The administration said the court had no jurisdiction and that the NIH had followed existing regulations.
A federal judge in Massachusetts issued a permanent injunction on April 4, blocking the Trump administration from reducing the amount.
The order is to solidify US District Judge Angel Kelly, issued in March. Her more recent orders disable notification of NIH changes to indirect cost rates. She also ruled in favour of various states and organizations on multiple legal claims brought against the administration.
More specifically, she found that she supported the plaintiff’s claim that the administration violated the Administrative Procedure Act (APA) by acting according to the law and not acting in an arbitrary and whimsical way.
In its February 7 notice, the NIH said $9 billion was allocated to overhead costs through indirect cost rates in 2023, but the average cost rate for indirect costs averaged between 27% and 28% over time.
When announcing the new 15% cap, the agency said it was “obligated to carefully award steward grants to ensure that taxpayer dollars are used in ways that benefit Americans and improve quality of life.”
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In February, the Department of Justice (DOJ) told Kelly that it was compliant with APA and existing regulations and that Kelly had no jurisdiction to block NIH policies. The DOJ found jurisdiction over the lawsuit, saying that the law known as the Tucker Act “is because “the plaintiff effectively seeks damages for breach of contract, and therefore seeks compensation for breach of contract with regulations incorporated in grant agreements.”
Kelly said in her April 4th order that her court had jurisdiction. In March, she challenged the idea that the Tucker Act prevented her from jurisdiction over the case, stating that the plaintiff’s actions were “essentially not contractually.”
Management fees include university administrator salaries, departmental staff, office supplies, and more. Since 1991, the NIH has concluded the university’s administrative fees at 26% of the direct grant fees. Universities receiving grants from the NIH must negotiate this rate every four years and provide the necessary reasons to support the research.
As Kelly stated in March, the first Trump administration offered a budget proposal in 2017 to reduce indirect cost rates. Congress rejected the idea and instead codified the existing cost reimbursement formula into the law.
The DOJ attempted to distance its previous disputes from more recent guidance on indirect cost rates, saying that Congress responded to budget proposals that would have limited indirect costs to achieve savings.
“But the concern is… there are no applications here,” the DOJ said, adding that the recent changes at NIH “we’re not trying to save government money.”
“Actually,” the department said, “we will spend the allocation to the NIH as given and allocate the grant given with that money so that more money will be spent on the direct costs of the NIH-funded projects.”
Kelly’s March opinion rejected the DOJ’s argument and said the administration violated plain language of the Expenditure Act. She also pointed out a NIH post that included potential savings from rate changes, and published it to X on the same day the agency issued guidance on rate changes.
“The change will immediately save more than $400 million in effect per year,” the agency said in the post.
Lawrence Wilson contributed to this report.
