Kent,

I apologize for my tardy response but such was dictated by other priorities.

1) In any event, your question was addressed with DHHS & ONR federal
negotiators at the April 2001 national Facilities & Administrative (F&A)
Cost [formerly known as Indirect Cost] conference and the following
responses provided.  Generally, auditors did not have a problem with the
difference in business & industry (B&I) F&A rate setting, since such is
outside A-21 applicability (see section A3).  Therefore, the application of
federally negotiated rates need not apply to non-federal grants.

2) Interestingly, auditors indicated that universities theoretically could
charge non-federal/B&I grants with their full Calculated F&A rates, even if
such was higher than the final federal rates negotiated with federal
auditors.  For example, assuming that a university proposed a 50% Organized
Research rate but such was negotiated and finalized at 45% with the federal
government, the institution could theoretically charge B&I research grants
at the full 50% level.

However, as you know, most institutions face competitive factors for B&I
grants that make this a scenario improbable for actual application.  Also,
please note that in this hypothetical example, the university would be
limited to the 45% rate application for federal Research clinical trial
grants.

3) Also, federal negotiators acknowledged that, in many cases, B&I sponsors
have written policies that mandate such lower rates (or, in certain cases,
provide for no F&A costs).  Negotiators agreed that non-federal grants may
use a total direct cost (TDC) basis for rate application (versus the normal
federally negotiated modified total direct cost-MTDC-basis), as mandated by
non-federal sponsor terms and conditions.

4) However, federal negotiators properly emphasized A-21 costing mandates.
For federal F&A rate proposals and calculations, the paramount issue is
consistency in mapping associated indirect type costs allocations and direct
"base" costs to the same proper major function (i.e., Organized Research,
Public Service, Instruction, etc.) for federal rate calculations (see
section G1a3).

For example, if an institution considers B&I clinical trials as related to
its Public Service mission, all such grant direct grant "base" costs and
associated indirect cost allocations (i.e., departmental administration,
depreciation, etc.) must be mapped as such within the federal Public Service
rate calculation.

5) Of course, this has the effect of lowering the federally negotiated F&A
rate.  And, an institution would experience reduced F&A costs Reimbursements
from non-federal/B&I grants by charging a rate lower than the federally
negotiated rate.

I hope my response is of some assistance concerning your question.

Regards,
Steve
=============================================================

Kent Walker wrote:

> Thanks to the five of you who responded to the recent question about F&A
> charged on federally funded clinical trials.  The information I'm
> seeking is should there be a concern about charging the full negotiated
> F&A rate to a federal clinical trial while charging 20 to 30% to a
> pharmaceutical firm sponsored clinical trial.  How is the disparate
> treatment defensible or is the answer so obvious so as not to require an
> explanation.  If you are willing to respond directly to my email address
> I would certainly appreciate your wisdom.  thanks.  see ya.
>
> --
> Kent Walker
> Chief Contract Administrator
> University of North Carolina-CH
> Office of Contracts & Grants
> 440 West Franklin Street
> Chapel Hill, NC 27599
> Voice:  919-962-1353
> E-Mail:  xxxxxx@UNC.EDU