[Research] Dept of Defense (DoD) 15% IDC Rate Cap - Update

[Cynthia J. Johnson]

*~~ Please disseminate this information with those researchers and research
administrators in your department who may find it noteworthy ~~*







*DOD info request related to DOD 15% Indirect Cost (Facilities and
Administration) rate cap: Recommended Response *



Both the Association of American Universities (AAU) and the Association of
Public Land Grant Universities (APLU) have sent messages to member
institutions alerting them to a request some institutions have received
from the Department of Defense (DOD) asking for information “document[ing]
any risk associated with the potential future implementation of th[e 15%]
directive.”   Specifically, DOD has asked universities to send them the
following information: “(a) Current indirect rates, (b) Any risk to DoD if
your institution does not agree to 15% cap and we are forced to terminate
the agreement, (c) Any risk to the university if they are forced to accept
the 15% cap.”



This pertains to the 15% F&A rate cap that DOD sought to apply but that is
not now in effect due to the preliminary injunction issued in AAU v. DOD (a
case in which the University of California is a plaintiff).



Given the ongoing litigation challenging the DoD Indirect Cost rate cap,
the associations and their counsel at Jenner & Block had advised that
institutions exercise caution in how they respond, since their responses
could be germane and material to the lawsuits.



*In response to efforts by Jenner & Block, DoD agreed to send an
instruction to the heads of DoD’s grant-making components today directing
them to STOP including a term in new awards that requires grantees to
affirmatively agree to a term that will automatically revert to a 15%
indirect cost rate if they prevail in litigation.*


*UC GUIDANCE*

Jenner & Block provided the following advice, which UC Legal supports:



If schools have pending requests to agree to a future 15% rate, they should
respond by indicating that they understand DOD is no longer requiring this
term and ask for it to be removed as needed.



If you have questions about responding to a DoD request, please send an
email to REDalert at ucr.edu.



* * *


As a reminder, UC Legal previously issued guidance re: the use of
reservation of rights language related to IDC rate caps in proposal
submissions to the DoD.  Such guidance continues to be in effect and reads
as follows:



To ensure the agency does not construe an institution’s proposal submission
as an “acceptance” of the 15% IDC rate, UCR should submit proposals to DoD
using our federally negotiated rate *and* include the following
“reservation of rights” language to explicitly reserve UCR’s right to
challenge retroactive application of the 15% rate:



“We are submitting this application using the indirect cost rate as
stipulated in our federally negotiated rate agreement.  We note that as of
June 17, 2025, application of the 6/12/25 Department of Defense internal
Memorandum “Implementation of a 15% Indirect Cost Cap on Assistance Awards
to Institutions of Higher Education” is temporarily enjoined, in connection
with the Temporary Restraining Order (TRO) issued in connection with *AAU
v. DoD* (D. Mass., No. 25-cv-11740).  We therefore plan to draw down in
accordance with the University’s negotiated rate.  We reserve the right to
challenge the attempted retroactive application of the 15% IDC rate cap
memo should the TRO be lifted or should there be another court ruling
allowing implementation of the rate cap specified in the Memo.”







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