Sharing The Load Strains Government-University Amity

2-13-96

Baltimore, Md.--Increasingly, requirements for cost-sharing or matching funds in federal grants and contracts are eroding the cooperative spirit between universities and the federal government, according to a Penn State researcher.

Based on a survey of nearly 200 universities that detailed their experiences, and on interviews with academic administrators and faculty in eight universities and program managers in federal agencies, Dr. Irwin Feller, director of Penn State's Institute for Policy Research and Evaluation, reports that universities are beginning to evaluate the effects of cost-sharing and matching fund requirements.

"Federal agency program announcements that stipulate university contributions or pre-award budget negotiations that require universities to find money from industry, state agencies, or operating funds are becoming more common," says Feller, also professor of economics. "Some fear federal awards are being auctioned to the institution that provides the largest cost-share, not necessarily to the one with the greatest ability to do the job."

While there is frequently a sufficiently wide difference in quality among universities to assure that the award goes to the most scientifically qualified, in situations where institutions are very closely matched, it is possible that cost-sharing could tip the balance. Federal program managers view cost-sharing as representing new forms of partnership arrangements, as necessary to stretch agency budgets, and as being offered voluntarily at times by universities to achieve competitive advantage.

"Another possible consequence of increased cost-sharing practices is that universities will have to decide if they will apply for certain grants and contracts because their ability to match funds and cost-share is limited," Feller told attendees today (Feb. 13) at the annual meeting of the American Association for the Advancement of Science in Baltimore.

Universities may simply pass on projects because they cannot provide matching funds, even if they have nationally competitive researchers.

"Institutions are just now beginning to recognize this quandary," says Feller. "Right now the response is one of frustration and it is straining relationships between universities and the government."

The balancing act that universities are experiencing is not just between granting agencies and institutions, but internal as well. Most grants and contracts allow for both direct and indirect costs. According to Feller, faculty would rather see cost-sharing or matching funds coming from indirect costs, preserving the full amount earmarked for research.

"Universities in general do not want to waive indirect costs, which are essential to the long-term maintenance of core research facilities, and reflect actual expenditures," says Feller. "The administration is afraid that if they waive a chunk of the overhead for specific proposals they will be setting a precedent for downward revisions in future negotiations."

From the point of view of the agencies, matching funds can come from several sources -- state, industrial, or university money, or in-kind compensation. From the university perspective, it is better for these funds to come from external sources.

"In the past, one way for universities to come up with matching funds was to recycle and reallocate indirect costs," says Feller. "However, a series of federal regulations capping indirect costs could further reduce the funds available to meet matching funds."

Requirements for cost-sharing and matching funds are not always specifically listed in the call for proposals. Sometimes bargaining only begins after the contract or grant is awarded.

"Budget negotiations can involve practices not fully consistent with agency policies," says Feller. Project officers may seek a higher percentage of cost-sharing or matching funds than their agency formally requires, or push for deletion of budget items that are allowed by the agency."

According to Feller, selected cost-sharing and matching provisions are accepted by universities. For example, universities realize that equipment can be used for other purposes than a specific project, and that sharing the burden of acquisition in this case makes sense all around.

Feller's interviews with agency representatives suggest that the change in approach began in the 1980s with the shift from funding individual investigators to funding centers. The increased competition for federal grants also leads agencies, as well as review panels, to seek to leverage agency funds by shifting part of a project's cost back upon the university. The current belief among federal agencies is that universities as well as the government benefit from funded research through graduate students, prestige and ranking, and therefore should participate in the funding of that research.

Greater specificity in the terms of the social contract for research support between the federal government and research universities is required, according to Feller. Also needed are more explicit ground rules on the boundaries of proposal budget negotiation.

**aem**

EDITOR: Dr. Feller may be reached at (814) 865-9561.

Contacts:
A'ndrea Elyse Messer
(814) 865-9481 (office)
(814) 867-1774 (home)
aem1@psuvm.psu.edu
76520.3240@compuserve.com

Vicki Fong
(814) 865-9481 (office)
(814) 238-1221 (home)
vyf1@psu.edu