On June 20, 2025, a significant legal battle has emerged as a coalition of 12 universities, including prominent institutions like Johns Hopkins, Arizona State, and Cornell, has taken a stand against the Department of Defense (DOD). This coalition, along with three trade organizations, has filed a lawsuit challenging the DOD’s recent decision to impose a cap on indirect research cost rates at a mere 15 percent.
The DOD’s Secretary, Pete Hegseth, previously stated that this policy aims to enhance “accountability” and eliminate “waste” within the system. However, the universities argue that such a drastic reduction in indirect cost rates could halt essential research initiatives, lead to job losses, and severely impact scientific inquiry across the nation. They contend that this move threatens the United States’ esteemed position as a leader in global scientific research and innovation.
In a swift response, a federal judge in Boston issued a temporary restraining order on Tuesday, effectively blocking the DOD from implementing this cap. A hearing regarding the case is scheduled for July 2, which will further explore the implications of this contentious policy.
This lawsuit is part of a broader trend where universities and their supporters have consistently challenged the federal government’s attempts to limit funding for indirect research costs. Similar caps have been proposed by agencies such as the National Institutes of Health, the National Science Foundation, and the Department of Energy, but federal judges have intervened to halt these initiatives for the time being.
For many years, universities have engaged in negotiations with the federal government to establish tailored indirect cost reimbursement rates. These rates are crucial for covering various research-related expenses, including facility maintenance, specialized equipment, and administrative support. Such costs are integral to the successful execution of multiple grant-funded projects.
As an illustration, Johns Hopkins currently has a negotiated indirect cost rate of 55 percent with the DOD. In 2024, the university received $32 million from the DOD to cover these indirect costs. However, if the DOD’s proposed cap is enforced, Johns Hopkins could face a staggering loss of $22 million, significantly impacting its research capabilities.
In light of these developments, the academic community is closely monitoring the situation, as the outcome of this lawsuit could have far-reaching consequences for research funding and the future of scientific inquiry in the United States.