Committee on Strategy and Budget (CSB)
Task Force on Cost Sharing

Request for Public Comment on Use of Cost Sharing in National Science Foundation-Funded Activities

SUMMARY OF REQUEST:
On August 9, 2007, the America COMPETES Act directed the National Science Board (Board) of the National Science Foundation (NSF) to "evaluate the impact of its [2004] policy to eliminate cost sharing for research grants and cooperative agreements for existing programs that were developed around industry partnerships and historically required industry cost sharing, such as the Engineering Research Centers [ERCs] and Industry/University Cooperative Research Centers [I/UCRCs]." The Act directed that the Board "also consider the impact that the cost sharing policy has on initiating new programs for which industry interest and participation are sought."

In fall 2007, the Board charged a Task Force on Cost Sharing to evaluate the impacts of its 2004 policy on the ERC and I/UCRC programs and also on the Experimental Program to Stimulate Competitive Research (EPSCoR), another NSF program with capacity-building goals. On February 8, 2008, the Board issued a report to Congress containing several recommendations regarding mandatory cost sharing policy at NSF. The Board is continuing its study, focusing now on voluntary cost sharing and the impact of both mandatory and voluntary cost sharing on broadening the participation of traditionally underrepresented groups and organizations in federally sponsored research. The Board's intent is to release a second, more comprehensive report on NSF cost sharing policy in early 2009. Qualitative input from the research community for this report will be drawn in part from responses to this notice and from two public roundtable discussions held in Arlington, VA on July 9 and 10, 2008.

The Task Force is soliciting public comment regarding community experiences in cost sharing with emphasis on specific topics. See below for the full text of topics and questions, and instructions on how to submit comments. ALL PUBLIC COMMENTS MUST BE RECEIVED BY OCTOBER 1, 2008.

For each part of your comments, please include the number of the specific question to which you are responding. Add any additional comments about topics not covered on this webpage at the end of your submission.

INSTRUCTIONS FOR SUBMITTING PUBLIC COMMENTS:
Comments should be addressed to Jennifer Richards, Executive Secretary, Task Force on Cost Sharing, National Science Board Office, National Science Foundation, 4201 Wilson Boulevard, Suite 1220, Arlington, VA 22230; telephone (703) 292-7000; FAX (703) 292-9008; e-mail nsbcostsharing@nsf.gov). Due to potential delays in NSB's receipt and processing of mail sent through the U.S. Postal Service, we encourage respondents to submit comments electronically to ensure timely receipt. We cannot guarantee that comments mailed will be received before the comment closing date. Please include "Cost Sharing" in the subject line of the e-mail message, and your name, title, organization, postal address, telephone number, and e-mail address in the text of the e-mail message. Please also include the full body of your comments in the text of the e-mail message and as an attachment.

FOR FURTHER INFORMATION CONTACT: Jennifer Richards (703-292-7000, nsbcostsharing@nsf.gov)

BACKGROUND: HISTORY AND CURRENT REGULATION/POLICY:
For more than 50 years, the U.S. academic enterprise and the federal government have enjoyed a fruitful partnership in the conduct of basic scientific and engineering research; NSF has been a central member in this partnership since its founding in 1950. The mutual sharing by academia and government in the costs of federally funded research, and the strategic involvement of private industry, have resulted in scientific and technological advancements that have driven economic growth in all sectors of the U.S. economy and improved quality of life in the United States. The funding that supports the research enterprise, however, has been the subject of continuous debate since the late 1950s, when the federal government first mandated that recipients of federal research grants share in the costs of that research.

Cost sharing can take many forms. Mandatory cost sharing describes resources required by particular federal agencies, usually with different requirements for different programs and solicitations. Such cost sharing may include un-reimbursed indirect costs incurred by grantee institutions associated with otherwise federally funded research activities; these costs are necessarily borne by the grantee institution. Before June 2007, mandatory cost sharing at NSF also referred to statutory cost sharing. Statutory cost sharing refers to one percent cost sharing required from recipients of grants resulting from unsolicited proposals; this cost sharing was the result of NSF appropriations language mandating that all grantee institutions share in the costs of research projects resulting from unsolicited proposals. This requirement was eliminated from NSF appropriations language in FY 2007.

Voluntary cost sharing describes resources made available to a given project solely at the discretion of the grantee institution performing the research; these resources can be committed (pledged formally in the proposal and made a binding condition of the award) or uncommitted (not formally pledged in the proposal and approved budget, but subsequently made available to the project). Voluntary cost sharing is not regulated by NSF policy, but contributions offered in an NSF proposal during the NSF decision process are considered binding and auditable contributions upon award of the grant.

During the 1990s and early 2000s, discussion about cost sharing at NSF and in the external research community focused on several key issues: ambiguities in the application of NSF cost sharing policy, the indirect cost rate cap, financial constraints on federal agencies and grantee institutions, and the burden of tracking and auditing cost shared resources. As a result, the Board approved a new NSF cost sharing policy in June 1999 that included the following key components: (1) Cost sharing would be an eligibility, rather than a review, criterion; (2) NSF cost sharing requirements beyond the statutory one percent requirement would be clearly stated in the program solicitation; and (3) only statutory cost sharing would be required for unsolicited proposals.

The Board formally modified its 1999 NSF cost sharing policy twice, in 2002 and 2004, to address unresolved concerns regarding audit difficulties related to documentation and satisfaction of cost sharing obligations, undue burdens placed on institutions, inequities among institutions, and friction among administrators and researchers. The 2004 revision eliminated program-specific cost sharing requirements. Additionally, the statutory one percent cost sharing requirement was eliminated for NSF grant proposals on June 1, 2007 because the FY 2007 Congressional appropriations bill providing funds to NSF no longer contained language requiring grant recipients to share in the cost of research projects resulting from unsolicited proposals. These changes effectively eliminated mandatory cost sharing NSF-wide and for all NSF grants.

In February 2007, the Board discussed whether the 2004 policy change had resulted in unintended, potentially negative, consequences for certain programs that had previously required cost sharing. The Board subsequently formed an ad hoc Task Group on Cost Sharing, which was engaging in study of the issue when the America COMPETES Act formally directed the Board to evaluate its 2004 revision to NSF cost sharing policy. In October 2007, the Board formally charged the Task Force on Cost Sharing with examining NSF cost sharing policy.

INVITATION TO COMMENT:
The Board is soliciting public comment regarding community experiences in cost sharing with emphasis on the following:

(1) The relationship between cost sharing and NSF program goals.

Mandatory cost sharing plays a relatively well-understood role and is subject to straightforward implementation strategies in the federal grant funding process. Mandatory cost sharing refers to those resources required from grantee institutions by particular federal agencies, usually with different requirements for different programs. The fundamental role of voluntary cost sharing is considerably less clear, although the resources and impacts associated with such sharing are significant. Voluntary cost sharing describes resources made available to a given project solely at the discretion of the grantee institution performing the research; these resources can be committed (pledged formally in the proposal and made a binding condition of the award) or uncommitted (not formally pledged in the proposal and approved budget, but subsequently made available to the project). Voluntary cost sharing resources may be articulated formally in the proposal narrative, in letters of support, or in the budget (e.g., faculty claiming zero salary for time contributed to the project). Voluntary cost sharing is not regulated by NSF policy, but contributions offered in an NSF proposal during the NSF decision process are considered binding and auditable commitments upon receipt of a grant.

(a) What roles do resources provided by grantee institutions as voluntary cost sharing play in planning and establishing the structure, goals, and budgets of NSF programs and solicitations?
(b) What roles do resources provided by grantee institutions as voluntary cost sharing play in achieving the goals of particular NSF programs and the grants they fund?
(c) How might the quality and quantity of research funded by NSF be impacted if voluntary cost sharing were restricted or eliminated?

(2) The relationship between cost sharing and institutional competitiveness in NSF grant funding.

The Board's 2004 policy that eliminated program-specific cost sharing for all NSF programs was motivated in part by concerns that the difficulty experienced by some institutions in providing cost sharing inhibited or eliminated their ability to compete for NSF funding. Mandatory cost sharing has not been required by any NSF program solicitation issued since the Board's 2004 cost sharing policy revision was implemented (except the FY 2008 solicitation for the Major Research Instrumentation (MRI) program, for which mandatory cost sharing was specifically reinstated by the America COMPETES Act). In FY 2009, NSF will reinstate mandatory cost sharing for the EPSCoR, ERC, and I/UCRC programs, as recommended in the Board's February 2008 report to Congress on NSF cost sharing policy. Voluntary cost sharing is not regulated by NSF policy and remains a factor that may impact relative institutional competitiveness in all NSF funding opportunities.

(a) To what extent is voluntary cost sharing necessary for a proposal or institution to be competitive in NSF funding opportunities?
(b) How does the type or nature of an institution impact its ability to provide voluntary cost sharing?
(c) How might the opportunity to provide voluntary cost sharing be used to stimulate participation and enhance competitiveness in NSF funding opportunities without providing an unfair advantage to any particular type of institution?

(3) The role of cost sharing in the NSF merit review process.

NSF has no formal method during the merit review process by which to account for or evaluate voluntary cost sharing. General NSF practice is for program officers to not consider any offers of voluntary cost sharing during the merit review process. However, institutional resources offered in a proposal as voluntary cost sharing may be apparent to reviewers during the merit review process. Such offers may be articulated formally in the proposal narrative, in letters of support, or in the budget (e.g., faculty claiming zero salary for time contributed to the project). Resources provided as voluntary cost sharing may bear on the principal investigator or institution's ability to complete the work described in a proposal.

(a) What are the positive and negative implications of formally considering voluntary cost sharing in the NSF merit review process?
(b) What are possible means by which voluntary cost sharing could be formally and objectively considered as part of the NSF merit review process?

(4) The importance of types, sources, and timing of voluntary cost sharing.

Currently, institutions applying for NSF grants may commit voluntary cost sharing resources in any form allowable under OMB Circular A-110 (2 CFR § 215.23). All cost sharing resources can be contributed toward any category of project cost and must be allowable (according to federal cost principles in Circulars A-21 and A-110 [2 CFR § 215]), allocable (with direct benefit to the award), necessary (needed to carry out the objectives of the award), reasonable (what a prudent business person would pay), and contributed toward costs incurred during the award period. For some NSF programs, certain types of cost sharing resources may be more appropriate (e.g. cash industry membership fees in the I/UCRC program). Some institutions may be more able to contribute resources in certain forms. Certain types of resources may bear differently on the ability to achieve the goals of NSF programs and particular grants funded by the programs.

(a) What are the relative merits to institutions of cash and in-kind contributions as cost-shared resources?
(b) What types of resources should institutions be permitted and not be permitted to bring to NSF projects?
(c) Would certain types of institutions be unfairly impacted if cost sharing were restricted to cash only?

(5) Effort associated with tracking and reporting cost-shared resources.

The Board's 2004 policy that eliminated program-specific cost sharing for all NSF programs was motivated in part by concerns about the difficulties of documentation and satisfaction of cost sharing obligations and the burden on grantee institutions of tracking and reporting cost-shared resources. Federal agencies and grantee institutions are required to maintain auditable records for direct research costs and committed cost sharing (both mandatory cost sharing as required by the funding agency and voluntary cost sharing committed in proposals).

(a) What are the nature and magnitude of challenges, both for NSF and grantee institutions, in tracking and reporting both mandatory and voluntary committed cost sharing? How do the challenges differ for cash and in-kind cost sharing?
(b) What impacts do time and effort reporting and agency funding regulations (e.g. restrictions on payment of summer salary) have on tracking and reporting both mandatory and voluntary cost sharing?
(c) What are possible ways to mitigate the challenges of tracking and reporting cost sharing?
(d) What are possible consequences for failure to fulfill cost sharing obligations?

(6) The relationship between cost sharing and institutional strategic investment.

Cost sharing has been rationalized by the idea that it brings additional financial resources to the research enterprise; serves as a means for leveraging institutional and state and local government support; provides incentives for strategic planning and buy-in by grantee institutions; promotes sustainability for large, multi-year activities initiated with federal funding; and provides a means for creating meaningful partnerships with industry. Cost sharing has been required in certain NSF programs that achieve such objectives as developing research infrastructure that can be used beyond the scope or life of the specific NSF award, or generating revenue for the grantee institution. An institution's decision to participate generally had to be made in the context of long-term strategic priorities, institutional goals, and desire to achieve program sustainability beyond NSF funding.

(a) How does cost sharing, both mandatory and voluntary, impact institutional strategic planning?
(b) To what extent might cost sharing requirements be used as a means of assisting smaller and traditionally underrepresented institutions in becoming and remaining competitive for external research funding?
(c) To what extent does cost sharing promote institutional sustainability for NSF-funded programs once NSF funding ends?
(d) Does cost sharing promote the involvement of industry in ways that otherwise would not be possible or likely?

(7) Options for ensuring institutional equity in NSF grant funding when cost sharing is either required or volunteered.

No NSF program solicitation issued since the Board's 2004 cost sharing policy revision was implemented has required mandatory cost sharing (except the FY 2008 solicitation for the Major Research Instrumentation (MRI) program, for which mandatory cost sharing was specifically reinstated by the America COMPETES Act). In FY 2009, NSF will reinstate mandatory cost sharing for the EPSCoR, ERC, and I/UCRC programs, as recommended in the Board's February 2008 report to Congress on NSF cost sharing policies. Mandatory cost sharing in such programs and voluntary cost sharing in all NSF programs remain factors that may impact relative institutional competitiveness and equity in NSF funding opportunities.

(a) What policies might be enacted by NSF to ensure institutional equity in NSF funding opportunities that require mandatory cost sharing and, more generally, in all NSF funding opportunities?
(b) What policies might institutions employ to more effectively meet both mandatory and voluntary cost sharing needs?

(8) Research resources from state providers.

Cost sharing between states and the federal government occurs in a variety of ways across a variety of programs, ranging from the development of critical infrastructure (e.g., roads and bridges, for which federal dollars must be matched by an appropriate percentage of state dollars), to the support of research at universities. With regard to the latter, cost sharing can be mandated by the funding agency - as in the case of large, permanent equipment acquisition grants funded by NSF - or be voluntarily committed to assist universities maintain or increase their ability to conduct research funded by federal grants (e.g., laboratory renovation, hiring of support staff).

(a) What processes do states employ for prioritizing investments of state dollars in federally funded academic research? Is cost sharing on federally funded projects a component of those investments? In the absence of specific processes for prioritizing such investments, to what extent do states provide state dollars to public and private universities for use in federally sponsored research projects?
(b) If cost sharing is not mandated by statute or by the federal agency providing funding for a university research project, how likely are states to provide financial or in-kind resources to universities? How are decisions made at the state level to provide financial or in-kind resources to particular research projects?
(c) Besides earmarks and other non-competitive funding mechanisms, what are possible means for states to help sustain successful university research projects initiated by competitive federal grants after federal funding ends?

(9) Research resources from industry providers.

Industry participation in academic research and development is a vital component of the U.S. higher education and private sector enterprise. It promotes the creation and application of new knowledge; helps ensure an adequately prepared workforce; brings important practical experience into the classroom; and provides industry access to intellectual resources, physical facilities, and technology that would be too costly to obtain by other means. Some federal grants to universities offer opportunities for formal engagement of private industry partners, with participation fees or cost sharing frequently required in return for special considerations in licensing, a role in setting project direction and priorities, and other benefits.

(a) What processes do private companies employ for prioritizing investments of corporate dollars in federally funded academic research? In the absence of specific processes for prioritizing such investments, to what extent do private companies provide corporate dollars to public and private universities for use in federally sponsored research projects?
(b) How do federal agency requirements for cost sharing impact the willingness of private companies to provide financial or in-kind resources to universities? How are decisions made to provide financial or in-kind resources to particular research projects?
(c) To what extent do private companies help to sustain successful university research projects initiated by competitive federal grants after federal funding has ended?

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