Is Sponsored Research a Loss Leader….

The question I’m asking is whether universities and academic medical centers actually make money on federally-funded sponsored research through the recovery of indirect costs. It’s a fair question: indirect cost rates vary greatly by institution. They are nominally paid by the US government to allow institutions to recover the costs of keeping the laboratory space functioning as a venue for conducting experiments. The indirect cost rate for a given institution is the product of a bi-lateral negotiation between government and the university guided by a formula which takes various factors into account. Is there arbitrage going on? I don’t know. But I do know that various administrators that I’ve talked to across the country have described the entire enterprise as a loss leader for universities. That is: their story to me is that they are actually loosing money on their research activities. And…I can see why a school would do that. Research success is very prestigious and can attract other revenue-creating activities such as students paying tuition. But it also seems that, because of the one-on-one nature of the negotiation for each institution, the balance could be the other way: institutions could be making a profit on research. It would be useful to see the hard data for this.

…just asking for a friend (smile)