I am preparing an NSF grant proposal in mathematics. I am requesting summer salary and a travel budget (and not much else), and after I compute the total I have to add an extra 50% of it and add it as the "indirect costs" of my proposed research.

This feels absurd to me (although it is the same, sometimes with an even higher rate, everywhere in the United States) -- especially since I do not require any special facilities or equipment to conduct my work. Is there a convincing argument to be made that this is reasonable?

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    "Special facilities or equipment" would be direct costs, not indirect costs. Oct 3 '14 at 21:16
  • Some of the answers to this question address why it's expensive to employ people, over and above their salary. (Obviously, all the stuff about equipment and so on isn't relevant.) Oct 4 '14 at 23:24

You can take a more birds-eye view of the question.

Recall that the main purpose of the NSF is to support part of the public policy interests of the U.S. government. Here is a quote from "NSF at a glance":

NSF's goals--discovery, learning, research infrastructure and stewardship--provide an integrated strategy to advance the frontiers of knowledge, cultivate a world-class, broadly inclusive science and engineering workforce and expand the scientific literacy of all citizens, build the nation's research capability through investments in advanced instrumentation and facilities, and support excellence in science and engineering research and education through a capable and responsive organization.

As the NSF says on the same page,

We fulfill our mission chiefly by issuing limited-term grants -- currently about 11,000 new awards per year, with an average duration of three years -- to fund specific research proposals that have been judged the most promising by a rigorous and objective merit-review system.

It is true that indirect costs on a grant don't directly support costs of research - that's why they're "indirect costs". But they do support the national research infrastructure by passing additional funding to institutions that show merit by winning competitive grant funding. The indirect funding helps these institutions provide a research environment not only to the researchers who are awarded grants, but also to other researchers and students.

Supporting the overall national research infrastructure is certainly a reasonable part of the public policy goals of the NSF, and the indirect costs system is not the worst way I can think of to decide which institutions will receive such funding. Of course, there are also equipment grants and other specialized NSF grants, which also help support the national research capacity.

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    Indeed, at many universities, part of the indirect costs goes back to an investigator or department to be used freely. Moreover, most universities use these indirect funds to create internal grants (here called the central development fund) to seed new efforts or pay for research not covered by NSF, NIH, DOE, etc. Oct 4 '14 at 3:18
  • Thank you for this answer. Implicitly I had in mind that the marginal cost to the university of supporting my grant is next to nil, and was a bit annoyed to be asking the NSF to fund the university to do things it would do anyway. But you make a very good case that this is exactly the NSF's intentions.
    – Anonymous
    Sep 25 '16 at 21:15

The indirect costs help to pay for all of the other resources you have access to which are not directly paid for by other costs. For instance, these indirect costs help to pay for administrative assistants, information technology, library subscriptions, utilities, and other costs.

They can also go to pay for the costs of administrators (including the fine folks in your university grants and contracts office who actually submit your NSF proposal).

Whether or not the rate is reasonable for your university is hard to judge, but a 50% overhead rate overall is not that excessive. Compare that to industry or the US national laboratories, where the overhead rate can exceed 200%, and things don't look so bad in comparison.


Is there a convincing argument to be made that this is reasonable?

One answer is no, it's not based on any real accounting. Indirect cost rates were negotiated individually by universities in the early days of federal research funding in the U.S., and they are very difficult to change now (because many funding agencies have to coordinate on these rates). Some universities genuinely have different costs, for example due to location, while others just negotiated more aggressively. There's little rational basis to it, so you can't hope for a detailed breakdown that indicates exactly why it should cost this amount.

On the other hand, the indirect costs are not meant to cover just special facilities or equipment (in fact, those would be direct costs). They are meant to cover office space, library access, computer infrastructure, administrative support, etc. These are all rather expensive, and taking these costs into account could very plausibly increase the total by more than 50%. So even though the numbers aren't arrived at by adding up actual costs, they really aren't crazy.

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    Over the years there have been repeated proposals to eliminate negotiated overhead rates and fix a single rate (of around 50%) for all institutions. This would be tough for a few institutions that have negotiated higher rates, but it would also save an immense amount of effort that is currently going into justifying and negotiating the rates. Oct 4 '14 at 5:40

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