In recent days, there has been discussion about the "overheads" or "indirect" costs that universities add on to the cost of research projects. This has been driven by a decision by the US government to reduce the indirect costs of research on grants awarded by the US National Institutes of Health (NIH) from the current 60% to 15%. Comments from people such as Elon Musk has suggested these costs are wasteful and can therefore be easily cut from research grants. In this blog, I make the case for retaining a fair amount of indirect costs on research grants.
Without the indirect costs that universities receive on government research grants, universities would struggle to provide the essential support and infrastructure required for high-quality research to take place. While direct research costs (such as staff salaries, laboratory equipment, travel and consumables) are essential, they are only part of the funding needed. Research relies heavily on a wide array of indirect resources that ensure long-term sustainability, efficiency, and the proper functioning of universities.
Indirect costs include funding for essential services, such as maintaining research facilities and buildings, providing IT infrastructure and support, managing financial systems, and ensuring compliance through administrative and monitoring processes. Without adequate funding to cover these areas, research projects would be more difficult to complete successfully.
To address this challenge and ensure that universities receive adequate funding beyond direct project expenses, the UK government introduced the Full Economic Costs model. The Full Economic Costs model is designed to fairly and transparently allocate funding that covers the full range of costs associated with research activities.
Under this system, universities are able to recover a more realistic portion of the actual costs incurred in hosting and conducting research, helping to bridge the gap between the direct funding provided by grants and the true expenses they face. This model recognises that indirect costs, although not always visible at the project level, are vital to the successful completion and long-term sustainability of research projects.
The issue of indirect cost recovery is not unique to the UK. In the United States, for example, universities receive indirect cost reimbursements through a negotiated rate with federal agencies, but this system now also faces scrutiny over transparency and fairness. Comparisons like these highlight the importance of continually refining models such as the Full Economic Costs model to ensure they remain fair value for governments, taxpayers and universities.
The successful delivery of research projects relies on more than just securing grants for individual projects. It requires a support system that includes well-maintained buildings and other facilities, appropriate technology, efficient administrative processes, and skilled personnel; all of which are sustained by indirect funding.
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