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Comment by etrautmann | Hacker News Reader

It’s worth noting that Pitt’s indirect rates are normal for universities and this is how the system functions.

Its "normal" because its generally accepted, not because it makes any sense.

I was part of a research lab on grants like that. We had close to $1m in total funding, on top of that indirect was like 50% (so $500k/year) We maybe had 4000 sq. foot of lab space in an old building that wasn't maintained well. We had one bathroom for each gender on the floor for the research arm of two whole medical departments. Two admins for the whole research department of 7-8 labs totallying maybe 60-70 staff.

I ran the numbers and the lab space would have maybe cost $100k/year tops (probably more like $80k, depending on quality) if we were rent out equivalent industrial office space. On top of that you have electrical, heating, telecom, at most $10k. Support services such as HR, cleaning, IT support (of which we didn't use a whole lot) could have been contracted out, at most around $20k. So there was about $350k which I figured was mostly just a subsidy and went to "administration". Not that I was philosophically opposed to it, except maybe the admin.

The parts you list result in wasted research money. The system you complain about results in more R&D getting out into the world.

The money you complain about goes to run an org that has connections, does advertising, provides stable employment when grants fluctuate, has hiring and HR and payroll and a zillion other services, all making those doing the research more able to do research, and provides more channels to move results into production.

So it makes sense. You just haven’t thought through or had to perform all the pieces, so to you it doesn’t make sense.

Ah yes, we need a fudge factor to subsidize a bunch of unquantifiable woo like “advertising” and “stable employment”.

I’m sick and tired of elites telling me basic business operations of profit and loss, value for money, quantifiable results are beyond my peasant brain to understand.

> Ah yes, we need a fudge factor to subsidize a bunch of unquantifiable woo like “advertising” and “stable employment”.

Try convincing the AC guys to work for parts cost + a skilled worker wage * number of hours worked, see how well that goes over. They'll laugh you out of the room, and you'll be left sitting on your ass without air.

The entire world charges overhead for work done. Most of it way more than 25% of the sticker price.

>Try convincing the AC guys to work for parts cost + a skilled worker wage * number of hours worked, see how well that goes over. They'll laugh you out of the room, and you'll be left sitting on your ass without air.

Huh? Thats exactly what they do. Parts + labor

And at what markup do they bill you, compared to what they paid their supplier, and to what they pay the guy who drives out to install it?

(Hint: Nearly half of what you pay on the bill is their overhead.)

It’s wonderful that I can compare proposals and know the bill. To pretend NIH grants are anything remotely like normal private sector contractors is absurd and shamefully deceitful

> It’s wonderful that I can compare proposals and know the bill

Does the NIH not, like, compare proposals before deciding on whether to pay for them?

> To pretend NIH grants are anything remotely like normal private sector contractors

Please enlighten us to the differences that are at all pertinent to this question. Specifics, not vague scare quotes.

While there are classes of grants with different levels of funding, the grants are generally considered on their own merits and not based on how much overhead a the recipients institution would charge. Thats a side negotiation.

It's a side negotiation that, as I understand, happens through a different process, set down by law. But there's still a process, and contracts have been made by the parties involved, and there's a legally mandated timeline for renegotiating those contracts that is not being followed.

You are right that it is different from how the private sector operates. The private sector does not even let you think about negotiating either their overhead or profit margin.

Typically overhead is only charged on a portion of expenses. In our case, anything over $5k or that is part of a "constructed equipment" over $5k (these two categories are the large majorities of expenses in our lab, as most things we buy are components of detectors we build) are overhead free. Supplies/laptops/travel/tools/business meals/inexpensive equipment do incur overhead, but the effective overhead rate is much less than the nominal one.

You're actually still misunderstanding overhead a little.

Overhead isn't applied uniformly. For example, tuition for Ph.D. students isn't charged overhead, nor is (usually) equipment. So on $1m of funding, if you've got 4 Ph.D. students, that may be something like $200k/year of tuition that isn't subject to overhead. Add in another $100k of equipment and suddenly that 50% indirect cost rate is actually more like 35%, so you end up doing $1m of "work" on $1.35m of budget.

Departments often negotiate something called "overhead return", which is a way of returning a small amount of money to the individual departments -- some of this does things like supporting Ph.D. students if their advisor runs out of funds, or helping research faculty bridge short funding gaps. These things are reasonable and help the institution remain coherent through the uncertainty of grant-driven existence.

There's waste everywhere, but it's not quite as bad as it might seem without a deeper understanding of the university research funding model.

It's also worth noting that this overhead percentage is misleading. A lot of other contexts would view $1M of work on $1.35M of budget as 25% overhead, not 35%.

They are high relative to private industry. They're supporting all those administrators that colleges have accumulated.

It's significant that U. Pitt. chose to stop admitting students rather than starting to lay off administrators.

Is there a stat or place I can read more about that? I hear people throw throw the idea of administrative bloat around a lot but would be interested to see data behind that

https://www.forbes.com/sites/paulweinstein/2023/08/28/admini...

Private industry does not run campuses full of graduate courses and basic research that America’s technological prosperity depends on

Those overhead fees go to fund that, so universities don’t have to be even mere full of nepo baby donor legacy admissions than they already are

No, overhead doesn't pay for grad students or techs. That money comes out of the grant funding or tuition fees (if not funded off the grant)

Dude this IS the grant funding they’re slashing. The NIH (and other grantmakers) make research grants and the overhead fee from that goes to the university. This is precisely what they’ve cut

Direct costs, not indirect. Grad students and techs don't see that money, unless in rare instances for a grad student the grant funding is suddenly cut off for one reason or another (private grants or some sequester by the NIH)

You are saying words. They make little sense however. The total cost of running these institutions can be broken down however you want. If the total doesn’t add up to the necessary amount they can’t operate

Not really, and it's not really how things work either.

Private industry is charging/billing cost + margin for profit.

University is saying X is allocated for research, Y is allocated to keep the lights running for the facility and pay for students. The students are generally funded by research, not the University. No research money, no money for students.

I guess you need to compare universities to research institutes like Howard Hughes (HHMI). Unfortunately only academic institutions are eligible for grants from NIH/NSF, so they don't break down their costs like that.

This is incorrect: while some NIH and NSF grants require an academic institution as the prime or sole awardee there are many that are open to private organizations and others that are mandated to be specific to small businesses (SBIR).

Research funding awarded to universities and to performers internal to NASA (back when there was a reasonable amount of that) had overhead rates that were similar to the NIH rates. When I worked at Xerox PARC, we would perform research for other parts of the company and charged overhead too, although the rate was a little lower (around 40%). Institutional overhead has been a regular feature of how research has been organized and funded for 60 years. Change is fine, but most of the costs are legitimate, and it takes time for the rest of the system to adjust to changes in one part of it. Doing it abruptly is damaging the system and will negatively impact the careers of many students and young researchers.

Most non-university non-industry non-government research institutes in the US (eg. Salk Institute, J. Craig Venter Institute, Sanford Burnham Prebys) rely on their researchers applying and getting grants from the NIH and NSF just as university scientists do. And their overhead costs are generally even higher than universities because they have no other source of income other than grants (I used to be faculty at JCVI). HHMI is unusual in that it is funded by a rich person's estate and doesn't need this.

And HHMI makes lease payments, etc, on facilities for researchers at partner institutions that cover a lot of what would be incorporated in indirect costs.

They also cover expenses of people, not specific projects, so the broader grant means that there's less of a need for common overhead across projects.

Administrative bloat is a concern, but these indirect costs include things like equipment, too.

If you build a good lab which has versatile equipment to address many use-cases, the indirect costs will be high.

BS they include equipment. Everything we needed was either bought by us on grant money, or was part of some collaborative grant for the whole department. E.g. and imaging lab that maybe had a SEM or two-photon, etc.

What you bought on one grant, and then is lab equipment being maintained and serviced afterwards is now "facilities" costs.

The university definitely doesn't "service" it at all. If it breaks, you call up the company and hope its under warranty, or you pay someone to fix it, again off the grant funds.

I guess it's fairies performing all those calibrations and restocking all those consumables that can't easily be charged to individual projects.

They did jack crap. Anything more complicated than a light-bulb or a toilet that broke, the lab handled it internally somehow (either getting the company to fix it or doing it ourselves).

There were a few department-wide resources. Again, ultimately funded off someone (or a bunch of people's) grants

Funded as indirect costs.

The "A" of F&A is capped at 26%.

That means any overhead over 26% went to some kind of facilities cost at your lab.

(Most private industry informal accounting would call that 26% "20% overhead").

> They are high relative to private industry.

Academia is not "private industry."

Do you know that “overhead” costs are not equivalent to payouts to administrators?

If my tax dollars are supporting research, I'd rather they go to universities even if that means some bloat in the form of more people hired than otherwise, rather than corporate shareholders.

The overhead rate at every corporation I've worked for is between 70-80%.

Two S&P 100s, one 500.

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