As a child, I was always a little grossed-out by flypaper. They were like sticky streamers of death hanging from the ceiling; anything that touched them was lost forever, including the eponymous fly.
Indirect costs, also referred to as “indirects” or overheads, are the flypaper of global health research funding.
Indirects reflect the money from a grant that is caught by the Finance Department before it is made available to the researcher. The money keeps the organisation going: the lights stay on, the rent is paid, the cleaners and security guards turn up, and the management services work.
If a researcher wins a $100,000 grant, after the financial flypaper has caught the indirects, she might receive $80,000. Those who do not come from the worlds of research or global health and development may be slightly appalled by this 25% overhead. Some research funders are. They see the indirect costs as a kind of sleazy tax on the worthwhile research they are supporting. Other funders are reluctant to pay indirect costs or will only pay at a significantly reduced rate, such as 8%. I should also add that there are funders that are fully aware of the issues, and will pay the indirect costs with little or no complaint.
I understand why some funders don’t like the indirect costs. They want to achieve the most significant impact possible for every dollar spent, and this means they want as much of their money to go into doing the research itself and as little money as possible going into general organisational support. Of course, they also want great researchers, good research infrastructure, and appropriate governance and compliance mechanisms. And herein lies the funder-research paradox. There is an obvious relationship between strong research organisations and strong research. Strong research organisations are strong because they have good governance, financial oversight, HR policies and procedures, procurement processes that are transparent, fair, and competitive, decent infrastructure, access to library services, and they also invest in their staff. Continuous professional development of the scientific and non-scientific staff is crucial for the development of strong research organisations. All that (infrastructure, processes and staff development) costs money above and beyond the cost of doing the research itself — and it costs more money than one might think.
Funders need to recognise indirect costs as part of their achievement, not a hindrance to it. Through their funding, they support research and research organisations.
The failure to pay reasonable indirect costs, in effect, forces a form of cross-subsidisation. I know of one university that encouraged staff not to apply for nationally competitive grants because too little was paid by the funder for indirect costs. For every grant that was won, the university ended up having to subsidise the research by picking up the indirect costs. Any research organisation that does that for too long will find itself bankrupt. That was in the Global North.
The situation is different, and in some ways worse, in the Global South research organisations. If the research organisation is essentially regarded by the (usually Global North) funder as a data manufacturer (sample collector) and not an intellectual contributor to the science, there is a greater reluctance for indirect costs to be paid. This recalls the theme of “trickle-down science” that I have discussed in another post.
Having argued, however, about the necessity for indirect costs for research organisations to survive and develop, there can be a darker side to indirect costs. It is the daisy chain of financial flypaper — reminiscent of a recent story I read of a botched assassination in China. A hitman subcontracted an assassination to a colleague, who subcontracted the assassination to another colleague… Five assassins were in the daisy chain and each one took money off the top, before passing on the residual. In global health and development, the financial daisy chain can be seen in large contracts awarded to management companies that skim money off the top as indirect costs, and hand on the residual…
Multilateral agencies can do this with sub-awards. They receive a grant from, say the Gates Foundation, they’ll take out the indirect costs and pass on the residual to an implementing agency — often cautioning them not to overcharge indirect costs. It can also arise from the use of sub-awards offered by research organisations. I have even heard about organisations taking indirect costs from a grant and then a management fee associated with a sub-award before passing it on to the sub-awardee, which will need to remove indirect costs before passing on the residual to the researcher. This can even happen within the same organisation. I win a large grant. The organisation takes out indirect costs. When I pass on a sub-award to a colleague, like a hitman, I take out my management fee first.
Let me say it again, funders need to recognise indirect costs as part of their achievement, not a hindrance to it. Research organisations, however, need to be clear about which part of an award should truly carry an indirect cost and which parts should not.