Although not formally announced, a memorandum from the Department of Defense (DoD) indicates that DoD, effective June 4, 2025, intends to cap indirect cost (F&A) rates at 15% or lower for all new grants and cooperative agreements awarded to institutions of higher education. This would mark a significant shift in how DoD reimburses universities for facilities and administrative costs, and would apply to all new financial assistance awards issued after the 21-day notice period following the memo’s date of May 14, 2025.
The memo also states that within 30 days following the release of the memo, DoD will also be looking to “renegotiate” the terms of existing awards to IHEs, with the possibility of terminating and reissuing current awards under revised terms.
The University of Minnesota has not approved the submission of proposals or acceptance of new awards at the 15% rate. For proposals that need to be submitted immediately, continue to budget normally using our federally negotiated rates. Please delay submission of proposals that do not have short-term, defined due dates at this time. For new awards issued with a 15% F&A rate, the award will be held temporarily until senior leadership makes a determination about whether to accept this rate.
We anticipate one or more legal challenges to the DoD rate cap to be filed shortly. The University will continue monitoring legal developments and agency guidance closely and will share updates as they become available.