Trump’s 15% F&A (Indirect) Rate Mandate

Judge Blocks Trump 15% F&A (Indirect) Rate Cap for NIH Grants

Judge Angel Kelley’s ruling on March 5^th to block a change by the NIH to impose a 15% reimbursement rate cap for F&A (indirect) costs means that the Trump Administration won’t be able to impose the 15% indirect rate cap on grants for the foreseeable future while the litigation plays out.

However, we are concerned that legal actions will not dissuade the Administration from work arounds, and eventually passing actions that have the effect of limiting indirect costs to 15% and believe it prudent to plan ahead should the Administration prevail.

HHS Secretary Kennedy Rescinds Richardson Waiver

As a case in point, on March 3, 2025, the Department of Health and Human Services (HHS), under Secretary Robert F. Kennedy Jr., officially announced the rescission of the Richardson Waiver, a policy in place since 1971 that required public comment for certain rulemaking processes.  HHS will no longer need to seek public opinion for rules related to agency management, personnel, grants, or contracts unless otherwise required by law – giving HHS greater discretion to expedite policy changes.

We believe this was done to make it easier for the Administration to change rules – like work requirements for Medicaid recipients, and changes to NIH funding easier for Secretary Kennedy to enact.

Business As Usual – For Now

However, until those changes are lawfully enacted, we will continue to operate under the existing rules.  As stipulated in the CFR, changes to the way HHS operate must be reflected in Notice of Funding Opportunities.  Until these changes are enacted and reduced to requests for proposal, we will continue with business as usual.

Our Opinion – NIH Indirect Rate Cap

The Administration is attempting to limit the F&A (indirect) costs that NIH grantees can charge the government to 15%.  However, they are NOT de-funding NIH!  What does this mean?  We believe if the Administration is successful – in general – this means that slightly smaller awards will be granted to individual awardees, but a slightly higher volume of awards will be granted.

There are NO SAVINGS TO THE TAXPAYER despite whatever you read or see on TV or social media under this scenario.

Who’s Getting Funding?

NIH awards grants based on an overall impact (or priority) score system where, like golf, a lower score is better.  We believe that slightly higher scores may now see funding.

NIH has also recently announced that they are centralizing the peer review process.

Choices For NIH Funded Companies If Trump is Successful

NIH grantees with F&A (indirect) rates greater than 15% will have one of three choices:

1.  Find a way to lower your F&A rate. If the Administration is successful, we will advocate that our NIH funded clients begin to run their accounting system more like non-profit organizations.

Webinar Under Development: NIH Grants—Living in Trump’s 15% World                                                         

We are developing webinar materials to educate our clients and friends about how to document and effectuate a change in accounting method that would see traditional indirect expenses, like rent, be treated as a direct expense – perhaps based on square footage usage allocations.  We will discuss several ways costs can be “converted”.       

Obviously, we will cover how to talk to your employees about how they fill out their timecards – as employee labor costs are a huge component of possible direct and indirect costs and whistleblower rules need to be adhered to when directing employees. Or,

2. Take a loss on the difference between their actual F&A rate and 15% (where the loss is typically covered by commercial revenue). Or,

3. Raise VC money to cover the difference and dilute their equity

SBIR Reauthorization

On a positive note, our friend Jere Glover at SBTC tells us that his testimony to Congress to INCREASE the SBIR/STTR share of funding was well received by 3/4^ths of the small business committee members, with Joni Ernst introducing her own “INNOVATE Act.”

We will keep you appraised of any new major developments as warranted.

Jameson & Company