Recovering the Costs of Research

Recouping the full, real costs of research is essential to maintaining the operations of a research university — for everything from keeping the lights on to ensuring that the labs where life-changing research is conducted are state of the art.

UC policy requires recovery of all costs, direct and indirect, associated with extramurally funded research, as articulated in the Academic Personnel Manual at APM-20: "For all tests and investigations made for agencies outside the University, a charge shall be made sufficient to cover all expenses, both direct and indirect."  

Every proposal budget that is submitted for sponsored funding should seek full-cost recovery.  

How Universities Think about "Full-Cost Recovery"

UC is the largest university recipient of federally sponsored research, with most of our funding coming from the National Science Foundation and the National Institutes of Health. Uniform Guidance, found at 2 CFR 200 in the United States Code of Federal Regulations, provides the cost principles that UC applies to recover the direct and indirect costs of research.

The cost principles found in Uniform Guidance "are designed to provide that Federal awards bear their fair share of cost recognized under these principles except where restricted or prohibited by statute," according to 2 CFR 200.100 (c).

Uniform Guidance defines direct costs as "those costs that can be identified specifically with a particular final cost objective, such as a Federal award, or other internally or externally funded activity, or that can be directly assigned to such activities relatively easily with a high degree of accuracy" and indirect costs as "those costs incurred for a common or joint purpose benefitting more than one cost objective, and not readily assignable to the cost objectives specifically benefitted, without effort disproportionate to the results achieved."

"Facilities and Administrative (F&A)"  is an interchangeable term with "indirect costs," "overhead," or "research operating costs."

The Association of American Universities (AAU) provides these expanded definitions with useful examples of indirect and direct costs in its guide Understanding the Costs of Federally Sponsored Research at Universities:

  • "Direct Costs – Direct research costs are what people generally think of when it comes to federal support of research projects. These costs solely support research that is about to take place and often include laboratory supplies, specific research equipment, salary support for researchers and lab personnel, and travel for conducting research or disseminating research results. This is the core of university research, and it’s also where the bulk of the federal investment is spent.
  • Facilities and Administrative (F&A) Costs [Indirect Costs] – In order to perform research on behalf of federal agencies, universities incur a variety of other significant costs both leading up to and during a specific research project that they would otherwise not incur. F&A costs cover the portion of these infrastructure and operational costs related to federally funded research. As described in more detail below, such shared costs include the maintenance of sophisticated, high-tech labs specifically designed for cutting-edge, federally-sponsored research; utilities such as light and heat; telecommunications; hazardous waste disposal; and the infrastructure necessary to comply with various federal, state, and local rules and regulations. The federal government reimburses universities for the share of these university costs that are attributable specifically to federal research."

Taken together, the direct costs and indirect costs of federally-sponsored projects represent full-cost recovery. The dominance of federal funding in UC's research portfolio means that federal accounting and costing concepts are prominent in our own institutional practices and in how we seek to work with other organizations. 

More Background