On May 14, 2025, the Secretary of Defense issued a memorandum stating the Department of Defense’s (DoD) intent to implement a 15% cap on indirect cost reimbursement rates for all new financial assistance awards to institutions of higher education. It is important to note that this cap is not yet in effect.
The memo outlines preliminary steps and directives, including:
- Notification to the Office of Management and Budget within 21 days of the DoD’s intent.
- Development and publication of formal policy guidance and justification criteria.
- Integration of the new rate into future solicitations and awards.
Despite these preparatory actions, the policy has not been activated. Some peer institutions have reported being asked by certain DoD Directorates to submit or revise proposals using the proposed 15% indirect cost rate. However, DoD has since clarified that no cap has been officially implemented.
DCG advises that researchers should reference the status of the policy if asked to use the lower rate and should continue to apply USC’s federally negotiated indirect cost rate unless formally instructed otherwise.
DCG will continue to monitor developments and share updates as official guidance becomes available.