ADDENDUM: Re: IDCs and research administration

Arthur E. Sowers arthures at
Wed Mar 27 02:06:42 EST 1996

After I wrote my part of the post quoted below the "===" and not 
modified, I thought of something worth mentioning. A true story about 
"tactics and rationale" in research administration hierarchies.

I was at another institution and had the opportunity to question people 
involved and so am able to piece together the following.

The institution had 30-40 PhDs at the time and needed graphic arts 
support. An outside person was hired and worked out of her home, charging 
$16 per hour for line drawings, artwork, etc., on a piece-work basis. The 
work and orders were passed back and forth by courier, so turn around was 
quite decent, and except at busy times, was usually done in one day or 
two at the most. Sometimes she visited PIs to clear up problems that could 
not be sketched or passed over the telephone. She told me that her yearly 
income from ALL of the institution was about $14,000.

Now, a bright research administrator came up with the following bright 
idea. Lets have a full-time internal person do the graphics art work. So, 
they hired a person at $30,000 salary (not counting fringe benefits) and 
bought a very fancy computer system (I was told this cost $100,000, 
although I did not confirm this and no memo came out). The 
research administration told us that we would have the "service" of this 
person (and equipment) free. In other words, we just brought up our work 
and get it done for free. That was pretty neat. We were not forbidden 
from using the outside person and courier, but we would have to pay for 
that service. So guess what happened? Yep, the outside person's work 
dried up. So guess what happened next? The workload of the work done for free
expanded to the point where the institution hired a second, on board, 
person and some additional computer equipment (you can guess what 
additional funds were paid out). Note that because of the increased 
workload the inhouse person organized the workflow so that the PI had to 
make appointments with the inhouse person and work took, usually, about a 
week to do (compared to the faster turn around before).

So guess what happened after that? After the second year, the institution 
decided to start charging for all work and a schedule was drawn up. Most 
of the rates, as I remember, were for services substantially above the 
$16 per hour charged by the original off-site person and the services 
were delivered slower. Almost imediately the workload fell back (because 
people didnt' get it done for free any more) and they had to lay off the 
second person (those parts of the second computer system devoted to the 
second person then became idle).

The institution continued to grow and I expect that the workload 
increased back up, but this story illustrates how administrative 
rationale operates within "logic-tight" compartments and ends up with 
something that, at least in my books, is wasteful and senseless. 
Extrapolation of the services of the outside person would have cost 
the institution about $14+ K per year for that 2-3 year period I talked 
about, but the inhouse setup cost them about $150K the first year and at 
least another $50-60K the second year, and in the end, when people were 
paying for the service, they were paying more for it.

Coming back, now, to "whats the point of this" there are two items. 
First, I don't know for sure, but I would be willing to bet that a 
substantial fraction of at least the computer equipment bought was 
eventually presented to the auditors who establish the indirect cost rate 
as a cost of doing research and this helped increase the indirect cost 
rate. It is widely documented that these indirect cost rates continually 
went up until about two years ago when the government cut them back (at 
our institution from 52% to now 45%) at most if not all institutions. 
Second, the whole story of how an administrator, brought into the 
picture, spent some part of his time and effort dreaming up a "change," 
under the idea that this would benefit everyone in some way, and the end 
result may be interpreted differently depending on who you talked to. In 
my mind "progress" (which it seems is becoming more unstoppable) is not 
always good, and few of the original anticipated benefits were ever 
achieved. In the end, more money was spent (wasted?).

I have seen similar scenarios in other "core facility" and 
"computer/network" functions that have been brought into existence, and 
eventually charged to the government. The story (the phenomenon) repeats 

When considered against the backdrop of what is going on accross the 
country right now, what I mentioned above is a miniature version of the 
reverse of a new business paradigm: outsourcing. See, after they set up 
the inhouse function, somebody comes up with the idea of firing all the 
inhouse people and outsourcing (because its cheaper).  Why this could 
not have been figured out beforehand in the story I told is open for 
speculation. In any case, similar stories get told from time to time 
in the Wall Street Journal and many businesses and corporations have 
found, also, that they often do not get the results that they expect 
or want. But, yet, administrators and managers will continue to 
rationalize, plan, and execute. And get paid .... sometimes bonuses 
and perks in addition to high comparative salaries, and if anything 
goes wrong, the suffering will surely be passed on down to those who 
occupy lower positions in the organization.
Art Sowers

On Tue, 26 Mar 1996, Arthur E. Sowers wrote:

> On 25 Mar 1996, Drmarts wrote:
> > >Art Sowers wrote:
> > >>On 23 Mar 1996, glover martin wrote:
> > 
> > >> Michael S. Straka (mike.straka at wrote:
> > >> : On 20 Mar 96, Troy Shinbrot <shinbrot at> wrote:
> > >> 
> > >> 
> > >> : BTW, I'd be interested to hear about overhead rates at other 
> > >> : institutions.  Here (University of Colorado Health Sciences Center,
> > >> : Denver) it is 51.1%.  Anybody care to go for the record?
> > > >
> > >> I believe here at Harvard the rate is 70%.
> > > 
> > >> Trei
> > 
> > >This is all chickenfeed. I know one private biomedical research institute
> > 
> > >where the overhead is about 105% or more. And, at some of the so called 
> > >"beltway bandits" around the beltway (otherwise known as rout 495 around 
> > >Washington, D.C.) it is at least 150%.  Most of the universities are 
> > >around 50% to 70-80%.
> > 
> > >Art Sowers
> > As this has turned into a "Mine's Bigger!" competition, I thought I ought
> > to go over some of the rules.
> > 
> > I'm no accountant, but I do know that there are at least two ways to
> > calculate indirect costs. The high percentages quoted by Art are for
> > indirect costs on a salaries and wages base. In other words, it's not 105%
> > of the entire grant amount, its 105% of the salaries category only. The
> > lower percentages are calculated on a "modified direct costs" base. I'm
> > not certain, but I think this is a percentage of the direct costs of the
> > grant LESS salaries and wages. I believe Art is correct in stating that
> > many non-university based research institutions use the salaries and wages
> > base while most universities use the modified direct costs base. 
> It is useful for people to learn what figures belong in what category. 
> The "normal" situation is as follows:
> Salary (take as X) + Fringe benefits (take as roughly 0.33X) + supplies 
> and all other materials and service costs (including subcontracts sums of 
> BOTH direct and indirect costs). This is "usually" the total indirect costs.
> The "normal" calculation of the total grant cost is IDC multiplied by the 
> overhead. Here at UMAB, it was 45%, a generally low end figure. So if you 
> need $100,000 per year to run your lab (direct costs), then the grant 
> goes in asking for $145,000 (with $45,000 going to the institution for 
> "overhead").
> Where the "modified" adjective comes in is in calculating the overhead on 
> large purchases, such as a single transaction for equipment costing above 
> a certain figure, which may be $5,000 or $10,000. You see, it would be 
> ridiculous for an institution to charge $4,500 for processing a few 
> sheets of paper and writing one check for $10,000. So, for the "modified 
> total direct cost" calculation, the large item figure is subtracted from 
> the total direct costs when calculating the total overhead.
> There are exceptions, details, and other factors that come into play. For 
> example, NIH may "disallow" equipment, salaries, etc., at several points 
> in the proposal review process. I have now heard of PIs getting 30-40% 
> cuts in their funding and in recent articles in the media (Science, The 
> Scientist) a number of programatic decisions are being routinely made to 
> grant less and sometimes substantially less funding, and for shorter 
> funding periods, than requested. 
> > I've read several disparaging remarks about research administrators and
> > accountants here. It seems to me that those making the remarks remain
> > quite ignorant of what it is these people to _for_ them. How can you
> > remain ignorant of such details as _how_ the indirect costs for your
> > grants are calculated and still gripe about the people who take care of
> > such petty details for you, so that you can use your superior intelligence
> > in the pursuit of Higher Knowledge. 
> > 
> > Sherry
> > 
> Support staff DO provide many functions for PIs, and facilities (such as 
> libraries) are major expenses. Ordering supplies (and moving zillions of 
> little papers across desks) does take work and a good number of people. A 
> staff in what is called on many campuses the "grants and contracts" 
> office does have to monitor and insure that the institution interfaces 
> correctly and legally with granting agencies, or other funding sources. 
> Sometimes the electric and heating bills, etc., are justifiably 
> chargeable to indirect costs. Maybe even some administrators salary. I 
> have yet to see (and wish I could see) an honest accounting of what goes 
> into indirect costs. Only once did I see such sheets, but the breakdown 
> was still very hidden.
> I see several problems: when I, as PI, have to pay for postage, 
> envelopes, letterhead, photocopying, telephone calls, faxing, virtually 
> all stationary supplies, additional library fees, and often other hidden 
> fees (where they are not disclosed ahead of time), and institutional 
> practices where a new service is started one year and given to the 
> staff/faculty for free and then the next year, it is moved to direct 
> costs, it borders on unethical. In the past, many institutions absorbed 
> "service contracts" as part of indirect costs, but more recently started 
> moving these to direct costs. Under various circumstances, the aquisition 
> of computers (and LANs, etc) may have been provided to PIs and their 
> labs originally at no cost to the PIs budget, but I am seeing many 
> efforts to "force" the PIs into paying for these and related costs 
> (including maintenance) out of their budgets (i.e. direct costs on 
> grants). I am seeing departmental administrations charging fees and rates 
> to individual PIs for the use of departmental facilities (stills, 
> incubators, tissue culture rooms, and other functions) in a practice 
> which takes (maybe?) indirect cost money to make capital investments and 
> then make an internal "profit" off the PI (effectively becoming a 
> "hidden" overhead) by forcing the PI to charge the cost against the PIs 
> direct costs. I have seen photocopy services charge PIs rates that are 
> higher than market rates, and the difference means the PI just has to 
> hassle the walk across the street and handle the paperwork (which is a pain).
> Another recent new practice which is becoming even more widespread is to 
> move larger fractions of faculty/staff salary from institutional resources 
> (i.e. the institution or department paid for that salary out of its hard 
> money budget) to the direct costs of the grant. All of these changes 
> effectively take money AWAY from the PI so that he/she has less funds 
> to do the research. All of these changes are dictated at the highest 
> levels of the administrations at the institutions and the PIs never 
> have any "input" into these decisions.
> Now, regarding the "research administrators" self-image, as it may be 
> disparaged by any of my prior remarks, I would LIKE to relate some of my 
> own recent experiences with how what "service" I get from THEM has been 
> decreasing and what "headaches" I get from THEM have been increasing. 
> However, this would go into a lot of specifics that I would prefer, just 
> at this moment, not to put in a widely public forum. Suffice it to say 
> that using the word "annoyed" is mild. I would also say, that not too 
> many years ago, the people in Grants & Contracts that I worked with were 
> very nice, understanding, and helpful on numerous items. As a grant 
> author, and as a reviewer on study sections, I NEVER saw anything on 
> proposals that was contributed by "research administrators" that helped 
> me get funding. If anything, the "help" that research administrator input 
> gave to a proposal was what I called "technical compliance with 
> institutional regulations and granting agency regulations". If anything, 
> not having this compliance could result in a block or delay in funding. 
> In the end, who would get hurt by this? Not the administrators who were 
> on hard money, but the PI. In fact, the whole string of people I have 
> dealt with in connection with proposal submission are surprizingly aloof 
> about their functions, especially recently. I also had submitted two 
> separate written complaints about this and they have remained unanswered.
> Art Sowers

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