Val has raised an interesting issue and illustrated a dilemma which all of
us face more often than we would like.  The difficulty is, that while we
would like to point to an A-21 citation or another regulation, I don't
believe that there really is one out there.  The A-21 citation frequently
referred to is  indeed G.1.(3)  (I agree with you this far, John) with the
statement "...Federal funds are not used to subsidize industry and foreign
government funded programs."  Reducing or waiving F&A charges to a sponsored
agreement does not violate that requirement.  Nor does it give the Feds any
grounds to demand the same privilege on Federal contracts.   It does do the
following:

--reducing or waiving F&A charges results in lost revenue which can not be
made up on other agreements (remember that your F&A charges are developed as
a result of the development of a research base, which includes all research,
not just that funded by the government; therefore when you charge the
government F&A costs, they are only paying their proportional share, no
more, no less--except if the particular program does not allow full recovery
of your rate)

--reducing or waiving F&A charges for commercial sponsors continues to erode
our arguments for full cost recovery particularly for those sponsors who can
most afford to pay

I have always been afraid that the way we treat F&A costs with
non-governmental sponsors will eventually have an effect on the validity of
our arguments with the Feds.  During the Stanford hearings, some private
agreements where they charged less than full F&A were brought up (a Weight
Watchers agreement, I believe) but it didn't seem to go anywhere other than
the A-21 language cited above.  However, it was one more example of what I
believe is shooting ourselves in the foot. We've basically said to one
sponsor, F&A costs aren't important, and to another, they are important.

 (Frankly, I feel the same way when institutions talk about returning
portions of the F&A recovery to their PI's--again it seems that we are
making the F&A recovery funny money.  But that's another story, another time.)

Well, I will get off my high horse now.  Val, I believe there really is no
clear answer for you.  My personal feeling is that the best you can do is
have an institutional policy and have any waiver authority at such a level
that makes the OSP office less involved with these decisions.  Frankly, it
always comes down to how badly we want the agreement and those decisions are
often neither rational nor objective.

Jane

>I am trying to locate the actual rule, citation, law, whatever for the
following situation:
>
>I have a P.I. who wants us to lower (cost share) our normal indirect rate
in a proposal going to a commercial firm. We have told him that we cannot do
this because, if we charge the commercial firm a lower indirect rate (lower
than what our negotiated rate agreement allows), then the Federal government
could come in and demand the same privilege on all Federal contracts.
Everyone is saying "yeah, that's right" but the P.I. wants to see it in
writing and we are all drawing a blank as to the location of the rule. Can
someone point me in the right direction. Thanks!
>
>Val Seaquist
>Office of Research Administration
>The University of Alabama in Huntsville
>
Jane A. Youngers
Director
Office of Grants Management
University of Texas Health Science Center at San Antonio
7703 Floyd Curl Drive
San Antonio TX  78284
voice:  210-567-2333
fax: 210-567-2344
email:  xxxxxx@uthscsa.edu