[Research] UC Guidance for Proposal Submissions to Federal Agencies

Mon Jun 30 17:02:10 PDT 2025

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

*National Science Foundation (NSF) IDC Rate Cap: Updated UC Proposal
Guidance*

On June 20, 2025, the U.S. District Court for the district of Massachusetts
issued a decision
<https://storage.courtlistener.com/recap/gov.uscourts.mad.284307/gov.uscourts.mad.284307.77.0_1.pdf>
 and order
<https://cases.justia.com/federal/district-courts/massachusetts/madce/1:2025cv11231/284307/78/0.pdf>
in
favor of the plaintiffs (including AAU and the Regents of the University of
California) who filed a lawsuit challenging NSF’s 15% IDC rate cap policy (NSF
Policy Notice NSF 25-034
<https://www.nsf.gov/policies/document/indirect-cost-rate>).  The court
declared NSF’s 15% Indirect Cost Rate and the Policy Notice: Implementation
of Standard 15% Indirect Cost Rate, NSF 25-034 to be invalid, arbitrary and
capricious, and contrary to law.

That said, NSF reiterated (via updated guidance posted on its website after
the 6/20/2025 court order) of its intention to retroactively apply the NSF
15% IDC rate cap policy.  See https://www.nsf.gov/updates-on-priorities#idc.
Such updated guidance suggests that there is still a risk that NSF will
attempt to retroactively apply a 15% IDC rate to awards issued after
5/5/2025.

*Updated UC Guidance*

For that reason, despite the 6/20/25 court order vacating NSF Policy Notice
NSF 25-034 <https://www.nsf.gov/policies/document/indirect-cost-rate>, UCOP
has issued the following proposal guidance:

Campus proposals should continue to utilize UCR’s current negotiated IDC
rate *and* include the following “reservation of rights” language in grant
proposals submitted to NSF proposals:

“We are submitting this application using the indirect cost rate as
stipulated in our federally negotiated rate agreement.  We note that on
June 20, 2025, the U.S. District Court for the District of Massachusetts
(in *AAU et al. v. NSF et al*, No. 1:25-cv-11231-IT) granted Plaintiffs’
summary judgment motion and vacated NSF’s 15% Indirect Cost Rate Policy
(NSF 25-034).  We therefore plan to draw down in accordance with the
University’s negotiated rate. We reserve the right to challenge attempted
retroactive application of the vacated 15% IDC rate cap policy should there
be a subsequent court ruling allowing NSF to implement the rate cap
policy.”

Note: The above “reservation of rights” language *replaces* the
“disclaimer” language that was previously suggested for use prior to the
6/20/2025 court order. (It would be best to insert the “reservation of
rights” language in the budget justification section of the proposal.)

*Department of Defense (DoD) IDC Rate Cap: Updated UC Proposal Guidance*

On June 17, 2025, the U.S. District Court for the District of Massachusetts
issued a nationwide temporary restraining order (TRO) in response to a
lawsuit filed by AAU, APLU, ACE, and several affected universities
(including UC) challenging the 15% IDC rate cap policy announced by DoD on
6/12/25 (
https://www.cto.mil/wp-content/uploads/2025/06/Indirect-Costs-Memo.pdf).
See, *AAU v. DoD* (D. Mass., No. 25-cv-11740).

Following the TRO, the DoD posted guidance on its website (
https://www.cto.mil/notice-indirect-cost-rates/
<https://urldefense.com/v3/__https:/www.cto.mil/notice-indirect-cost-rates/__;!!Mih3wA!BJuFkXSefY1e3hJFt0f7qhrlHhnHACjG5UkEsk9jEMZuWG-t3UVjUOXXX2gadw3ttZ9HQv_M7Lo0H7-vT9C8hg$>).
Such guidance includes a statement of concern, because it suggests that DoD
will include terms in new grants specifying that if DoD’s 15% IDC rate cap
is allowed by the courts to go into effect, the 15% rate will apply
retroactively (i.e., for periods after June 12, 2025, even for periods
during which the TRO was in effect).

*Updated UC Guidance*

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 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.”

*National Institutes of Health (NIH) IDC Rate Cap: UC Guidance*

On April 4,  2025, the U.S. District Court in Massachusetts issued a
nationwide Permanent Injunction
<https://storage.courtlistener.com/recap/gov.uscourts.mad.280590/gov.uscourts.mad.280590.112.0_1.pdf>,
enjoining NIH from taking any steps to implement, apply or enforce the 15%
IDC rate cap announced in its 2/7/25 supplemental guidance (NOT-OD-068).

*UC Guidance*

UC is not currently aware of any NIH statement announcing an intent to
retroactively impose a 15% IDC rate cap should the injunction be lifted.
Therefore, a “reservation of rights” statement is neither necessary nor
recommended.

UCR should proceed with proposal submissions using its federally negotiated
indirect cost rate.

*Department of Energy (DOE) IDC Rate Cap: UC Guidance*

On May 15, 2025, the U.S. District Court in Massachusetts issued a
Preliminary Injunction enjoining the Department of Energy from implementing
the 15% IDC rate cap policy that had been announced in DOE’S “Policy Flash:
Adjusting Department of Energy Grant Policy for Institutions of Higher
Education (IHE) (the “Policy Flash”).”   *See* Memorandum & Order, *Association
of American Universities, et al. v. Department of Energy, et al.*, Case No.
25-CV-10912-ADB, ECF No. 62 (D. Mass
<https://www.aau.edu/sites/default/files/AAU-Files/Key-Issues/MemorandumAndOrderDOE.pdf>
.).

*UC Guidance*

UC is not currently aware of any DOE statement announcing an intent to
retroactively impose a 15% IDC rate cap should the injunction be lifted.
Therefore, a “reservation of rights” statement is neither necessary nor
recommended.

UCR should proceed with DOE proposal submissions using its federally
negotiated indirect cost rate.

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