Federal judge freezes Energy Department’s 15% cap on indirect costs

A federal judge Wednesday temporarily blocked the U.S. Department of Energy from implementing a 15% cap on grant funding for indirect costs. The ruling came just days after a dozen higher education associations and colleges sued the department, calling the new policy an overstep of authority and a threat to U.S. research and advancement.

In the ruling Wednesday, U.S. District Judge Allison Burroughs said the plaintiffs — including higher ed groups like the American Council on Education and threatened colleges like the University of Michigan and Brown University — had successfully demonstrated that they would “sustain immediate and irreparable injury” if the policy were allowed to proceed in tandem with the lawsuit. 

Burroughs’ temporary restraining order bars the Energy Department — until further court order — from terminating grants, either under the challenged policy or “based on a grantee’s refusal to accept an indirect cost rate less than their negotiated rate.” The judge is also requiring the department to submit biweekly reports confirming that the federal funds are being distributed during the pause.

When announcing the funding cap last Friday, the Energy Department said the move would save $405 million annually and reduce what it called inefficient spending. Indirect research costs typically include overhead expenses such as facilities and administrative support staff.

The department said the change would affect over 300 colleges and that it would terminate grants to any institutions that failed to comply.

But the plaintiffs said the policy’s rapid implementation would give institutions no choice but to scale back funding and lay off staff.

Their lawsuit, filed in U.S. District Court in Massachusetts, called the Energy Department’s policy “a virtual carbon copy” of one announced in February by the National Institutes of Health. A federal judge permanently blocked NIH’s plan to cap indirect cost funding at 15% earlier this month, a decision the agency quickly appealed. The NIH plan would cost research universities billions in annual funding.

“DOE’s action is unlawful for most of the same reasons and, indeed, it is especially egregious because DOE has not even attempted to address many of the flaws the district court found with NIH’s unlawful policy,” the plaintiff’s lawsuit said.

The next hearing in the case is set for April 28 before the same court.