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About the Author
Dan Greenberg is a longtime observer of science policy and politics. He is the author of "Science for Sale: The Perils, Rewards, and Delusions of Campus Capitalism" (University of Chicago Press), as well as other books, and has published widely in newspapers and popular and professional magazines.
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'Rebranding' Engineering | Comment [13]
Prizes Won't Beat the Energy Crunch ... | Comment [8]
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Featured Articles By the Author
'Science Rattles the Tin Cup' Draws More Fire
“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.
Posted at 08:52:12 AM on April 24, 2008 | All postings by Dan GreenbergComments
Commenting is closed for this article.
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One need only compare the indirect cost rates of the different funding departments (say, US Department of Education) to the NSF and NIH to get the picture.
The DOED’s allowable/recommended indirect-cost rate is a small fraction of that of the science-only agencies and departments.
So, let’s see now, if a university conducts the very same science grant project as a FIPSE, it will likely budget something like an 8% indirect cost rate in the application; at NIH, well, as we are told in the posting above, 38% to 69%; at NSF, if memory serves correctly, approximately the same ballpark as at NIH.
Go figure…. (I’m in your corner, DG.)
— Anti-hypocrisy advocate · Apr 24, 02:26 PM · #
All of this endowment bashing, however timely and popular, is also suspect. Any manager who has the chance to fund activity from outside provisional sources that may dry up with the vagaries of politics, global economics, and wayward asteroids, and who, instead, out of “virtue” chooses to drop endowment funds to fund it, should be and would be, ordinarily, shot. But we hear voices saying “he/she should do the virtuous thing, the just thing, the fair minded thing, the generous thing, and fund operations from endowment funds rather than impoverishing our government”.
I like virtues—they are pleasant to contemplate—but you’ll never find those virtues unstatus-ing my quo or making my beelzebubble burst (broadway reference). I failed to find an ultimate benefit for getting MORE endowment to fund operation activities—other than a vague assumed “virtue”. Did I miss something? Was there some benefit to that that I missed? I think not, it is a kind of bashing—vague appeals to virtue—in the face of what ALL managers in every sector of the world do—fund operations as much as humanly possible out of contigent sources of funds, saving non-contingent funds for true emergencies. People who assume emergencies never happen are few and far between because the last emergency always killed off most of them.
— Richard Tabor Greene · Apr 25, 05:42 AM · #
The overhead game is just that — a game. Universities use it to try to fund other things at their campuses in addition to the grant project.
Sure, that’s one way of getting the government to subsidize more of higher education — but it is not a clearly honest way of doing so.
In fact, universities even play games rather openly diverting funds of the grants themselves — as we saw last year with several major research institutions (including Ivies, like Yale, etc.).
One can only applaud government oversight when it verifies and rectifies (rarely, if truth be told) just what went on as a grant closes. But when government “looks the other way” as part of the application jockeying game?
Please….
— Anti-hypocrisy advocate · Apr 25, 09:46 AM · #
Oh, and wasn’t there something years ago about indirect costs to the tune of $200 million investigated as improperly spent over a ten-year period at Stanford? Including a lavish wedding reception for the then-president of the university, Donald Kennedy?
http://query.nytimes.com/gst/fullpage.html?res=9D0CEFDA1F3DF936A15750C0A967958260
As Edward Albee wrote in Who’s Afraid of Virginia Woolf?: “That’s all blood under the bridge, blood under the bridge”, eh?
— Anti-hypocrisy advocate · Apr 25, 10:12 AM · #
Dan, the plural possessive pronoun is “their” not “there.” You write like my students.
— Frank · Apr 25, 11:27 AM · #
— Alex Kafka · Apr 25, 02:35 PM · #