These contrasting perceptions can be a cause for misunderstanding. The faculty member feels that she or he is contributing significant F&A cost dollars to the University, whereas the administration maintains that the University is simply being appropriately reimbursed for the F&A costs of the project. There is typically a tendency for faculty to underestimate the nature and cost of essential support services. All too frequently, the recovered F&A costs do not fully cover the actual F&A costs of such research. In many instances the cost of the space alone, if calculated at market rates, would be comparable to the F&A cost amount generated by the grant.
The situation is even more complicated than the above analysis suggests. When a federal agency receives its appropriation from Congress, there is often no distinction between direct and F&A costs. The agency receives a total budget to carry out its program. Whatever funds the agency has to pay out for F&A costs are clearly unavailable to award for direct cost purposes. Thus, there is a fundamental trade-off made at the agency level between direct and F&A costs, which makes this issue of legitimate concern to faculty considering the long-term funding prospects for their disciplines.
Some faculty members feel that if they could force sponsors to reduce the F&A costs a university can recover, there would be more money for their research program. That tactic might work in the short term, if the "savings" were used to help fund a larger number of grants. However, in the longer term, if the University loses revenue in this way, it will be forced to cut services, staff and faculty positions, reduce available research space, and trim other expenses, so that any initial advantage will be undermined or completely outweighed by later disadvantages. In reality, the University subsidizes many proposals for which the F&A cost rates are arbitrarily restricted by the agency. In light of this, the University continually strives to lower administrative costs and to conduct research in the most efficient and effective manner possible. Through these efforts, the University lowers its costs, and more direct cost funds are made available.