National Science Foundation cost sharing: Few perfect answers

I n an effort to be "consistent, clear, and up-front with our grantees," the National Science Foundation has is­

sued a new policy statement on cost sharing with colleges and universities. The policy itself was adopted by the Na­tional Science Board, NSFs governing body, at its meeting in early May.

The policy was announced in early June, and NSF officials say they are now gathering a list of frequently asked ques­tions in hopes of further clarification. In­deed, many people familiar with the cost-sharing issue insist that, while it is a step in the right direction for NSF, it still leaves too much guesswork for grantees. Worse, they say, it still potentially under­mines the merit review process that alone is supposed to determine which proposals are worthy of funding.

Cost sharing can be thought of as the amount of money or other support that a university contributes to an investiga­tor's project. It can be a contribution as small as the university's purchase of ba­sic office equipment, or it can be mil­lions of dollars in state aid promised to support, for example, a research center under NSF's Materials Research Sci­ence & Engineering Centers program.

Critics of NSF cost sharing say the policy can lead to problems that span an equally wide range. One investigator told of having to resubmit a proposal

with her university's promise to buy her a personal computer. Another told of his and other researchers' frustration and outrage at the siting of an NSF research center that seemed to be decided solely on the basis of state funds promised. Other considerations—such as access by scientists and proximity to other world-class institutions—seemed not to carry nearly as much weight.

'There are many ways to play this cost-sharing game," says an NSF grant recipient about the often vague nature of the cost-sharing process. "You learn from experience, from talking to col­leagues, and so on, about what is re­quired cost-sharingwise. It never comes back in a review [of the proposal]."

According to one report on the sub­ject, "matching funds and cost sharing are closely connected, sometimes equiv­alent, and sometimes different terms used to describe a variegated set of poli­cies, practices, and behaviors found in federal agency grant policy manuals, re­search program announcements, pro­posal review criteria, and grant negotia­tions." The term "matching" typically means federal agency requirements for specific dollar or percentage amounts to be applied to a project from a college or university.

Cost sharing is a more general term used to describe both matching and

cost sharing. In practice, many agency program announcements blur these dis­tinctions by speaking of required or ex­pected institutional contributions. Some critics contend that unstated or vague "cost sharing" is actually "cost shifting."

At the earliest, the legislative history of cost sharing dates back to NSF appro­priations from Congress in 1958, says Robert B. Hardy, director of NSF's Divi­sion of Contracts, Policy & Oversight. One concern consistently voiced, he says, is that federal agencies are not clear about cost-sharing requirements. Where cost sharing is beyond 1%—the least amount required of universities for funding unsolicited proposals from its faculty—it should not be left for investi­gators to guess, Hardy says.

Controversy about cost sharing, while not new, has escalated in recent years. Some policy experts see it as eroding the "traditional" partnership that has existed between universities and the federal gov­ernment. It arises now because an in­creased number of research-intensive uni­versities have intensified the competition for federal research funds, "inducing de facto bidding wars for federal awards and voluntary cost sharing even when none is formally required," says a 1997 report commissioned by NSF to study the issue.

Known as the Feller report, after its author, economist Irwin Feller, the study confirms substantial differences in the way universities and federal agen­cies view the "legitimacy, probity, and impacts" of cost sharing, and it "high­lights] the potentially dysfunctional im-

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pacts that flow from the collective force of the decentralized, agency-specific character in which matching-fund and cost-sharing practices are coming to pervade federal government-university research relationships."

According to the report, federal pro­gram managers say "flexibility" in lan­guage used to describe the amount or percentage required for matching and cost-sharing contributions is designed to ensure that worthy proposals are not turned down because of inadequate funding. Program managers also report­ed that high levels of cost sharing can convince review panels of the serious­ness of institutional commitments.

On the other hand, the Feller report says, "Open-ended language related to cost sharing can set in motion competi­tive dynamics that produce an upward ratchet on bids." Worse, "the combina­tion of loosely specified financial condi­tions and the increased number of po­tential bidders permit program manag­ers to play institutions against one another." As is sometimes the case claimed by critics of cost sharing, pro­

gram managers can use "the bids of some institutions to seek increased of­fers from others."

According to a study of cost sharing by President Clinton's National Science & Technology Council (NSTC), "agen­cy cost-sharing policies and practices must be transparent." Cost sharing is appropriate, says NSTC, "when there are compelling policy reasons for it, such as in programs whose principal purpose is to build infrastructure and enhance an awardee's institution's abili­ty to compete for future federal awards."

Cost sharing is rarely appropriate, the NSTC report continues, in such instances as when the federal government con­tracts for specific research services. This, it says, "would entail a university subsidy of goods purchased by the government."

Moreover, if agency funds are not suf­ficient to cover the costs of a research project, "the agency and university should reexamine the scope of the project." Many current critics of NSF cost sharing—including the agency's internal critics—cite this issue as a driving force behind the recent policy change.

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In brief, significant aspects of the new NSF cost-sharing policy are the following:

• NSF-required cost sharing is an eli­gibility rather than a review criterion. In other words, stated cost-sharing require­ments must be met before a proposal moves to the merit review process.

• NSF cost-sharing requirements be­yond that required by law (1%) will be clearly stated in the program announce­ment, solicitation, or other mechanism which generates proposals.

• Only statutory cost sharing (1%) will be required for unsolicited research and education projects.

• Any negotiations regarding cost sharing will occur within the parameters stated. Furthermore, any reduction of 10% or more from the amount proposed should be accompanied by a correspond­ing reduction in the scope of the project, unless the program officer, principal inves­tigator, and institution clearly agree that the project as proposed can be carried out at a lesser level of support from NSF.

The eligibility versus review criteri­on, especially, is a step in the right di­rection, says Mark E. Davis, a professor of chemical engineering at California In­stitute of Technology. 'The foundation is saying, 'Let's have a consistent policy on investigator-driven grants.' "

But for Davis and others, questions linger. "Should there be a box to check for cost-sharing criteria?" Davis asks. "How does a principal investigator know that this will be an eligibility versus re­view criterion?" On NSF proposals, cost-sharing is still revealed to reviewers once a proposal has been passed to them for merit review.

"While we feel we have addressed some concerns, we have not addressed all concerns," Hardy says. "Some [prob­lems] will have to be worked out through experience with the revised policy. There are not necessarily perfect answers to all issues."

The Feller report suggests that om­budsman-like positions be created with­in agencies to handle university com­plaints about alleged deviations from agency policies in practices by program managers. "Agencies need to address the growing concerns about and discon­tent with their grant management pro­cedures," the report says. "If not ad­dressed systematically within an agen­cy, these concerns will likely spill into the political arena, potentially harming both the agency and universities."

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