INDIRECT COST RATE VARIATION FOR UNIVERSITY-RESEARCH - SEVERAL CONVENTIONAL EXPLANATIONS DO NOT WORK

The wide variation in indirect cost rates that universities charge the federal government in research grants and contracts has reduced the c redibility of universities, as have accompanying charges that universi ties have been overreaching in indirect cost recovery. Many explanatio ns for rate differences have been presented, but not systematically ex amined. Detailed cost and policy data from seven major research univer sities were used to simulate a standardization of costs and policies t o eliminate several of the differences widely believed to contribute t o rate variation. The result was an increase in rate variation, rather than the expected decrease. Furthermore, each of the universities cou ld have charged the federal government a higher rate than actually cha rged, providing evidence that universities have not been over-reaching in indirect cost recovery.