Department of Defense

Indirect Cost Rate Cap Implementation

• On July 18, Judge Brian E. Murphy of the U.S District Court for Massachusetts released his decision granting a preliminary injunction in the lawsuit challenging DOD’s F&A policy. The injunctive relief is granted to all plaintiffs and their members. His order reads:
  
  The Court, therefore, pursuant to Rule 65(a) of the Federal Rules of Civil Procedure, PRELIMINARILY ENJOINS Defendants, their agents, and anyone acting in concert or participation with Defendants from implementing, instituting, maintaining, or giving effect to the immediately effective portions of the Rate Cap Policy, i.e., those portions implementing a 15% cap for all awards issued on or after June 12, 2025, including but not limited to rejecting or treating adversely proposals for DOD funding submitted at universities’ negotiated rates rather than the 15% rate, in any form with respect to University Plaintiffs and Organizational Plaintiffs’ member universities until further order issued by this Court. This includes where a University Plaintiff or Organizational Plaintiffs’ member university is a sub-grantee or collaborator.
• On June 12, the Department of Defense (DOD) issued a memo regarding the implementation of a 15% F&A rate cap for DOD research funding conducted at institutions of higher education (IHE). The memo states that all new awards to IHEs will not allow indirect cost rates higher than 15%, effective as of the date of the memo (June 12). For all existing awards, the DOD is directed also to apply the 15% cap on indirect cost rates through renegotiations. Until a renegotiation is completed, existing awards may continue to operate under their originally determined rate, and the new rate is not retroactive to the beginning of the award but must have an effective date that is not later than Nov. 10, 2025. If renegotiations are not completed by Nov. 10, 2025, the DOD is directed to terminate the award.