Facing a potential annual loss of over $200 million, Duke University and leading academic associations are backing a proposed overhaul of how the federal government reimburses universities for research-related costs. The move comes in response to proposed caps on indirect cost recovery by federal agencies—a policy shift that has sparked legal battles and widespread concern across the higher education sector.
Currently, research institutions like Duke negotiate their rates for indirect cost reimbursement—also known as facilities and administrative (F&A) costs—with federal agencies. For instance, Duke receives an additional 61.5 cents for every NIH dollar awarded to cover support costs such as building maintenance and HR. However, under proposals introduced during the Trump administration, agencies including the NIH, NSF, DOE, and DOD have sought to cap these rates at 15%, a drastic reduction. While those caps are currently blocked by ongoing litigation, Duke warned that the NIH’s proposed cap alone would slash $194 million from its annual budget, escalating to $230 million if fully enacted.
To mitigate this risk, academic institutions have developed a new approach. On July 11, the Joint Associations Group (JAG) on Indirect Costs introduced the Fiscal Accountability in Research (FAIR) model. This revised framework restructures how federal grants account for research support expenses. Subject matter experts developed the proposal from 10 national organisations, including Duke-backed entities like the Association of American Universities and COGR.
Rather than applying a blanket F&A rate, the FAIR model introduces three separate cost categories: general research operations, essential research performance support, and research performance costs. This would shift indirect cost components into explicit line items within project budgets. For example, costs for facilities maintenance, IT support, and regulatory compliance would be incorporated into the “essential support” category, giving institutions the option to either provide an itemised breakdown or allocate a fixed 10% of a project’s total cost.
Jennifer Lodge, Duke’s vice president for research and innovation and a key contributor to the FAIR model, emphasised that the new framework aims not to generate extra revenue but to recover the real costs of conducting federally funded research. “We are not looking for more, we are just looking to recover the costs,” she said. JAG also proposed a two-year transition period to allow institutions to adopt the model and build out the required administrative infrastructure. Kevin Droegemeier, JAG leader and professor at the University of Illinois Urbana-Champaign, stated during a July 15 town hall that the federal government has shown interest in the FAIR proposal and is working collaboratively on reforms. Congress, however, will have the final say.
Lodge stressed that the goal is to work “collaboratively” with lawmakers to embed the FAIR model within the federal appropriations process, ideally maintaining current F&A rates during the transition period. The urgency of the model’s rollout was driven by the need to offer policymakers an actionable alternative before enacting potentially damaging caps. Feedback from more than 175 institutions helped shape the final proposal. While the model’s core structure is likely to remain intact, refinements to specific line items are expected. Droegemeier noted that efforts to revise the funding model date back to 2017, but current litigation and budget pressures make reform imperative. “The days of explaining everything are gone. Now it is time to act,” he said.
