Special
Feature/Commentary Resolution
of the Indirect Robert
M.
#{149} Universities research. They
a position national
of world goal.
are an important have developed
leadership
setting faculty
in basic
Issue
Rosenzweig
Here is a safe prediction in an otherwise uncertain world: So long as the government supports research in universities, the subject of indirect costs will be an item on the agenda of government-university relations. There is some reason to hope, however, that it may be possible to address the issue in such a way that it will move to a lower positionon the agenda where it can be dealt with as an element in a larger whole, rather than as a part that overwhelms and distorts the whole. The latter condition is, I believe, a fair description of the situation throughout 1991 and into 1992. After the allegations about Stanford, and then about other universities, surfaced, itwas virtuallyimpossible in Washington to discuss science policy or universitieswithout being forced to confront those allegationsand eitherdefend what seemed indefensible or concede malfeasance before the charges had been fully made and the defenses against them explained and evaluated. More importantly, serious and substantive discussions about ways to reform and improve the system, which had been in progress for a year, were abruptly terminated because it was impossible for any government agency to agree to change until they were able to see how the political dust would settle. Fortunately, the atmosphere is quite different now. On the government front, changes in 0MB Circular A-21, announced in October 1991, dealt with the most visible aspects of the issue, the so-called unallowable costs,in a way that lowered the political temperature. As a result, Congress seems less disposed to reach for damagingly simplistic solutions to ill-understood problems, and 0MB, in oonjunction with the Office of Science and Technology Policy, is leading an interagency task force in the most serious review of the indirect cost system in a decade. On the academic front, scientists and university administrations that were frequently bitter adversaries seem rather chastened. There is a chastening sense of how close we have come to doing serious damage to institutions whose health is essential to the health of science in America, and that has produced on both sides a willingness to try to find common ground on which to stand. The recent statement of the New Delegation on Biomedical Research, to which both FASEB and AAU [Association of American Universities] subscribed, is an example. There is something in that statement to which every signatory would object if lifted from the context of a more general agreement. The document is important for what it says, but even more profoundly, for the willingness of the parties to take the risk of joining in it. It is essential now that opportunities afforded by this new atmosphere be seized right now. We are still operating under a set of rules that needs fixing. The failure to do so would be devastating, should other allegations of abuse of responsibility be made in the future. Moreover, if all of us - university administrations, faculties and government officials - keep our sights on what is both attainable and important, fixing the system is actually not all that difficult. Let me suggest the premises on which the needed changes can be built. #{149} Maintaining is an important
Cost
facilities and equipment, ments that enable them
and established to meet
national
institutional research
arrangepriorities.
#{149} Universities in America are not homogeneous, but display a wide variety of characteristics. This diversity- academic, administrative, and financial - isa strength for both education and research, and itis in the national interest to avoid policies that would undermine it. #{149} In addition to conducting research, universities simultaneously educate students at the graduate and undergraduate levels, using the same faculty and frequently the same facilities used in research. That is widely believed to be to the advantage of both research and education. #{149} Teaching and research are often joint enterprises members and other university personnel. Judgment exercised in allocating costs to each activity.
of faculty must be
#{149} Modern research on any significant scale requires support systems and facilities that are beyond those that would be required to meet other university obligations. #{149} Substantial research crease in administrative, sonnel costs.
activity facility,
on a campus maintenance,
produces an inand related per-
#{149} Some of the associated costs can be explicitly and charged directly, project by project. #{149} Other associated costs or in the aggregate. These are commonly charged to tional to research on the
identified
can only be identified on the average costs are regarded as “indirect” and research campus.
sponsors
on a basis propor-
#{149} Federal sponsorship of research on university campuses has evolved on the basis of reimbursement to each university for what Circular A-21 describes as the “fair share” of costs actually incurred, both direct and indirect. For a variety of reasons, that reimbursement has always been less than the total amount expended. Nevertheless, documented actual costs have been the basis on which rates have been set. #{149} For research done under the terms of Circular A-21, universities are to receive no profits or windfall payments of other kinds from government-sponsored research. Those premises point to and focus on the development of more ing and calculating costs, while results are not a reasonable goal in as many different dimensions proposals for reform that fit these
support changes that would uniform methods of assignrecognizing that uniform in a system that is as diverse as ours. Among the specific premises are the following:
science
for carrying out basic and staff, invested in
Dr. Rosenzweig is President of the Association of American Universities, One Dupont Circle NW, Suite 730, Washington, DC 20036, USA.
3236 NEWS & FEATURES Vol. 6 November 1992 w.fasebj.org by Iowa State University Serials Acquisitions Dept (129.186.138.35) on January 11, 2019. The FASEB Journal Vol. ${article.issue.getVolume()}, No. ${article.issue.getIssueNum
#{149} The elimination of artificial caps on any part of the indirect cost rate, and the substitution, wherever appropriate, of threshold rates. Caps are inherently unfair, and because they are not cost-based, they are also inherently arbitrary. Carefully chosen threshold rates, by providing relief from the need for audit, would provide incentives to institutions above the threshold to accept a lower reimbursement level, but they would also allow any institution that feels excessively damaged to justify a higher rate. #{149} Special studies will always be necessary to take account of the variety of circumstances that apply to universities in a nation of continental scope and diversity of institutional types. However, an infinite variety of special study methods is neither necessary nor wise. Development of a limited number of agreed-upon methodologies would make the system simpler to administer and easier to understand. #{149} Greater consistency to different cost pools and indirect.
should be sought in assigning and in allocating costs between
costs direct
#{149} Greater be included
consistency is also needed in the cost base, from which
#{149} Widespread use of time would give costs down, would ity than now exists, on both universities
in deciding what is to the rate is determined.
of predetermined rates for longer periods institutions important incentives to keep produce greater predictability and stabiland would lessen the accounting burden and the government.
Neither a single one of these proposals, nor all of them together, constitutes a revolution in policy or a radical and disruptive break from the past. Rather, they add up to a longoverdue reform of a system that did not keep pace with the growth in the size of the enterprise it was intended to regulate. As a consequence, it produced tension, bad feelings, and bad behavior on the part of all parties to it. We have an opportunity to make major changes for the better. Failure to capitalize on that opportunity can only make a bad situation even worse.
Vol. 6 November 1992 NEWS & FEATURES 3237 w.fasebj.org by Iowa State University Serials Acquisitions Dept (129.186.138.35) on January 11, 2019. The FASEB Journal Vol. ${article.issue.getVolume()}, No. ${article.issue.getIssueNum
Feature/Commentary Resolution
of the Indirect Robert
M.
#{149} Universities research. They
a position national
of world goal.
are an important have developed
leadership
setting faculty
in basic
Issue
Rosenzweig
Here is a safe prediction in an otherwise uncertain world: So long as the government supports research in universities, the subject of indirect costs will be an item on the agenda of government-university relations. There is some reason to hope, however, that it may be possible to address the issue in such a way that it will move to a lower positionon the agenda where it can be dealt with as an element in a larger whole, rather than as a part that overwhelms and distorts the whole. The latter condition is, I believe, a fair description of the situation throughout 1991 and into 1992. After the allegations about Stanford, and then about other universities, surfaced, itwas virtuallyimpossible in Washington to discuss science policy or universitieswithout being forced to confront those allegationsand eitherdefend what seemed indefensible or concede malfeasance before the charges had been fully made and the defenses against them explained and evaluated. More importantly, serious and substantive discussions about ways to reform and improve the system, which had been in progress for a year, were abruptly terminated because it was impossible for any government agency to agree to change until they were able to see how the political dust would settle. Fortunately, the atmosphere is quite different now. On the government front, changes in 0MB Circular A-21, announced in October 1991, dealt with the most visible aspects of the issue, the so-called unallowable costs,in a way that lowered the political temperature. As a result, Congress seems less disposed to reach for damagingly simplistic solutions to ill-understood problems, and 0MB, in oonjunction with the Office of Science and Technology Policy, is leading an interagency task force in the most serious review of the indirect cost system in a decade. On the academic front, scientists and university administrations that were frequently bitter adversaries seem rather chastened. There is a chastening sense of how close we have come to doing serious damage to institutions whose health is essential to the health of science in America, and that has produced on both sides a willingness to try to find common ground on which to stand. The recent statement of the New Delegation on Biomedical Research, to which both FASEB and AAU [Association of American Universities] subscribed, is an example. There is something in that statement to which every signatory would object if lifted from the context of a more general agreement. The document is important for what it says, but even more profoundly, for the willingness of the parties to take the risk of joining in it. It is essential now that opportunities afforded by this new atmosphere be seized right now. We are still operating under a set of rules that needs fixing. The failure to do so would be devastating, should other allegations of abuse of responsibility be made in the future. Moreover, if all of us - university administrations, faculties and government officials - keep our sights on what is both attainable and important, fixing the system is actually not all that difficult. Let me suggest the premises on which the needed changes can be built. #{149} Maintaining is an important
Cost
facilities and equipment, ments that enable them
and established to meet
national
institutional research
arrangepriorities.
#{149} Universities in America are not homogeneous, but display a wide variety of characteristics. This diversity- academic, administrative, and financial - isa strength for both education and research, and itis in the national interest to avoid policies that would undermine it. #{149} In addition to conducting research, universities simultaneously educate students at the graduate and undergraduate levels, using the same faculty and frequently the same facilities used in research. That is widely believed to be to the advantage of both research and education. #{149} Teaching and research are often joint enterprises members and other university personnel. Judgment exercised in allocating costs to each activity.
of faculty must be
#{149} Modern research on any significant scale requires support systems and facilities that are beyond those that would be required to meet other university obligations. #{149} Substantial research crease in administrative, sonnel costs.
activity facility,
on a campus maintenance,
produces an inand related per-
#{149} Some of the associated costs can be explicitly and charged directly, project by project. #{149} Other associated costs or in the aggregate. These are commonly charged to tional to research on the
identified
can only be identified on the average costs are regarded as “indirect” and research campus.
sponsors
on a basis propor-
#{149} Federal sponsorship of research on university campuses has evolved on the basis of reimbursement to each university for what Circular A-21 describes as the “fair share” of costs actually incurred, both direct and indirect. For a variety of reasons, that reimbursement has always been less than the total amount expended. Nevertheless, documented actual costs have been the basis on which rates have been set. #{149} For research done under the terms of Circular A-21, universities are to receive no profits or windfall payments of other kinds from government-sponsored research. Those premises point to and focus on the development of more ing and calculating costs, while results are not a reasonable goal in as many different dimensions proposals for reform that fit these
support changes that would uniform methods of assignrecognizing that uniform in a system that is as diverse as ours. Among the specific premises are the following:
science
for carrying out basic and staff, invested in
Dr. Rosenzweig is President of the Association of American Universities, One Dupont Circle NW, Suite 730, Washington, DC 20036, USA.
3236 NEWS & FEATURES Vol. 6 November 1992 w.fasebj.org by Iowa State University Serials Acquisitions Dept (129.186.138.35) on January 11, 2019. The FASEB Journal Vol. ${article.issue.getVolume()}, No. ${article.issue.getIssueNum
#{149} The elimination of artificial caps on any part of the indirect cost rate, and the substitution, wherever appropriate, of threshold rates. Caps are inherently unfair, and because they are not cost-based, they are also inherently arbitrary. Carefully chosen threshold rates, by providing relief from the need for audit, would provide incentives to institutions above the threshold to accept a lower reimbursement level, but they would also allow any institution that feels excessively damaged to justify a higher rate. #{149} Special studies will always be necessary to take account of the variety of circumstances that apply to universities in a nation of continental scope and diversity of institutional types. However, an infinite variety of special study methods is neither necessary nor wise. Development of a limited number of agreed-upon methodologies would make the system simpler to administer and easier to understand. #{149} Greater consistency to different cost pools and indirect.
should be sought in assigning and in allocating costs between
costs direct
#{149} Greater be included
consistency is also needed in the cost base, from which
#{149} Widespread use of time would give costs down, would ity than now exists, on both universities
in deciding what is to the rate is determined.
of predetermined rates for longer periods institutions important incentives to keep produce greater predictability and stabiland would lessen the accounting burden and the government.
Neither a single one of these proposals, nor all of them together, constitutes a revolution in policy or a radical and disruptive break from the past. Rather, they add up to a longoverdue reform of a system that did not keep pace with the growth in the size of the enterprise it was intended to regulate. As a consequence, it produced tension, bad feelings, and bad behavior on the part of all parties to it. We have an opportunity to make major changes for the better. Failure to capitalize on that opportunity can only make a bad situation even worse.
Vol. 6 November 1992 NEWS & FEATURES 3237 w.fasebj.org by Iowa State University Serials Acquisitions Dept (129.186.138.35) on January 11, 2019. The FASEB Journal Vol. ${article.issue.getVolume()}, No. ${article.issue.getIssueNum
