Indirect Costs of Health Research--How They Are Computed, What Actions Are Needed

HRD-79-67: Published: Jul 27, 1979. Publicly Released: Aug 24, 1979.

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Congress has voiced concern over the large proportion of health research funds spent for indirect costs, wide range in indirect cost rates among institutions, methods used to determine such rates, and Federal audit and negotiation processes. Questions have also been raised as to whether Federal limits on indirect costs reimbursement should be reinstated.

Federally sponsored health research has increased from $1.6 million in 1973 to an estimated $2.7 billion in 1978. Indirect costs associated with this research are taking a greater share of each research dollar. Comparing indirect cost rates among institutions is not meaningful for measuring the relative efficiency of research activities. Many factors, such as the age and type of facilities used, the type of research performed, and a host of other considerations, cause wide variations in indirect cost rates. Various sets of Federal guidelines have been promulgated which set forth cost pinciples and negotiation instructions to be used for reporting and recovering research costs under grants and contracts. Government-wide guidelines have been issued for educational institutions and for State and local governments.

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