“Science Rattles the Tin Cup in Washington,” my post of April 14, evoked critical comments concerning my contention that well-endowed universities should spend more of their own money on research. Particularly grating to some commentators was my skeptical view of current levels of indirect-cost reimbursements. Now adding to the commentary is a well argued and informed critique of “Tin Cup” by Anthony DeCrappeo, president of the Council on Government Relations, and David Korn, chief scientific officer of the Association of American Medical Colleges. I’ll comment on their views in a later post. But first, here is their critique, in full:
Dan Greenberg’s “Science Rattles the Tin Cup” is an informative study of how to use numbers selectively to support a specious argument. To try to set the record straight, we’d point out some numbers Dan neglected to mention.
Universities Already Significantly Subsidize Research Costs
According to the same NSF report cited by Mr. Greenberg, universities are the second largest funding source for academic research after the federal government, spending just over $9 billion of institutional funds. In fact, universities provide more support for university research than states, industry, and private foundations combined. Furthermore, because of the 26-percent cap on administrative costs imposed by OMB Circular A-21 in 1991, universities now absorb 100 percent of all new regulatory and compliance costs, which have progressively increased over the intervening years. These include new rules and costs for research on select agents, export controls, HIPAA mandated privacy protections and other human subjects regulation, research animal care, hazardous materials administration and disposal, and occupational health and safety standards.
Taking an historical view, NSF data reveal that over the period 1976 to 2006, universities’ share of R&D expenditures has grown faster than any other category. In the most recent NSF survey, institutional funds account for 19.0% of all R&D expenditures, compared to 12.0% of all R&D expenditures in 1976, a a growth factor of 58%. The share provided by industry research experienced similar growth (54%), while for all other sectors, including the Federal government (-6%),their respective shares declined.
Regarding indirect costs, Greenberg states:
“The National Institutes of Health, with a total budget of $29-billion, spends about $6-billion a year on indirect costs. That’s money that never gets to a laboratory.”
He goes on to assert:
“Indirect cost rates, generally amounting to 50 to 75 percent of direct costs of research at NIH, invite skepticism but are politically untouchable.”
To state that indirect cost payments to universities is money that never gets to a laboratory is a bizarre mischaracterization of the facts. For one thing, indirect cost payments represent partial reimbursement to universities for costs already spent by the university on infrastructure, including new research space and laboratories. For another, OMB rules require that a certain percentage of indirect cost payments be spent on new or renovated research facilities and equipment. Scientists cannot apply for grants and conduct research if the space and laboratories and other essential infrastructure do not exist!
The numbers Greenberg cites are also perplexing – if rates are 50 to 75%, and the NIH budget is $29 billion, then the amount one would expect NIH to pay for indirect costs would be $12 – 15 billion, not the $6 billion NIH actually pays. Why the disparity? Indirect cost rates at major research universities actually range from 38% to 69%, with the average about 51%. But actual recovery is a different story.
The GAO –hardly an academic lobby—did a study recently on this subject – GAO-07-294R – “National Institutes of Health Extramural Research Grants: Oversight of Cost Reimbursements to Universities”, and here are their major findings:
Proportion of Indirect Costs to Total Amount Awarded for Extramural Research Was Stable during Fiscal Years 2003 through 2005
The proportion of NIH extramural research grant funds awarded to universities for reimbursement of indirect costs remained stable during fiscal years 2003 through 2005. The amount in indirect costs awarded annually equaled about 28.5 percent of the total amount awarded in extramural research grants to universities. This was similar to the percentages for fiscal years 1992 through 2002, when indirect costs ranged from about 28.5 percent to about 30 percent of the total amount NIH awarded in extramural research grants to universities annually.
The stability of the proportion of indirect costs awarded during fiscal years 2003 through 2005 can be attributed to the stability of indirect cost rates during this period. For the 100 universities that received the most NIH funding for fiscal years 2003 through 2005 and for which DCA negotiates indirect cost rates, we found that average indirect cost rates were stable over the 3 years we examined. For each of these 3 years, indirect cost rates averaged about 51 percent of the modified total direct costs associated with NIH extramural research grants.
Even at an average of 51 percent, studies by COGR [e.g., see “Finances of Research Universities”, March 2008)] demonstrate that indirect cost recoveries fall significantly short of covering infrastructure costs. In addition to increasing costs associated with the operation and maintenance of research facilities, the administrative costs capped over fifteen years ago also fall increasingly short of covering the increased demands placed on awardee institutions to address ever expanding regulatory compliance requirements, as noted above.
When you add in the costs of faculty recruitment, two to three years of support for new research track faculty until they get their first grant, and bridge-funding when previously well funded and tenured faculty lose their grants, the fact is that colleges and universities must pony up institutional funds, by some estimates as much as twenty-five cents on every dollar, when their faculty are awarded a grant. Under this very real scenario, you don’t make up your losses by increasing your volume!
Greenberg’s claim that school’s are stingy about using their “plump” endowments completely ignores the fact that the use endowment monies and the earnings on them are generally tightly restricted by the will of their donors. So, while it may be true, for example, that Yale spent only $29.8 million of its earnings on endowment on research in 2006, according to their financial reports, in toto they spent $616 million from their endowment! These expenditures supported new faculty recruitments, the launch of new academic programs, improved facilities, financial aid for students, etc., http://www.yale.edu/investments/Yale_Endowment_06.pdf.
Lastly, Greenberg chastises industry for not going beyond “praise” in support of their academic partners, observing that industry’s “…focus is on applied research and development products.” We concur in this view, which should serve to remind all of us that in the United States, it is the federal government that has accepted the responsibility for supporting the fundamental, undirected research from which flows the discoveries so essential to strengthening the economy, improving health, and enhancing the nation’s security.
