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Home Back Issues No. 43: I'm One of Two PIs on Project; Will My Move to New Institution Result in Loss of Direct Costs?

Aug 30

No. 43: I'm One of Two PIs on Project; Will My Move to New Institution Result in Loss of Direct Costs?

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I'm One of Two PIs on Project; Will My Move to New Institution Result in Loss of Direct Costs?

Reader Question: I have a new RO1 grant starting next month in which I am one of the two (multiple) PIs. I will be moving to another institution, and so this grant will need to be re-budgeted as a consortium. Will we lose direct costs for the project as a result of needing to cover the indirect costs for the subcontractee institution out of the direct costs to the grantee institution?

Expert Comments: You will lose direct costs under one particular circumstance only, explained as follows:

As a rule, indirect costs do not come out of the subcontract. However, the following exception exists: I quote here from my book, Writing the NIH Grant Proposal: A Step-by-Step Process (Page 185): "Although the National Institutes of Health (NIH) does not wish to pay facilities and administration (F&A;) costs twice, your home institution does want some money as a fee for administering the sub-award. To this end, NIH allows the home institution to charge its indirect rate on the first $25,000 of the sub-awards' direct costs."

That is, the office in the home institution that administers the grant — the budgets, the signatures, etc. — wants some money to do this because the grant you are bringing in is going to cause them additional work.

There a couple of scenarios that might emerge:

First, there are sub-awards whose direct costs total at least $25,000 in Year 1. In that event, someone — either the subcontractor or the parent grant — must pay the home institution's F&A; rate on that $25K. So if, for example, the rate were 50 percent, then $12,500 must be allocated for that purpose, which comes out of the direct-costs budget in that first year. (Note that not all institutions do this, but many do, certainly large academic hospitals).

Second scenario: The direct costs of the subcontract do not total to at least $25,000 in Year 1. Say they total $15,000. Then the direct costs would be levied on that $15,000 in Year 1, and on the remaining $10,000 in Year 2.

So, Yes, it is going to cost someone, in this example, $12,500. Who? That's up to negotiation. Often it will come out of the home institution's budget, because those dollars usually don't exist in the sub-awards.

Because of this, it is sometimes useful to hire consultants, rather than having co-investigators or other "personnel" at the sub-award institution(s). Consultants don't require sub-awards (nor do they require fringe benefits; they are just paid as contractors from the direct costs). No sub-awards, no fee.

Of course, often there are other reasons that the individuals at the sub-award institutions might prefer, and/or the principal investigators might prefer, to remain as co-investigators. That is an individual decision.

Expert Comments: William Gerin, PhD, P.I. e-Alert's chief grants consultant, professor of biobehavioral health, Pennsylvania State University, and author of Writing the NIH Grant Proposal: A Step-by-Step Process (SAGE Books, 2006)

Comments (2)
Associate VP/Research
written by Gina, August 30, 2010
There are rules governing whether a budget appropriately uses the consultant or a subcontract mechanism when utilizing the services of individuals not employed at the prime grant recipient's institution. Those rules supercede desire on anyone's part to "save" money on a grant, and will determine which mechanism legitimately can be used. Also, as the writer indicates, most subrecipient institutions likely would want a faculty member who has a substantial portion of the SOW to perform at their institution to receive a subcontract, fully loaded to recover all applicable costs (both direct and indirect), rather than have their employee conduct work as a consultant while likely using their instition's resources and favilities.
university grants and contracts administrator
written by Diane M, November 01, 2010
In my experience, the new [subrecipient] institution is often willing and able to forego the indirect costs (or a portion of them) charged to a transferred award, or in this case new subaward. It makes a win-win situation for everyone.

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