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By John M. Owens
University research efforts can suffer when researchers don't include building and
administrative costs in their proposals.Hardly a day goes by that those of us in research administration don't receive a request from a faculty member to “waive the overhead” on a grant or contract proposal. The reason: They believe it will increase their chances of getting grants. In most cases we say “no” to these requests, but not because we're bad guys. Unless it is specifically spelled out in the evaluation criterion, overhead costs are not considered in the proposal evaluation. And furthermore, most federal, state, and private for-profit organizations will pay for the researcher's indirect costs. It's important for researchers to collect those costs whenever possible, and for them to know that factoring the money into their proposals won't lessen their chances of getting the funding.
We all understand direct costs (salaries, travel, supplies, equipment). But what is “overhead”? Facility and administrative (F & A) costs (formerly called indirect or overhead) are real costs that cannot be easily or specifically associated with a particular project. They include charges for lab and office space, building maintenance, heat, light, and power, and the use of university facilities/services and support staff, including secretarial, library, insurance, and accounting. Thus the total cost of a project includes both direct and overhead costs.
Some sponsors are unwilling to pay the full F & A, or in some cases, won't compensate for any overhead. Others limit the recovered F & A, believing the university should “cost share” some of the expenses. This is particularly true of nonprofit organizations. But most for-profits pay the full F & A plus a fee, including it in the contract. Full F & A costs typically run between 40 percent and 70 percent of the direct costs. The F & A rate is determined by ratioing the cost of facilities and administration to the direct project costs. Institutions generally have different F & A rates for different activities, such as research and training. Universities typically recover only about half of what they could recover at the full F & A rate. This is mostly due to waivers of indirect costs, both required and not required.
If the university isn't reimbursed for F & A costs, then it has to pay them out of its own funds. But collecting this money is not just beneficial to the university. Most institutions provide “program development funds”—sometimes under a similar-sounding name—to faculty, departments, and colleges that are directly tied to F & A cost recoveries. These funds are usually directed to research program development to encourage further research activities. These funds are not an “indirect return” but are tied to it. They are another reason why you as researchers should try to collect all the F & A costs available since the result is usually money in your pocket—which you can use to support and develop your research.
Researchers tend to think that overhead costs don't apply directly to them. They believe they can get more money by not factoring them in, and that nobody gets hurt. However, F & A costs are significant and necessary to both you and your university. They can provide a direct reward to you and your research. If we don't collect them, we lose an opportunity to support research.
So—please quit beating up on your research administration organization. They are really trying to help you and your institution.
John M. Owens, is vice president of research at Boise State University.
He can be reached at jowens@asee.org.
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