Universities sue Energy Department over cuts to advanced research funding

(CN) — A coalition of universities sued the U.S. Department of Energy on Monday after the department published a memo announcing a cap on indirect research funding reimbursements for advanced energy projects in artificial intelligence and nuclear science.

The department released the memo late on Friday explaining a new policy aimed at “halting inefficient spending by colleges and universities” which capped indirect cost reimbursement at 15% for higher education institutions exclusively. The new policy also retroactively impacts grants already being dispersed.

Nine universities and three higher education associations say the policies caps them at the unsustainable 15% rate while leaving other research institutions untouched.

“The rate cap policy ignores that indirect costs are necessary for critical research to proceed and are distinguished from direct costs only in that they are not attributable to just one grant,” the plaintiffs say in their suit. “It ignores how its across-the-board policy thwarts the very goal that DOE purports to pursue: ‘continuing to expand American innovation and scientific research.’”

The plaintiffs say that under the policy, they will have to immediately make staffing cuts, possibly derailing scientific careers and halting key projects.

“Because universities cannot sustain DOE-funded programs at the 15% indirect cost rate that DOE will now inflict, myriad critical projects — often the product of years or decades of effort — are in jeopardy of being stopped in their tracks. These include the development of advanced nuclear and cybersecurity technologies, arms control verification mechanisms designed to reduce the risk of nuclear war, novel radioactive drugs to diagnose and treat cancer, and upgrades for the electrical grids that keep the lights on in rural communities, among many others,” they write.

Research institutions, including universities, incur direct and indirect costs when conducting federally funded research. Direct costs can be directly attributed to specific projects, while indirect costs are often administrative or facility costs like specialized equipment, advanced computer systems and utilities.

The federal government reimburses researchers for indirect costs at a fixed, pre-determined rate based on unique costs required for the research being conducted. Advanced nuclear preparedness research might require expensive nuclear-rated facilities, for example, while other projects may be able to use labs with standard electricity systems.

The Office of Management and Budget is authorized by Congress to regulate how federal agencies negotiate the reimbursement rate for indirect research costs. In 2023, the Energy Department followed this process and awarded $2.6 billion to nearly 400 different universities.

Now, some of those universities — including Brown University, California Institute of Technology, Cornell University, University of Rochester and the Massachusetts Institute of Technology — say that the policy violates the Administrative Procedure Act by throwing out the negotiated rates process established by the law in favor of its arbitrary 15% rate.

The cited law does allow agencies to deviate from individual pre-negotiated rates, but only when required by federal statute or regulation, and only after publishing a legal foundation for the departure.

The universities are joined by the Board of Trustees of The University of Illinois, Regents of The University of Michigan, Board of Trustees of Michigan State University and Trustees of Princeton University in the suit, along with the Association of American Universities, the American Council on Education and the Association if Public and Land Grant Universities.

The plaintiffs say the law does not allow the energy department to do away with all negotiated rates for energy research reimbursement in one fell swoop. Nor does it allow the department to terminate grants to higher education institutions who “do not conform” with the 15% cap.

“No act of Congress expressly authorizes DOE to devastate research by enacting a radical change from institution-specific negotiated rates to a single across-the-board rate for all universities. Thus, under the major questions doctrine, DOE cannot impose such a change unilaterally,” the plaintiffs write.

They also argue that the policy is arbitrary and capricious because it fails to examine relevant data and offer a satisfactory explanation of the decision as the law requires.

In the way of explanation, the department offers the broad goal to “improve efficiency, reduce costs and ensure a proper stewardship of American taxpayer dollars,” according to a statement accompanying Friday’s memo.

“With President Trump’s Leadership, we are ensuring every dollar of taxpayer funding is being used efficiently to support research and innovation — saving millions for the American people,” U.S. Secretary of Energy Chris Wright said in a statement.

The department claims the new policy will save taxpayers over $405 million every year.

Wright did not explain in the memo or accompanying statement why the audits his agency is required to perform before paying out funds are not enough to ensure no dollar is wasted, nor why it could not have achieved a reduced rate within the statutory negotiation framework.

The new policy is part of a broader effort by President Donald Trump and his administration to limit the power and influence of American universities.

The Association of American Universities said in a statement that the new energy department policy would damage the energy sector, limit American economic opportunities, and interrupt the American workforce pipeline for skilled energy sector workers and innovators.

“It would be, quite simply, a self-inflicted wound and a gift to competitors and potential adversaries such as China,” the association said.

The suit against the energy research policy mirrors a similar action filed in Massachusetts federal court earlier this year after similar caps were placed on National Institutes of Health grants for indirect costs to 15% for biomedical research that the agency claimed “no longer effectuate agency priorities.” Those grants were for research into treatments for AIDS, HIV, Covid-19, Zika, Alzheimer’s and shingles.

In March, a federal judge blocked those cuts after 16 states sued Trump and Secretary of Health and Human Services Robert F. Kennedy Jr. for violations to the Administrative Procedure Act, just like in Monday’s lawsuit.

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