Research Policy Analysis and Coordination
Background on Rate Agreements
Each UC campus, in coordination with UCOP, develops and negotiates an F&A rate agreement with the U.S. Department of Health and Human Services (DHHS) Cost Allocation Services. The formulas in these negotiated F&A rate agreements are applied to all externally funded projects, including U.S government grant-making agencies and non-federal sponsors, to calculate prohect-specific indirect costs. For most U.S. government-funded grants, UC's federally-negotiated Facilities and Administrative (F&A) rate agreements, which are calculated on the assumption of full-cost recovery, will be applied, according to 2 CFR 200.414(c)(1).
In the lead-up to the F&A negotiation, each campus submits a proposal that calculates its total research costs (direct and indirect) during a given year. Then those costs are compared to the total amount of all direct costs of research supported during the same year to arrive at a proposed rate at that campus. This proposal is reviewed by the federal government and negotiated down to a final rate. The final negotiated rate then applies to all new grants and contracts at that campus, unless limited by statute, regulation or other agency rule, going forward for the next three to five years, until the next F&A rate negotiation.
When working with non-federal sponsors of research, we seek to apply our federally-negotiated rates as UC considers the application of these rates as a proxy for full-cost recovery. Some non-federal sponsors, however, have policies that do not allow the application of UC's F&A rates. In such cases, an exception to UC policy may be granted — before a grant proposal is submitted.
The university strongly discourages exceptions to UC's policy on full recovery of costs; however, we know that in relatively rare circumstances UC's mission may best be served by accepting a sponsored award with indirect cost recovery that is below the specified rate for the sponsored activity. In such situations, the sponsored activity should be critical to UC's mission as each approved exception reduces necessary financial support for critical University administrative functions and campus infrastructure.
UCOP has established certain UC Rates, indirect costs rates for classes of sponsored activities separate from federally-negotiated rates that are applied to certain types of sponsored activity.