Under Secretary of Defense for Research and Engineering Emil Michael signed the attached memorandum on June 12, 2025, to deviate from negotiated indirect cost rates for assistance awards to institutions of higher education and to implement a 15% indirect cost rate cap for awards to such institutions.

As of June 17, 2025, plaintiffs in the AAU v. DoD indirect cost rate litigation (D. Mass., No. 25-cv-11740) have filed suit and received a temporary restraining order (TRO).  The TRO prohibits DoD “from implementing, instituting, maintaining, or giving effect to the immediately effective portions of the Rate Cap Policy, i.e., those portions implementing a 15% cap for all awards issued on or after June 12, 2025, including but not limited to rejecting or treating adversely proposals for DOD funding submitted at universities’ negotiated rates rather than the 15% rate.”  DoD will comply with the terms of the TRO while it remains in effect.  Additionally, DoD will pause efforts to renegotiate rate caps for existing awards to institutions of higher education for the duration of the TRO.

DoD awards to institutions of higher education issued while the TRO remains in effect will not implement the attached memo.  However, awards made during this time should include a term stating that the policies of the memo will be applicable for the entirety of the award if there is a court decision permitting application of the policies.