Health Law Advisor

On May 2, 2025, the National Science Foundation (“NSF”) issued a “Policy Notice: Implementation of Standard 15% Indirect Cost Rate” (NSF 25-034) (hereinafter “Policy Notice”) adopting a uniform 15% Indirect Cost Rate (“IDC”) for all new NSF grants and cooperative agreements awarded to Institutions of Higher Education (“IHEs”). The Policy Notice, which became effective May 5, 2025, sets forth a new policy by which NSF will now apply a single, standard IDC “not to exceed 15%” to all future grants and cooperative agreements awarded to IHEs for allowable indirect costs. Currently, IHEs have reported IDCs ranging from 50% to 65%. The Policy Notice allows the awardee organization to “determine the appropriate rate up to this [15%] limit.”

Rationale for the New Policy

Indirect costs, also referred to as “facilities” and “administrative” costs (“F&A”), encompass costs not directly assignable to a specific project or activity but necessary to support the overall research infrastructure of the recipient organization. Historically, awardees seeking to recover indirect costs related to NSF awards have negotiated IDCs on an institution-by-institution basis. These rates were included in Negotiated Indirect Cost Rate Agreements (“NICRAs”), binding upon the institution and the agency, and applied against the Modified Total Direct Costs (“MTDC”) for the project. In contrast to the new uniform 15% rate, NICRAs represent a formally negotiated rate based on an exchange of information with NSF concerning the institution’s general costs and expenditures, including historical cost information, and regularly updated by the institution, often annually.