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Handbook of Operating Procedures

Indirect Costs

Policy Number: 69


Indirect costs on sponsored projects



Date Reviewed:
April 2018
Responsible Office:
Sponsored Projects Administration
Responsible Executive:
Senior Vice President, Finance and Business Services


Unless specifically disallowed by a sponsor's written policies, The University of Texas Health Science Center at Houston ("University") must recover all indirect costs on contracts and grants by applying its relevant policies and procedures.

Sponsored Projects Administration will ensure that all proposals submitted to, and contracts executed with, any sponsoring agency include the appropriate indirect cost recovery. Any deviation from the indirect cost rates described below will require the prior approval of the dean or administrative equivalent of the appropriate unit, the Associate Vice President Sponsored Projects Administration, Executive Vice President and Chief Academic Officer, and the Senior Executive Vice-President, Chief Operating and Financial Officer. 


Direct costs are those costs that can be directly related to a specific project. Examples of such costs include the salaries, wages, and benefits of the researchers and support staff, consumable supplies, travel and equipment necessary to carry out the project, patient care charges, and alterations and renovations required by the research.

Indirect costs are those costs that cannot be directly related to a specific project but are incurred in providing services in the operating environment within which the research project is carried out and on which it relies. Examples of these costs include:  maintaining and staffing libraries, departmental and central administration (payroll, procurement, sponsored projects administration, information technology), maintaining buildings and grounds, building and equipment depreciation, and providing security, housekeeping services and utilities.

Cost-Sharing: Any project cost that is not paid by the sponsor. The University commits to a pledge of "cost share" either as a fixed amount of money, a percentage of the project costs, or the commitment of effort without charging salary. The cost share obligation must be met using non-federal, non-sponsored funds.


The applicable indirect cost rate is determined by the source of the funds and the type of activity.

A. Federal Sponsored Projects

The indirect cost rates for federal sponsored projects are established through negotiation between the University and the Department of Health and Human Services. These negotiations are based on actual indirect costs incurred by the institution in the previous fiscal year. Sponsored Projects Administration and Budget and Financial Reporting prepares the rate proposal. The term of the negotiated agreement may be one or more years. Indirect cost rates are negotiated for both on-campus and off-campus research, as well as instruction, and other sponsored activities.

The federal rates are applicable to all sponsored projects for which the ultimate source of funds is the federal government. Contact Sponsored Projects Administration for current federal rates. 

In accordance with the University’s rate agreement, for all activities performed in facilities not owned by the University and to which rent is directly allocated to the project(s), the off campus rate will apply. If rent is not applied to the project(s), the on campus rate shall apply. There will not be more than one indirect rate charged to a project.  

B. Non-Federal Sponsored Projects

Non-federal sponsored projects shall include indirect cost recovery as a percentage of total direct costs.  Current rates can be found on the SPA website under Institutional information. The rates may differ if the request for proposal or funding opportunity announcement details a different indirect cost rate, or the sponsor's rate is otherwise publicly posted.

C. Request for Waiver of Indirect Costs:

A waiver or reduction of indirect costs may be requested in extraordinary circumstances with adequate justification.  Requests for indirect cost waivers are not intended to take the place of direct financial support by the departments or schools. In most cases, cost-sharing may be more appropriate than an indirect cost waiver. The Indirect Cost Waiver Request Form and Instructions are located on the Sponsored Projects Administration website.

The University will not allow a waiver or reduction of indirect costs if:

  • The principal investigator failed to submit the proposal with budget and budget justification to Sponsored Projects Administration for review at least 14 days prior to submitting to the sponsor.
  • The sponsor is industry/for profit.
  • The waiver is solely an attempt to increase the competitiveness of a proposal.



    • Sponsored Projects Administration
    • 713-500-3999