1. What is the difference between a direct cost and an indirect cost?
An indirect cost is any cost that cannot be easily identified (or it would not be cost effective to identify) to a specific project, but identified with two or more final cost objectives. There are three types of indirect costs: Fringe Benefits: services or benefits provided to employees, e.g., Health Insurance, Payroll Taxes, Pension Contribution, Paid Absences, etc
Overhead: indirect costs associated with the performance of a project, e.g., Facility Costs (rent, heat, electricity, etc.), General Laboratory Supplies, etc.
G&A: indirect costs associated with the overall management of an organization, e.g., President’s Office, Human Resources Office, Accounting Office, office supplies, etc.
2. What is an F&A rate?
3. How does the process start for obtaining a negotiated indirect cost rate with a commercial organization?
The notification to DFAS needs to include the following information:
- Organization’s Representative’s Name, Title and Email Address
- Organization’s Name
- Organization’s Address
- Grant Number or RFP/Contract Number
- Grant Specialist’s/Contract Specialist’s Name
4. If a commercial organization’s provisional indirect cost rate has recently expired, what rate should be used for funding a new NIH award?
5. How can I determine if a commercial organization has an indirect cost rate negotiated with NIH?
6. Who is responsible for negotiating indirect cost (F&A) rates for subrecipients that receive no prime awards?
Yes, if a major portion of the grant/contract funds is for the subaward, as determined on a case-by-case basis.
7. Is the DFAS Indirect Cost Branch responsible for negotiating indirect cost rates for universities, hospitals, non-profit organizations and state and local governments?
8. How can I obtain the HHS negotiated indirect cost rate for a college/university or non-profit organization?
9. Why are indirect cost rates required for cost reimbursement type awards?
10. I represent a commercial organization. This is our first time preparing an indirect proposal, we're not sure how to do this?
11. How is an Indirect Cost Rate Computed?
- One Tier System: One Pool
Pool includes Fringe Benefits, Overhead and G&A
- Two Tier System: Two Pools
(Go to Excel File Two Tier System for a detailed example)
Fringe Benefits Pool
Overhead and G&A Pool
- Three Tier System: Three Pools (Go to Excel File Three Tier System for a detailed example)
Fringe Benefits Pool
An organization should chose a Base for allocating indirect costs that will equitably distribute indirect costs to all projects.
12. Which rate structure should I use when submitting my indirect rate proposal?
13. Is there a standard or average indirect cost rate for Commercial Organizations?
- Size of Organization
- Type of Organization (e.g.; research or manufacturing)
- Age of Organization
- Location of Organization
- The rate structure used
- The indirect cost base used
14. Is the Organization required to negotiate a rate prior to submitting a grant application/contract proposal?
NOTE: Phase I SBIR/STTR grantees that do not have rates negotiated with a federal government agency should not propose in the grant application a rate in excess of the 40% (of total direct costs) ceiling rate specified in the SBIR/STTR Omnibus Solicitation.