Universities Sue Over DOE’s Plan to Cap Indirect Cost Rates

A coalition of research universities and higher education advocacy groups filed a federal lawsuit Monday against the Department of Energy, asking a judge to immediately block the department’s plan to cap universities’ indirect research cost reimbursement rates at 15 percent.

The lawsuit, filed in Massachusetts district court, argues that “if the DOE’s policy is allowed to stand, it will devastate scientific research at America’s universities and badly undermine our Nation’s enviable status as a global leader in scientific research and innovation.”

Plaintiffs include the Association of American Universities, the American Council on Education, the Association of Public and Land-grant Universities, and nine individual universities, including Brown and Cornell Universities and the Universities of Michigan, Illinois and Rochester.

The DOE sends more than $2.5 billion a year to more than 300 colleges and universities, a portion of which covers indirect costs that may support multiple grant-funded projects, including specialized nuclear-rated facilities, computer systems and administrative support costs. 

DOE grant recipients at colleges and universities currently have an average 30 percent indirect cost rate, and the Trump administration has cast indirect costs as an example of wasteful, difficult-to-oversee spending by universities, even though the costs are audited extensively. Capping the rates at 15 percent would save $405 million and ensure that “every dollar of taxpayer funding is being used efficiently to support research and innovation,” U.S. Secretary of Energy Chris Wright said in a memo Friday announcing the plan. 

However, the lawsuit against the DOE argues that slashing indirect cost rates in half “ignores that indirect costs are necessary for critical research to proceed and are distinguished from direct costs only in that they are not attributable to just one grant.”

The lawsuit comes three days after the DOE announced its plan, which is nearly identical to a plan the National Institutes of Health announced in February. 

Earlier this month, U.S. District Judge Angel Kelley in Massachusetts permanently blocked the NIH plan to cap indirect costs because, she said, it would cause irreparable harm and NIH officials failed to provide any sufficient reasoning, rationale or justification for the change. (The government has filed an appeal.)

“DOE’s action is unlawful for most of the same reasons,” the lawsuit said. “And, indeed, it is especially egregious because DOE has not even attempted to address many of the flaws the district court found with NIH’s unlawful policy.”