The House Committee on Science, Space, and Technology May 24 held a joint Oversight, Research and Technology hearing titled, “Examining the Overhead Cost of Research.” The hearing covered facilities and administrative (F&A) costs for the National Science Foundation (NSF), but also addressed the nature of F&A reimbursements broadly.
Testifying witnesses included: William Bell, division director, division of institution and award support, NSF; John Neumann, director for natural resources and environment, U.S. Government Accountability Office (GAO); James Luther, chair of the board, Council on Government Relations (COGR), and associate vice president of finance and compliance officer, Duke University; and Richard Vedder, PhD, professor of economics, Ohio University.
After gaveling in, Research and Technology Subcommittee Chair Barbara Comstock (R-Va.) noted in her opening statement that the “indirect cost rates for universities and institutions vary widely from less than 1 percent to over 60 percent,” suggesting the current system is a system of “have and have nots, where wealthy institutions benefit the most.”
Research and Technology Subcommittee Ranking Member Dan Lipinski (D-Ill.) noted the debate around F&A costs but stated that F&A reimbursements are “essential to American universities’ capacity to execute their research as well as train the next generation of scientists and engineers that our country needs.” He added that F&A reimbursements “include the support necessary to comply with the high administrative burden that comes with federal research funding.”
Oversight Subcommittee Chair Darin LaHood (R-Ill.) acknowledged that “Universities and non-profit research institutions are at the forefront of innovative inquiries” and indicated that he hoped to learn how they can “increase the effectiveness of taxpayer dollars used to fund research.”
Oversight Subcommittee Ranking Member Don Beyer (D-Va.), compared F&A costs to his work as a small business owner. “I cannot run my auto dealerships without electricity for light, heat, and the tools, without accountants to manage our budgets, without IT gurus to maintain the computers that manage every aspect of our inventory and sales processes, and without the mortgages on our buildings. These kinds of overhead costs are just as necessary to run a science lab as they are to operate an automobile dealership.”
Full Committee Chair Rep. Lamar Smith (R-Texas), provided an opening statement and claimed that “indirect costs have expanded and expanded again.” After citing that the NSF uses $1.3 billion of its annual budget for F&A costs, Chairman Smith stated that, if directed differently, the money “would pay for 2,000 more scientific research projects.”
After walking the committee through the basics of F&A at the NSF, William Bell explained in his testimony that, “Indirect costs are real and necessary costs of conducting research.” He continued, “Unless paired with reductions in regulatory and administrative burdens, curtailing or ceasing reimbursement of indirect costs could include increases in tuition and adverse impacts on less well-endowed institutions.”
The GAO witness, John Neumann, highlighted a recent GAO study that found F&A costs vary depending on type of organization, research activities, and field of study of the research award. Neumann also acknowledged that a current GAO study on NSF is ongoing and has not determined why indirect cost payments have increased for NSF. Analysis is also incomplete for indirect payments to national laboratories and industry.
Similarly, James Luther noted that the geography and type of research conducted often has an impact on F&A costs. Mr. Luther stated, “An institution that primarily does social science or observational research is likely to have a lower F&A rate than a biomedical research institution engaged in cutting-edge genomic research.” Pointing to geography, he added that research buildings in San Francisco or New York City tend to be more expensive than buildings in America’s heartland.
Mr. Luther disputed the claim that F&A costs have been increasing over time. For example, he pointed to F&A costs at that National Institutes of Health, saying the rate of 27-28 percent has stayed “consistent for decades” despite increasing regulatory burden.
Dr. Vedder’s testimony stated that, from his perspective, the current system of negotiated F&A rates is “seriously flawed.” He also suggested replacing the existing F&A cost reimbursement system with “a system of fixed reimbursement rates that were not related to a university`s actual indirect costs.”