Judge temporarily blocks DOE’s move to slash university research funding

The DOE policy announced last Friday afternoon upends a congressionally approved process dating to 1965 that allows universities to negotiate a reimbursement rate for the indirect costs of science and energy research under federal grants, and would instead apply a blanket indirect cost rate of 15 percent. While all universities receiving DOE grants would be affected, prominent research universities with large nuclear science programs have a lot at stake, and several have joined the lawsuit.

What’s in the policy: The DOE said it will limit financial support of “indirect costs” of DOE research funding to 15 percent, claiming the cuts would save $405 million annually while “halting inefficient spending by colleges and universities while continuing to expand American innovation and scientific research.”

When a university is awarded grant funding for research, it receives both the full value of the grant—including direct costs of research—and an additional set percentage of the direct costs to cover the indirect costs of research. Those costs are also known as facilities and administrative (F&A) costs.

Universities typically negotiate an indirect cost reimbursement that is applied to the direct costs of any federal research grant funding; actual costs are later confirmed by audit. The DOE’s memorandum says the agency will no longer use the negotiated indirect cost rate, that it “is undertaking action to terminate all grant awards” that don’t align with the policy, and that “all future Department grant awards to [institutions of higher education] will default to this 15 percent indirect cost rate.”

According to the DOE’s announcement, the average indirect cost rate at colleges and universities is “more than 30 percent,” and “a significantly higher rate than other for profit, non-profit, and state and local government grant awardees.” The DOE is initially taking the action only with respect to university grants.

The suit: The AAU, which represents 71 leading research universities, was joined by the American Council on Education, the Association of Public and Land-grant Universities, and nine universities in filing a lawsuit in the United States District Court for the District of Massachusetts against the DOE and Energy Secretary Chris Wright seeking to halt the rate cut policy. The universities that joined the suit are: Brown University, California Institute of Technology, Cornell University, the University of Illinois, MIT, the University of Michigan, Michigan State University, Princeton University, and the University of Rochester.

The AAU issued a statement on the DOE rate cut on April 14: “Besides damaging the ability of research universities to help strengthen our nation’s energy sector and create new American economic opportunities, this cut would also undermine universities’ training of the next generation of highly skilled energy sector workers and innovators,” the AAU said. “The loss of this American workforce pipeline would be a blow to the U.S. economy, to American science and innovation, and to our dominant position in the world as a leader in energy and other critical areas of research. It would be, quite simply, a self-inflicted wound and a gift to competitors and potential adversaries such as China.”

The National Institutes of Health issued a similar policy in February, capping indirect costs rates for NIH research at colleges and universities at 15 percent. That policy was similarly challenged in the U.S. District Court in Massachusetts, and, like the DOE’s action, was initially blocked by a temporary restraining order. The NIH cuts are now blocked by a permanent injunction issued April 4. The Trump administration filed an appeal on April 8.

Impact on nuclear research: Prominent research universities and universities that carry out significant nuclear research tend to have negotiated indirect cost rates significantly higher than the 30 percent cited in the DOE announcement because they house and maintain expensive lab equipment with specialized maintenance and administrative costs. And because indirect costs apply to shared equipment, an expensive piece of equipment that supports multiple lines of research—a research reactor, for instance—translates to higher indirect cost rates than similar equipment designated as a direct cost of only one research project.

The University of Michigan, for example, agreed to an indirect cost rate of 56 percent with the federal government in July 2024, and based on that rate expects to receive about $42.2 million for reimbursement of indirect costs annually, according to the suit. Reducing the reimbursement rate to 15 percent would cut the university’s cost recovery by $31.1 million, to $11.4 million, and leave the university with a budget shortfall.

“Because universities cannot sustain DOE-funded programs at the 15 percent indirect cost rate that DOE will now inflict, myriad critical projects—often the product of years or decades of effort—are in jeopardy of being stopped in their tracks,” the plaintiffs assert. “These include the development of advanced nuclear and cybersecurity technologies, arms control verification mechanisms designed to reduce the risk of nuclear war, novel radioactive drugs to diagnose and treat cancer, and upgrades for the electrical grids that keep the lights on in rural communities, among many others.”

The DOE’s stance: The DOE estimates that it provides over $2.5 billion annually to more than 300 colleges and universities through grant programs.

“The purpose of Department of Energy funding to colleges and universities is to support scientific research—not foot the bill for administrative costs and facility upgrades,” said Energy Secretary Chris Wright. “With President Trump’s leadership, we are ensuring every dollar of taxpayer funding is being used efficiently to support research and innovation—saving millions for the American people.”

The DOE’s announcement states that, “While the department is cognizant that many grant recipients use indirect cost payments to effectuate research funded by the Department’s grant awards, these payments are not for the Department’s direct research funding. . . . To improve efficiency and curtail costs where appropriate, the Department seeks to better balance the financial needs of grant recipients with the Department’s obligation to responsibly manage federal funds.”