Negotiated Indirect Cost Rate

What is a negotiated indirect cost rate?

A negotiated indirect cost rate is a percentage formally agreed with a federal cognizant agency that governs how much overhead a grantee may charge to federal awards. It is set out in a Negotiated Indirect Cost Rate Agreement, commonly called a NICRA. Unlike a commercial overhead rate you calculate for internal pricing, this one is approved by the government and binding on every federal award you hold.

Getting a rate, or electing de minimis

Obtaining a NICRA means preparing an indirect cost proposal with a cost allocation plan showing how shared costs are pooled and distributed, then negotiating with the agency that provides most of your federal funding. Organizations that have never held a negotiated rate may instead elect the de minimis rate on modified total direct costs, which requires no negotiation and no proposal. Many stay on de minimis for years, even though a negotiated rate commonly lands well above it.

The subsidy hidden in capped awards

Private funders often cap indirect recovery below your approved rate, and some refuse it outright. Every award accepted below your real rate is subsidized from unrestricted funds, which is how heavily grant-funded organizations grow revenue while reserves quietly shrink. Calculate your true rate even where no funder will pay it in full, so the board can see the size of the subsidy and decide which awards are genuinely worth accepting.