How progress occurs

On February 7, the National Institutes of Health released a notice, effective February 10, to limit reimbursements for indirect costs (IDC) related to its grants. The largest public funder of biomedical research globally, the NIH aids investigations into various issues including combatting cancer, managing infectious disease, understanding neurodegenerative conditions, and enhancing mental health. The agency is a major supporter of research at Harvard, possessing over 1,500 active grants and providing $488 million in funding in the previous year; this new limit could lead to a loss exceeding $100 million annually for the University.

The action instigated several lawsuits aimed at preventing the enactment of the change: one filed by the attorneys general of 22 states, including Massachusetts; another led by the American Association of Medical Colleges (AAMC); and a third spearheaded by the American Association of Universities (AAU), to which Harvard offered a declaration of support. On Monday, a federal judge issued temporary restraining orders halting NIH from proceeding with or enforcing the change until further court instructions.

The Gazette engaged in a discussion about indirect costs with John H. Shaw, Harvard’s vice provost for research, who has been keeping the University community updated on recent alterations and submitted a declaration stating Harvard’s stance in the AAU litigation. This dialogue has been condensed for clarity and brevity.

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What distinguishes indirect costs from direct costs?

Direct costs pertain to the execution of the work itself: this can include salaries for personnel involved in the project, equipment, travel costs, and similar expenses. However, when considering the actual cost of that work, other elements must be evaluated: the buildings, the infrastructure, the laboratories our researchers utilize, the electricity and utilities supporting the facilities, and administrative staff ensuring the research is compliant with associated terms and conditions.

It’s essential to underline that all those indirect activities are vital for supporting research efforts. Reimbursements for indirect costs from sponsors like the NIH do not feed into a discretionary fund for an institution’s unrestricted use. We have a duty to the sponsor to guarantee that those funds are allocated to supporting the research.

So, while these costs are classified as indirect, can they truly be considered “incidental”?

No — they are fundamental to the research endeavor. We require buildings; we need laboratories; we depend on computational resources; we need networks to facilitate scholarship across diverse fields and disciplines. Without the resources provided through the reimbursement of indirect costs, the research simply cannot advance.

Over the past two decades, there have been significant transformations in the execution of biomedical science. Have these transformations impacted indirect costs?

The developments emerging from our laboratories are directly linked to technological advancements over the past several decades. As a result, the costs associated with research have risen universally. For instance, laboratories have evolved to be more advanced and imaging technologies have significantly progressed. Equipment — much of it field-specific and exceptionally specialized — has grown increasingly complex. Additionally, the expenditures for constructing and maintaining laboratory facilities and specialized equipment, as well as for supply computers that enable rigorous and innovative analyses, have also escalated.

Our approach is to supply the necessary resources for a particular laboratory through a sponsored research agreement or a University contribution. When a resource is required by more than one investigator, we scale that resource and support it to facilitate its usage across the institution. This is the advantage of conducting research at a university level.

What is the rate of indirect costs at Harvard?

The indirect cost rate varies slightly among our Schools, but for the general University context, the rate stands at 69 percent. This rate, when considered alongside other factors — such as deducting items like equipment expenses — determines the indirect costs that are reimbursed by the sponsor to facilitate the research.

People frequently cite the 69 percent figure. One point of clarification: this does not imply that 69 percent of the total funding is allocated to indirect costs. It signifies that 69 percent of modified direct funding is added on top to help mitigate some of the support expenses. Ultimately, if one evaluates this comprehensively, approximately 30 percent of the funds we receive from the federal government for sponsored research is directed toward indirect costs. The remaining 70 percent is utilized directly for the research activities.

The indirect funds received from a sponsor do not fully encompass the total costs of all necessary infrastructure and activities to support research. The collaborative relationship between a university and a research sponsor means that both parties contribute.

“No matter how you approach the accounting, decreased funding for research and scholarship equates to fewer individuals involved in research. It results in diminished innovation and fewer discoveries from academic research labs that serve the American populace.”

In the NIH’s announcement, they referenced lower figures for other institutions. Why does Harvard’s rate exceed theirs?

Indirect rates among different sponsors, especially between

The federal administration and organizations are not directly analogous. They incorporate and exclude various elements to which the rate is applied.

Our calculation for indirect costs is periodically negotiated between Harvard and the federal government. We perform our calculations with the Department of Health and Human Services due to the extent of life sciences research we conduct. This computation for indirect rates consists of two key components: an administrative component and a facilities component.

The administrative aspect essentially includes the personnel and systems necessary to oversee the project from a financial standpoint and ensure adherence to federal standards and stipulations. There is a perception that escalating expenses are a result of administrative expansion — that a higher number of administrators is the cause. However, that is not accurate. The rate we obtain for administration has been limited for over twenty years, and we invest more than we collect in indirect costs to guarantee proper support for these initiatives.

The facilities component examines our buildings, laboratories, and the expenses associated with their maintenance and operation, which is where differences between institutions arise. The fraction of those facilities designated for research is incorporated into this rate. This explains why various institutions in diverse regions of the country, with differing real estate markets and scales and complexities of laboratory functions and other facilities, possess distinct indirect rates.

You brought up computational infrastructure as part of the escalating costs of executing research. Does the University offer computing resources centrally, or are they allocated to various grants?

Computational requirements encompass multiple support elements, some of which are general and others tailored to specific research needs. The general elements are usually included in the IDC calculation. These consist of aspects like networks and basic data storage — items of that nature. Project-specific resources, often on a larger scale, are generally covered under direct charges. A prime example is supercomputing resources. If access to a substantial GPU or CPU cluster is necessary for your scientific work, you incur a fee to the relevant department of the University that is facilitating your access to that computational power.

Another critical area is managed data. These datasets are essential for research and must remain confidential and secure, such as identifiable health information. We have established specialized systems and, over the past two years, created a University-regulated data environment that serves faculty throughout the institution. This represents an additional cost, dedicated to a particular category of research activities, meaning faculty usage would typically be factored into the direct charges of a grant. Thus, there is no single answer for computation. It indeed relies on the scale and specific connection to the research activity.

So, considering that even just a decade ago, we are in a transformed environment concerning reliance on big data, immense computational resources, and the accompanying expenses?

Absolutely. I would also emphasize that we are contending with an increasingly intricate federal regulatory framework. We must ensure that the information and outcomes funded by the federal government remain secure. This necessitates implementing protections to shield data from bad actors, which would not only jeopardize our researchers’ contributions but would also not be in the best interests of the nation. Therefore, this high-level computing capability and the security systems we establish are both critical national priorities — priorities that we uphold as an institution.

As the vice provost for research, you submitted a declaration backing the AAU lawsuit. You projected the cost of this transition to Harvard to exceed $100 million annually for FY25, and $590 million through 2030. Can Harvard endure these expenses?

There would be implications linked to these changes. As a nonprofit, we reinvest our resources each year to further our core mission of education and research. To contextualize these figures, the $100 million annualized cost is more than double the University’s operating surplus from the previous year. Thus, despite having a substantial endowment, we lack surplus resources readily accessible to bridge such a deficit.

Why can’t we utilize the endowment?

There is a misunderstanding that Harvard’s endowment functions as a checking account. In actuality, the endowment comprises thousands of individual funds designated for specific uses according to the legal stipulations of the donor’s contribution. These philanthropic donations are vital for supporting the University’s mission, including our dedication to student financial assistance. Harvard allocates as much as it responsibly can from the endowment to assist current and future generations of students and scholars in advancing knowledge; to clarify, we do allocate considerable resources to enhance research beyond what we receive from the IDC reimbursement. We endeavor to pursue all research endeavors at the highest caliber, and the investments we make demonstrate our commitment to this objective. Consequently, these changes would significantly impact our capacity to further that research.

Another aspect to consider is that the NIH policy alteration does not imply that federal funding will be redirected for research in alternative manners — for instance, through increased direct budgets. There will be a reduction in funding for science. Regardless of how you account for it, a decrease in investment in research and scholarship translates to fewer individuals engaged in research. This results in diminished innovation and fewer breakthroughs emerging from academic research laboratories that would benefit the American populace.

What are recent instances of Harvard’s research benefiting society?

Numerous examples exist, such as gene therapies for illnesses — employing novel gene-editing technologies as treatments for sickle cell disease and other ailments. There are cellular and genetic therapies for treating specific cancer types. Research dedicated to understanding and addressing the spread of infectious and drug-resistant diseases. All of these developments are rooted in academic research and would suffer due to this lower level of investment.

You referenced in your declaration a 75-year collaboration between the federal government and research universities. How has this collaboration functioned?

It’s a collaboration that draws envy globally — one that has propelled scientific advancement, economic growth, and American prominence in innovation and discovery.

This relationship is founded on the acknowledgment of the significance of fundamental research in fostering scientific revelations. Fundamental research involves risk, as the outcomes are often unpredictable, and the pathway remains unclear. Academic institutions are particularly well-positioned to engage in authentic curiosity-driven exploration and innovation — more so than for-profit enterprises, which operate on shorter timelines and concentrate on how to turn research into profitable ventures. This encapsulates the essence of the partnership: The government derives the most value from its investment by collaborating with higher education institutions and identifying avenues, as breakthroughs surface, to translate them into beneficial economic and social impacts in areas such as healthcare.

You’ve alluded to the economy. How substantial are the economic advantages of research?

There’s a distinct advantage, though its scale varies based on the evaluator of the impact. In Massachusetts, for instance, for every dollar of sponsored research funded by the federal government, there is a return of two to three times that in economic benefits to the region. It’s a mutually beneficial arrangement that acts as an economic driving force for both the state and the nation.

To illustrate with an example beyond life sciences: Harvard is at the forefront of quantum science, where extensive scientific inquiry has been undertaken for decades that was traditionally regarded as fundamental and far from producing immediate benefits. However, we are now constructing quantum computers at the Massachusetts Green High Performance Computing Center. We have faculty members who lead in this domain, establishing new startup ventures to ensure this transformation yields tangible, measurable economic effects throughout the state and the region. Federal funding has been crucial in supporting the evolution of quantum science research since its inception.

We have abundant instances of fundamental research that require time to develop, with their ultimate repercussions not visible from the outset. This indicates that it’s unwise to limit your investments prematurely. Instead, broad scholarly support and research must be sustained, along with training the next generation of talent who, in many instances, will be the ones to translate what you have uncovered into impact.

How essential is stability for research? You assert that research builds upon prior knowledge, and that disrupting current research hinders progress in the long run.

Disruption can cause harm in several respects. For ongoing research initiatives that incorporate cellular lines or animal research, you cannot halt activities without forfeiting something significant. A delay means retracing steps.

More crucially, this revolves around human beings. It concerns talent. It concerns the capacity of individuals to learn and evolve, to enhance their skills, and to develop insights. In many ways, we are the world’s emblem for this journey, this aspiration. People from around the globe come to engage in that research mission. Disabling that pathway will have profound long-term repercussions on the quality of the research we conduct and, ultimately, on its societal impact.