Congressman Lamar Smith

Representing the 21st District of Texas
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U.S. Congress probes underlying costs of research

May 25, 2017
In The News
Rising fees for building upkeep, administration eat into federal grant funding

Overhead costs, such as fees for administrative support and building maintenance, are on a slow rise and becoming a larger share of federal research spending, a congressional investigator said May 24.

A study by the Government Accountability Office, the research arm of Congress, shows that some $1.3 billion out of NSF’s $6 billion annual research budget is consumed by payment of these indirect costs to universities and research institutions.

Similarly, in 2015, the National Institutes of Health spent some $6.3 billion on indirect costs, accounting for 27% of its $24 billion extramural research budget, notes John Neumann, director of natural resources & environment at GAO. He discussed GAO’s findings at a U.S. House or Representatives hearing.

Members of the House Science, Space & Technology Committee expressed concern about GAO’s findings.

“We must look at whether or not those overhead funds are being spent efficiently,” said Rep. Barbara Comstock (R-Va.), “particularly in a time of tough budgets, when only one out of five research grant proposals are funded.”

Comstock, who chairs the panel’s Subcommittee on Research & Technology, pointed out that since the 1960s, every institution negotiates its own indirect cost rate with the federal government. Indirect cost rates for universities and institutions vary widely from less than 1% to more than 60%.

This overhead, says Science Committee Chair Lamar Smith (R-Texas), “would pay for 2,000 more scientific research projects. It raises a question of whether or not we have inadvertently created a system of ‘haves and have nots,’ where wealthy institutions benefit the most.”

Overhead spending varies by region and research type, Duke University’s James Luther told lawmakers. Medical research’s high overhead costs, he said, stem from complex facilities and equipment. Public policy research, in contrast, calls for more computers and office space.

But, Luther stressed, direct costs, which cover the cost of researchers’ salaries and equipment, inseparable from indirect ones. “If direct costs are the gas for the research engine, facilities and administrative reimbursements are the oil. A research engine requires both.”

Lawmakers and hearing witnesses talked about possible reforms, including a ranking system that weighs overhead costs or a fixed overhead cap. Overall, however, they expressed concern along the lines of committee member Rep. Don Beyer (D-Va.), who warned of “unintended consequences” in cutting science budgets or reducing overhead costs.

“Let’s be certain any changes we make keep the best scientists doing the most important work,” Beyer said. “Let’s make sure we are not initiating a race to the bottom, with prizes to the lowest bidder doing the least valuable research.”