A new cap imposed by Congress on the costs that universities can charge for performing basic Department of Defense research threatens to upset the long-standing system by which research institutions have financed new laboratories and other infrastructure required by the work, say higher education officials.

Appropriations legislation signed into law in November caps the DOD’s reimbursement of the indirect costs universities incur on basic research grants at 35% of a grant’s total value. As a result, institutions whose indirect costs, also known as facilities and administrative (F&A) costs, are above the cap will have to swallow the disallowed portion of the costs on new Pentagon awards for basic research going forward.

“We’re discouraging investment in new facilities,” lamented Arthur Bienenstock, a physicist and special assistant for research policy at Stanford University. “It’s a dangerous precedent.”

The cap is the latest flare-up in long-simmering tensions between Congress and academia over indirect...

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