Update on the Institute's Response to Proposed Funding Caps

To: The Caltech Community
From: Thomas F. Rosenbaum, President; David A. Tirrell, Provost
Date: June 17, 2025

We write to provide an update on the Institute's response to announcements by federal agencies of proposals to implement 15% rate caps on facilities and administration (F&A) costs on academic research grants. 

Yesterday, Caltech joined the Association of American Universities (AAU), the American Council on Education (ACE), the Association of Public Land-Grant Universities (APLU), 10 research universities, and a state university system in filing suit to block the proposed cuts to facilities and administration costs for Department of Defense (DOD) grants. The complaint and motion for temporary restraining order (TRO) were filed in response to the distribution of a memo to universities in which the DOD said that it would cap the F&A rate at 15% for all new awards to institutes of higher education and would renegotiate indirect cost rates to 15% for all existing awards. The memo provided that if current grantees do not agree to the 15% rate by November 10, 2025, the DOD is directed to cancel grants issued at the existing negotiated rates. Today, the United States District Court for the District of Massachusetts issued a TRO prohibiting DOD from implementing its 15% indirect cost rate cap policy, pending a further hearing on July 2.

Caltech will continue to submit proposals and revised budgets to DOD agencies using the Institute's federally negotiated rates. Principal investigators who seek further clarification on process, particularly if contacted directly by DOD agencies to discuss or negotiate their budgets relative to the rate cap, should email David Mayo ([email protected]) in the Office of Sponsored Research.

Our response to the DOD memo aligns with the Institute's actions following announcements by the National Institutes of Health, the National Science Foundation, and the Department of Energy that they will unilaterally reduce the rate used to reimburse universities for the real and necessary costs of conducting research.

In related news, a hearing was held last Friday, June 13, on a motion for summary judgment in the suit filed with AAU, ACE, APLU and peers to challenge the NSF's 15% F&A cap; we expect the judge to rule sometime this week. While we await the ruling, the NSF has agreed to continue to stay implementation of its proposed 15% cap through June 20 and to provide notice of the continued stay by June 18 "to all institutions that have pending funding applications that may be affected."

We will continue to monitor developments and provide you with updates as the situation evolves.