Dear Colleagues,

We are sharing this announcement to update you on a significant policy change released this morning by the National Science Foundation (NSF). The new policy substantially alters the framework for indirect cost recovery, also known as Facilities and Administrative (F&A) costs, on grants and cooperative agreements. F&A costs represent the infrastructure and administrative support necessary to conduct research, such as lab space, utilities, and compliance services. Effective May 5, 2025, NSF will apply a standard indirect cost rate not to exceed 15% of Modified Total Direct Costs (MTDC) to all new awards made to institutions of higher education (IHEs), where indirect costs are allowable. This represents a significant reduction from PSU’s federally negotiated F&A rate and will have notable implications for how we budget and recover costs on NSF-funded research moving forward.

Key Points to Note:

• This change does not affect existing awards and will not require rebudgeting current grants.
• It will apply to all new NSF awards on or after May 5, 2025. Consequently, we will need to use the new rate for proposals going forward.
• We anticipate that this policy may follow a similar path to previous NIH F&A policy changes, including potential legal challenges that could delay implementation. However, any delay may take several days to take effect.

What We Are Doing

 

As NSF remains our largest source of federal research funding, we are taking the following steps to support the campus community:

• Proposal Preparation Support: Faculty submitting proposals on or after May 5 will receive direct support from our SPA Proposal Team. We are working with them to prepare two versions of proposal budgets, one using the new 15% cap and one using the current rate. This ensures flexibility in the event that the policy is delayed or modified.
• Award Negotiation Readiness: As new NSF awards are received, our SPA team will work closely with PIs during the award negotiation phase to revise budgets in accordance with the latest guidance.
• Resources & FAQs: As we learn more about the implementation of this policy, we will post updates and a set of Frequently Asked Questions on our federal impacts website here.
• We encourage all faculty and staff to opt-in to our biweekly research newsletter for additional updates, resources, and funding news. You can subscribe here.

In addition to these actions, RGS is tracking weekly grant termination announcements from NSF and other federal agencies and working to mitigate the impact on PSU faculty, students, and research staff. We are actively reviewing all terminations in coordination with the Office of General Counsel, filing appeals where appropriate, and joining legal actions when warranted. At the same time, we are working closely with our Government Relations team to ensure that our congressional delegation is fully informed about the consequences of these actions on our research programs and student support. Across all efforts, our focus remains on identifying viable alternatives and support mechanisms for the individuals and research activities most affected.

 

We recognize the challenges these actions may pose and remain committed to supporting our research community through this transition. Please don’t hesitate to reach out with any questions.

 

Best regards,

 

Richard A. Tankersley, Ph.D.
Vice President for Research and Graduate Studies