Indirect Costs

Facilities & Administrative (F&A) Costs Memo dated October 9, 2014 (PDF)

The above memo provides the University’s new federally negotiated Facilities & Administrative (F&A) Costs rate effective September 1, 2014 and clarifies the University’s policies and practices regarding indirect costs. The following indirect costs rate information is provided as a guideline for proposals submitted by The University and is effective immediately:

  • On-Campus Rate: The current on-campus federally negotiated Facilities and Administration (F&A) Costs rate applies to all proposals including those submitted to for-profit entities. Note: UT requires that industry pay all costs, including the full IDC, associated with the performance of industry-sponsored work. The on-campus rate increases to 55 percent for FY 15 and FY 16 and to 56.5 percent in FY 17 and FY 18. Proposal budgets for new projects and competitive continuations should apply the rate that corresponds with the proposed start date for funding.
    • Research proposals with a proposed start date of 09/01/2014 – 08/31/2016 should use 55%.
    • Research proposals with a proposed start date of 09/01/2016 - 08/31/2018 should use 56.5%.
    • All budgets utilizing the federally negotiated rate should be calculated on modified total direct costs (MTDC1).
    • The F&A Rate Agreement (PDF) is posted on the OIE website, along with associated information for Special Facilities Fees, and UT’s clinical trial definition.
  • Off-Campus Rate: The off-campus rate remains capped at 26% and should be calculated on modified total direct costs (MTDC1) for projects conducted off-campus, including projects for which the majority of activities are performed in facilities not owned by the institution and/or to which UT facility rent is directly allocated to the project. Generally, off-campus work must extend for at least an entire semester or all three summer months. Use of the off-campus rate on industry-funded projects must be approved in advance by the Office of Industry Engagement. Projects may not use split rates for on- and off-campus activities. If more than 50% of a project is performed off-campus, the off-campus rate will apply to the entire project.
  • Other Sponsored Programs Rate: This rate should be used for conferences and other projects that do not fall under the research category.  The rate is now 38% and should be calculated on modified total direct costs (MTDC1).
  • State Rate:  Use for proposals funded using State, City and County funding, a 15% rate calculated on TDC2 is authorized.
  • Not-for-Profit:  Proposals to not-for-profit agencies without published rates should use a rate of 15% and should be calculated on the total direct cost (TDC2)
  • Clinical Trial Rate:  Effective September I, 2014, the rate for clinical trials and pre-clinical trials is 25% and should be calculated on the total direct costs (TDC2).
  • Training Rate:  The University’s current federally approved instruction rate is 50% of modified total direct costs.
  • Note: Modified total direct costs consists of all salaries and wages, fringe benefits, materials, supplies, services, travel and subcontracts up to the first $25,000 of each subcontract (regardless of the period covered by the subcontract).

1. Modified direct costs shall exclude equipment, capital expenditures, charges for patient care, student tuition remission, rental costs of off-site facilities, scholarships and fellowships as well as the portion of each subcontract in excess of $25.000.
2. Total direct costs consists of all salaries and wages, fringe benefits, materials, supplies, services, travel and subcontracts. There are no exclusions. A gift to support research is not subject to indirect cost. It includes only those unrestricted funds provided to The University without any terms, conditions or other obligations. All gifts should be processed through UT’s Development Office.

Due to limitations imposed on the University’s ability to fully recover Facilities and Administrative (F&A) costs, also known as indirect costs, currently there are limited means to accumulate the financial resources that are needed to replace or repair major research infrastructure. If the infrastructure unit is part of a University approved user facility, the user charges can accrue over time to support repair and possibly replacement. However, there are many more instruments and considerable research infrastructure that are not part of University-designated user facilities. In these cases costs for repairs or replacement are generally paid from a combination of gift funds, one-time special allocations, discretionary accounts, and direct research funds. All too often the costs exceed the available resources in an organized research unit.

The University allows proposals submitted to industry sponsors to bear the true F&A/indirect costs rate for facilities used in the research. For proposals submitted under the FY 2015/2016 negotiated rated, this represents an increase of 14.49% to arrive at a new industry rate of 68.99%. The decision to ask for this rate from industry sponsors resides with the principal investigators (PIs) at the time a proposal is submitted. Accounts carrying the additional indirect rate for the Special Facilities Fee will have the associated indirect costs returned to the colleges/schools annually on the same cycle as the normal institutional return of indirect costs. The colleges/schools will receive an annual statement indicating the balances of the Special Facilities Fee that have been earned by PI’s in their units for the prior year. The Special Facilities Fee funds are intended to be used for repair, replacement and/or major upgrades of facilities. Requests to use the funds will be made to and managed by the colleges/schools.

The additional overhead charge for the Special Facilities Fee is based on the difference between the true calculated indirect costs associated with the facilities needed to conduct the research and the rate that is determined and ultimately reduced through negotiations with the University’s cognizant agency, the US Department of Health and Human Services. The University calculates the F&A/indirect costs rates for buildings, equipment, and operations and maintenance using a prescribed method. The negotiated rate that can be charged against federal awards is currently 54.50% or 14.49% less in these three categories of costs. The Proposal Review Form allows PIs to elect into the higher overhead rate for industry proposals.

The following table indicates the adjustments through FY 2015/2016:

YearNegotiated RateSpecials Facilities FeeAdjusted Industry F&A Rate
FY 2010/201153.50%9.19%62.69%
FY 2011/201254.00%10.92%64.92%
FY 2012/201354.00%13.01%67.01%
FY 2013/2014 ~ 2015/201654.50%14.49%68.99%

Standards for Privately Funded Clinical Trails

  • Privately supported clinical trials listed in the registry of clinical trials at are eligible for a 25% F&A rate, applied to the project’s total direct costs.
  • Privately supported clinical trials NOT listed in the registry but meeting the following
    conditions may qualify for the 25% F&A rate:

    1. (a) Any research project that prospectively assigns human subjects to intervention and comparison groups to study the cause-and-effect relationship between a medical intervention and a health outcome, including the evaluation of investigational new drugs, devices, treatments, interventions or diagnostics, or alternative indications of approved drugs, devices, treatments, interventions or diagnostics; OR
      (b) The collection or review of data generated or acquired in a clinical setting for the purpose of assessing the safety, efficacy, benefits, costs, adverse reactions or outcomes;


    1. Contact with human subjects or the review of patient care clinical data; and
    2. Performed in an off-campus clinical setting or patient care facility.
  • The University may accept a F&A rate other than 25% where
    1. The clinical trials meet the condition(s) outlined above;


    1. The private entity funding the clinical trial has a previously published F&A rate for support of clinical trials that is different from 25%.
  • Preclinical laboratory studies or studies in animals are not included under the term clinical trial.

Adapted from