How Core Facilities Can Convert Indirect Costs Into Billable Direct Costs

The choice is clear: Indirect Costs (Declining) or Direct Costs (Sustainable)—a tough decision that will define the future of core facilities.

The Funding Shift That’s Changing Core Facility Operations

Research institutions are facing a financial challenge: NIH’s 15% indirect cost cap and shrinking overhead reimbursements are making it harder to sustain core facilities. For decades, institutions relied on indirect cost recovery (F&A rates) to fund shared research infrastructure. But with federal and institutional policies shifting, administrators are now forced to rethink how they account for these costs.

This change isn’t just about cutting budgets—it’s about restructuring how core facility expenses are classified. The institutions that adapt quickly will be the ones that sustain and even expand their research capabilities.

From Indirect to Direct: A New Approach to Cost Recovery

Many institutions are beginning to reclassify traditionally indirect costs as direct, billable expenses. Instead of being absorbed into overhead, costs like instrument usage, data analysis, and administrative support can be directly billed to individual labs, grants, or external clients.

This shift offers two key advantages: 

1. Makes core facility budgets more predictable – Instead of relying on fluctuating overhead rates, institutions can track and recover costs in real-time. 
2. Improves compliance with funding agency requirements – Direct cost recovery aligns with the way NIH and other funders prefer research expenses to be allocated.

How Institutions Can Make the Transition

Many universities are exploring digital platforms that can automate this cost recovery process, making it seamless for both internal researchers and external industry clients. Platforms like GRAVL provide:

• Automated tracking and invoicing for instrument usage and research services.
• Flexible billing models that allow institutions to recover costs through a take-rate model or structured direct-cost billing tied to lab purchases.
• A centralized system that ensures transparency and compliance in cost allocation.

Scaling External Revenue: The Key to Sustainability

Some research universities have explored models where core facilities generate revenue through external partnerships and fee-for-service agreements. These approaches are helping institutions diversify funding sources beyond traditional overhead reimbursement. Institutions that have begun implementing external service models have reported:

• Higher facility utilization rates as industry partners fill usage gaps.
• New funding streams from corporate partnerships that help offset fixed costs.
• Reduced reliance on overhead reimbursement models, leading to greater financial sustainability.

The Urgency to Adapt

Institutions that wait to adapt will face budget shortfalls, service reductions, and even facility closures. Those that take action now will future-proof their core facilities, positioning themselves as regional hubs for research services and securing new funding opportunities.

Early adopters will not only mitigate risk but set the standard for sustainable research operations in a changing funding landscape.

We’re working with institutions to help implement cost-recovery strategies that align with new funding realities. If this is something your university is navigating, we’d love to connect.