The previous post in this two-part series focused on the United State’s current research funding model and the history behind it—but today, we’re facing policy debates that may radically change this long-standing process.

In the last two years, the U.S. federal administration has pushed for changes to how federal funds are allocated and used. A largely impacted area of our current model is indirect costs (IDCs), which have been heavily scrutinized.

Although the proposed 15% flat rate for IDCs failed in 2025, researchers agreed that the way these rates are currently calculated could be made clearer and more transparent.

A coalition of universities and other research institutions created The Joint Associations Group (JAG), and they developed a recommendation known as the Financial Accountability in Research (FAIR) Model—a new way to calculate IDCs.

To recap, indirect costs are expenses of doing research that cannot be directly attributed to a single project. Sometimes referred to as “Facilities and Administration” (F&A), these include electricity, water, research administration, IT services, and other broadly used infrastructural needs. Since it is difficult to set these costs per individual research project, institutions have calculated an average usage cost over a short range of years, approved through a series of negotiations with the federal government (often with accounting offices at the Department of Defense Office of Naval Research and the Department of Health and Human Services). 

IDCs vary greatly. For example, Seattle Children’s Hospital’s IDC rate is 87.7% for bench research whereas the University of Mississippi’s IDC rate is 46.5% for on-campus research. And the current process to calculate these rates is long and cumbersome. The FAIR model hopes to change that.

The FAIR model proposes to switch from direct and indirect costs to three new components: Research Performance Costs (RPCs), Essential Research Performance Support (ERPS), and General Research Operations (GROs). RPCs are the same as direct costs—research effort, reagents and supplies, research publication costs, and other expenses that are directly related to the project. 

ERPS, the brand new component, takes previous IDC items and reclassifies them as direct costs under four categories. 

  1. Regulatory compliance: Any costs related to human and animal research protections and regulations, like institutional review boards, institutional animal care and use offices, etc.
  2. Award management, oversight, and reporting: All administrative work highlighted in the research funding roadmap after the notice of award, including financial management of the award, research project progress reporting, and award close-out.
  3. Research information and data services: Costs of digital repositories where data is stored and/or made accessible for sharing as well as the personnel required to maintain said repositories.
  4. Essential research performance facilities: Costs for research spaces like utilities and maintenance, leases, and other facility expenses that directly support research.

Although this seems straightforward on paper, the recalculations that institutions would be required to perform may be challenging and cumbersome during the adoption phase. For example, institutional review boards (IRBs) are legally required for any research that involves human subjects; the boards determine whether the research proposal abides by the principles outlined in the Belmont Report to ensure safety of the participants. Currently, when institutions have their own IRBs, the operating costs associated are often characterized as IDCs. In the FAIR model, IRBs would fall under ERPS which means that for each project, there would need to be a budgeted IRB cost—the institution would need to calculate the IRB’s operating costs for the initial application review and for each continuing review or unanticipated problems and adverse events reporting. While initial and continuing reviews may be straightforward to calculate, the operating costs for reporting adverse events and anticipated problems may not be as clear, making calculations challenging in the adoption phase and requiring institutions to do extra work to align their own cost accounting with the new model.

The final component of the FAIR model is GROs—the rest of the indirect costs, which include human resources, procurement, and other resources. The FAIR model recommends that GROs be capped at 15% of the complete research project budget.

Currently, the FAIR model is only a recommendation from JAG and has not been adopted by any funding agency or government office. However, as policy debates on research funding continue, some see it as the best option for research institutions going forward. 

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