On May 14, 2025, the Secretary of Defense announced 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. This policy was formally enacted on June 12, 2025, through the issuance of the attached memorandum. The following day, on June 13, 2025, a coalition of universities and higher education associations filed a lawsuit against the DoD, challenging the newly implemented 15% cap on indirect cost (F&A) reimbursement rates for research grants.
What is in the June 12th Implementation Memo
New Awards:
This memo implements indirect cost rates at 15% or lower on all new DOD federal assistance awards (e.g., grants and cooperative agreements) made to IHEs. This policy applies to all DoD Components and must be reflected in funding opportunities moving forward.
Existing Awards:
The memo also impacts current ONR and DoD assistance awards to USC as follows:
- DoD Components are instructed to renegotiate existing indirect cost rates to comply with the 15% cap, with a deadline of November 10, 2025.
- If an agreement on revised rates cannot be reached, awards may be terminated and reissued under the new terms, per 2 CFR 200.340(a).
Guidance for PIs and Schools
It is anticipated that the lawsuit will result in this order being placed on hold. In the meantime, please reach out to your DCG Officer if:
- You plan to submit a proposal to the Department of Defense (DOD), or
- You are contacted by the DOD regarding the renegotiation of an F&A rate.
The Department of Contracts and Grants will continue to closely monitor legal developments and agency updates and will share relevant information and guidance as it becomes available.