Indirect cost rate (F&A)

US federal awards do not use a flat overhead percentage the way Horizon Europe does. Instead an organisation NEGOTIATES a rate with a single federal agency, and that agreement (a negotiated indirect cost rate agreement) is then honoured by every other federal agency.

Rates vary enormously. Large research universities commonly hold rates well above 50%, hospitals higher still, small non-profits far lower. The rate reflects the organisation's audited overhead structure, not a policy choice, and negotiating one for the first time is a substantial accounting exercise.

An organisation that has never negotiated a rate may instead take the DE MINIMIS rate without any negotiation at all. That rate was 10% for many years and was raised to 15% in the 2024 revision of the guidance, applying to awards issued from October 2024. For a foreign applicant with no intention of negotiating with a US agency, this is the practical option.

The base matters as much as the percentage. Rates are usually applied to MODIFIED TOTAL DIRECT COSTS, which excludes equipment, capital expenditure, participant support costs, and the portion of each subaward above a threshold, raised to $50,000 per subaward in the 2024 revision. A 50% rate on a base that excludes most of the budget yields less than a 25% rate on everything.

Some programmes cap indirect recovery below your negotiated rate by statute, and training grants often cap it sharply. The notice states the cap; the difference between your rate and the cap is money your organisation absorbs, and it should be established before the budget is built rather than after the award.