Indirect cost rate variation for university research: Several conventional explanations do not work

Abstract

The wide variation in indirect cost rates that universities charge the federal government in research grants and contracts has reduced the credibility of universities, as have accompanying charges that universities have been overreaching in indirect cost recovery. Many explanations for rate differences have been presented, but not systematically examined. Detailed cost and policy data from seven major research universities were used to simulate a standardization of costs and policies to eliminate several of the differences widely believed to contribute to rate variation. The result was an increase in rate variation, rather than the expected decrease. Furthermore, each of the universities could have charged the federal government a higher rate than actually charged, providing evidence that universities have not been over-reaching in indirect cost recovery.