Policy Number: 69

Indirect Costs


Indirect costs on contracts and grants



Date Reviewed: November 2013

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.

The Office of Sponsored Projects will ensure that all proposals submitted to any sponsoring agency include the appropriate indirect costs. Any deviation from the indirect cost rates described below will require the prior approval of the dean or administrative equivalent of the appropriate unit and the Senior Executive Vice-President, Chief Operating and Financial Officer. All contracts will be comprehensively reviewed prior to finalization in order to ensure recovery of all costs. 

A portion of indirect costs will be returned to units as part of the annual budget based upon the actual level of indirect costs brought in by a unit. Annual revenue from indirect cost recoveries will be distributed as defined in the annual budget instructions.


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 an operating environment within which the research project is carried out and on which it relies. Examples of these costs include:  maintaining and staffing libraries, maintaining buildings and grounds, and providing security, janitorial services and utilities.


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

A. Private Funding Sources

Many private sponsors set fixed rates at which they will reimburse indirect costs. If a sponsor's written policy does not exclude reimbursing indirect costs, the university will recover a minimum of 30 percent of the total direct costs of the contract or grant. The indirect costs associated with all privately sponsored research and Clinical Study Agreements (industry-sponsored drug studies) are recovered in this manner.

The Office of Sponsored Projects groups private fund sources by category and applies the following indirect cost recovery rates:

B. Federal Contracts and Grants

The indirect cost rates for federally sponsored projects are established through negotiation between the university and the Department of Health and Human Services. These negotiations are based on indirect costs incurred by the institution in the previous fiscal year. Sponsored Projects Administration prepares the 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.

The specific expense categories that make up the overall indirect cost rate include:  building use, equipment use, improvement use, operation and maintenance, general administration and general institutional expense, departmental administration, sponsored projects administration, and libraries. The federal rate is applicable to all research grants (not training grants) for which the ultimate source of funds is the federal government. Sponsored Projects Administration should be contacted for current federal rates.

Additional information about on/off campus indirect cost rates can be found on the Post-Award Finance page


ContactTelephoneEmail/Web Address
Sponsored Projects Administration 713-500-3999