UC Berkeley lags competitors in recovering costs of research

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Mingxi Zheng/Staff

As UC Berkeley awaits a verdict on whether the federal government will pay a greater portion of its indirect costs of research this year, the campus finds itself at a disadvantage compared to private research universities.

With state funds in decline, the campus has increased its focus on recovering the indirect expenses of federally funded research, since the campus currently spends millions covering indirect costs that research sponsors do not cover.

But even if the campus succeeds in its request that the federal government fund a higher percentage of indirect costs, the campus still will not be on par with its peer private research universities, which receive funding through a different federal agency.

As state support drops, funding the campus’s indirect costs — the overhead expenses like building operations, utilities and administrative office expenses necessary to carry out research — is taking a higher priority, which the campus identified when it requested a higher rate of recovery in July.

The campus submitted a proposal for a 62.3 percent indirect cost recovery rate — an almost 10 percent jump from the current 53.5 percent rate.

Indirect cost recovery makes up a significant portion of the campus budget. In fiscal year 2010-11, the campus was awarded about $691 million in sponsored research, teaching and public service projects. Of this, indirect cost recovery funding totaled $114.6 million. Federal agencies like the National Science Foundation sponsored $79.8 million in indirect cost recovery funds, while private contracts and grants yielded $30.2 million and state agencies contributed $4.5 million.

When research sponsors do not fully cover indirect costs, the campus has to make up the difference with its own unrestricted funds.

In the UC system, each campus separately negotiates an recovery rate with the United States Department of Health and Human Services. The campus’s agreement will be finalized by late spring or early summer 2012 and will last four to six years, according to campus spokesperson Dan Mogulof.

However, the request will most likely not be granted in full because the campus’s interaction with the Western Field Office of the department’s Division of Cost Allocation is “not really a negotiation,” according to Steven Beckwith, vice president for research and graduate studies at the UC Office of the President.

“The federal funding agencies simply don’t want to give us higher rates,” Beckwith said.

In contrast, private universities, such as Massachusetts Institute of Technology — whose rate is 15 percent higher than the UC average of  53 percent — negotiate much more favorable rates because they have requested consistently high rates in the past.

In fiscal year 2010-11, MIT and Harvard University recovered 68 percent of indirect federal research costs and Yale University recovered 65.5 percent of the costs, compared to UC Berkeley and UC San Diego’s rates of 53.5 percent and 54.5 percent, respectively.

UC campuses also see lower rates because of inconsistencies in how federal government agencies apply rate-determining guidelines, according to Howard Gobstein, executive vice president of the Association of Public and Land-Grant Universities.

The department determines rates for thousands of universities — including the UC — and different regional offices do not always apply rate considerations consistently, according to Gobstein.

The federal Office of Naval Research in the Department of Defense is assigned only a few dozen universities involved in defense research — including MIT, Stanford University and California Institute of Technology — and those negotiations tend to result in higher rates, he said.

The Department of Health and Human Services is trying to mitigate concerns over rate discrepancies by participating in a federal working group on applying rates to educational institutions, according to Bill Hall, director of the News Division of the department.

“There is government-wide acknowledgement that we must take a fresh look at these kinds of issues, policies and procedures that impact the research grant community and where possible, search for standard procedures and opportunities that reduce grant recipients’ administrative burden,” Hall said in an email.

Some UC Berkeley faculty worry that raising indirect cost recovery rates could adversely impact the availability of research grants and have differing opinions about how to allocate increased indirect cost funding, according to Bob Jacobsen, chair of the campus division of the Academic Senate.

Private foundations will not solve the UC campus’s indirect cost recovery challenges, since most foundations pay very low rates or do not fund indirect costs at all, Beckwith said. UC campuses have waived recovery funding obligations with foundations such as the American Heart Association in the past. However, willingness to provide waivers is decreasing, and reliance on federal funding is increasing, he said.

The UC recovers nearly $900 million yearly in indirect costs from about $4 billion in externally sponsored research, according to a UC Working Smarter report. Research sponsors do not cover about $250 million, and waiving indirect costs for private foundations and other sponsors costs the university a further $250 million.

“It’s going to be increasingly difficult to accept foundation funds if we can’t recover the costs of research,” said Beckwith.