Historically the NIH has allowed a 40% indirect rate on SBIR and STTR grants without requiring backing evidence. As such, we have recommended that our clients just include a 40% indirect rate in their SBIR/STTR budgets. Often the company’s indirect rate is really unknown at this early stage and may be higher or lower.
On February 7, 2025, the NIH issued a guidance limiting the indirect rate for grants to 15%.
This guidance focuses primarily on academic grants and does not mention SBIR/STTR projects. It is currently unclear to me if SBIR/STTR is included in this, but companies funded by NIH should take this into account and visit with their program manager for clarification. Note that this guidance covers all new proposals AND current proposals that are underway. While not being ‘retroactive,’ it appears that any new drawdowns on current grants will have a limit of 15% indirect rate. If you are expecting your indirect rate to be actually above this 15%, you will need to account for this change (assuming this affects SBIR/STTR as well). It is also not clear how this will affect negotiated indirect rates. The assumption is, too, that if you are collaborating with a University on an SBIR or STTR, their indirect rate they are charging you may be now limited to 15%.
The situation is ‘in flux’ which means my current understanding may change as we learn more. A federal judge has temporarily halted this order.
