inspired by what was already done in the US. The government took a big chunk of core funding for universities, gave the money to research funders, and significantly increased overhead rates. Instead of awarding money based on opaque negotiations between universities and the government, which were prone to corruption, that money would be given according to competitiveness in research.
What struck me most about your response is what you hear from all the stakeholders when it comes to reforming the healthcare system in the US - you talk to each individual stakeholder and they'll give you a list of reasons why they aren't the problem and how they couldn't possibly get by on less money.
Doctors talk about how their salaries, the highest in the world, couldn't possibly be lower and blame insurance and the hospitals. Hospitals tell stories about all the uncompensated care they provide, how they can't tell doctors how to practice and how patients would be dying on the streets if they got $1 less and the problem really lies with doctors and insurance. Insurance companies talk about how hospital spending is out of control and most of the money is paid out in claims and how doctors fees have exploded.
Etc, etc, etc.
The truth is that the cost of university has skyrocketed over the past few decades. University budgets have grown well beyond inflation for decades. The administrative class has exploded in terms of head count and campuses have gotten more and more luxurious (try comparing them with one in Europe or Canada!).
In the end if universities couldn't possible move money around to cover what amounts to a few percentage of their total budgets, then I don't know what to say. Maybe the slate needs to be wiped clean and we start again with a system that makes more sense in terms of where the dollars come from and go.
I haven't seen any luxurious campuses in the US, though I don't have much experience with student housing and services. Some departments are baseline modern office buildings, while others remind me more of Latin America than Europe. And some would be eerily similar to the USSR, if you painted them light blue.
Large part of the cost explosion is simply Baumol effect. In particular, universities employ many professionals, and professional salaries have grown ridiculously high in the US. Median full time income is something like $60k, which means that anything above $120k should be high income by the usual definition. But if you ask a professional, $120k is not a particularly good salary.
Another large part is the growth of mandatory spending. Roughly speaking, many administrators are mandatory, because they exist for external reasons. Universities cannot cut them, unless the external environment changes. The more regulations and expectations there are, the more administrators universities require.
Then there is the issue that American students expect to be taught, which makes education more expensive. I studied in a European university, where the curriculum was structured around exams. Classes were offered when the resources allowed it, but you were expected to pass the exams regardless. Very convenient if you are sufficiently independent. And less so if you are not.
The public research university I'm at recently had something like 15% deficit in core funding. Mostly due to tuition fees and state funding lagging behind inflation. There is simply no money to move around.
> Another large part is the growth of mandatory spending. Roughly speaking, many administrators are mandatory, because they exist for external reasons. Universities cannot cut them, unless the external environment changes. The more regulations and expectations there are, the more administrators universities require.
Can you shed more light on that? I haven't heard that, but would be interested to hear what admin is required.
In some countries, a researcher can write a grant on their own, with minimal support from the university. Not in the US. If you are not a full-time administrator, it's effectively impossible to know what is required from the application. A department-level administrator will often work with the PI to produce an endless pile of documents. And then a higher-tier administrator has to double-check everything, because the department-level administrator is likely to miss some details.
Universities hire a lot of foreign employees. Because the US immigration system is complex, there are usually people helping new hires deal with it. And they only deal with immigration bureaucracy – they rarely have time to help with more practical issues, such as how to open a bank account.
Maybe you are attending a conference. It's often cheaper to pay a membership fee in a professional organization + discounted registration fee than the full registration fee. But you can't pay membership fees from federal grants, so administrators have to pay those from another funding source.
You came back from the conference with a bunch of restaurant receipts in random foreign languages. Now the administrators need to check and double-check that they are not reimbursing any alcohol from federal grants.
Or maybe you are attending two conferences in a row in Europe, with a few days between them. Now you need to provide evidence that it's cheaper to stay in Europe instead of flying back to the US for the weekend. And you also need to justify the use of a European airline for flying between two European cities.
Pretty much everything a university does is in a similar regulatory hell.
Degrees are somewhat overrated. Dating sites however suggest we've moved past peak tradie (plumber's bum wasn't a good look) and teacher is the new "it" partner. I'm still betting on a plumber. Handy in the apocalypse.
Altering the deal on existing contracts without notice is very much NOT a good idea. That they're attempting to do so is a pretty good sign of bad faith.