Indirect costs, also known as overhead, are the university costs that support the research and instruction activities of the university, but cannot be directly identified to a specific group or award. Indirect costs are known as facilities and administrative (F&A) costs and are expressed in terms of a rate. The F&A rate is applied to eligible direct costs of sponsored research awards. The rates are developed under the requirements of the U.S. Office of Management and Budget. CMU negotiates the following rates with the Office of Naval Research (ONR):

• On Campus Capped/Uncapped                                                
• Off Campus Capped/Uncapped
• NREC Capped/Uncapped
• Silicon Valley Capped
• Software Engineering Institute

The composition of the F&A cost “pools” are mandated by regulation. They are comprised of the following categories of costs:

• Depreciation, which includes buildings, land improvements and equipment.
• Interest, which includes the costs associated with bond financed buildings or renovations
• Operations and Maintenance, which includes costs incurred for the administration, supervision, operation, maintenance, preservation and protection of the institution's physical plant. It includes utilities, repair and maintenance, insurance, public safety, environmental health and safety, etc.
• General Administration (GA), which includes costs incurred for the general executive and administrative offices of the university, and other expenses of a general nature. Included are the Office of the President, Office of the General Counsel, Human Resources, the Finance Division, etc. (University Advancement is not included in the GA component of the rate.)
• Sponsored Projects Administration, which includes those costs incurred by separate organizations primarily to administer sponsored projects. Included are the Office of the Vice President for Research, Office of Sponsored Programs, Sponsored Projects Accounting and Cost Analysis.
• Departmental Administration, which includes those costs incurred for administrative and supporting services that benefit common or joint departmental activities or objectives in dean's offices, academic departments and divisions, organized research institutes, study centers and research centers.
• Student Services Administration, which includes those costs incurred for services benefitting graduate students analogous to fringe benefits. Included are University Health Services and public transportation expenses.
• University Libraries, which includes those costs incurred for the operation of the library system, including the cost of books and material.

F&A costs are the real costs of the university, not a tax. The Defense Contract Audit Agency (DCAA) audit the costs annually to confirm compliance with the federal regulations and to confirm the costs are allowable, allocable and reasonable for reimbursement.

The Office of Naval Research (ONR) is CMU’s cognizant agency. Cognizance is determined by which federal sponsor funds the most sponsored activity at the university. The Department of Defense (DoD) funds the largest portion of CMU’s sponsored activity, and the DoD agency responsible for negotiating F&A rates is ONR.

CMU’s rate is a Fixed with Carryforward rate and is one of the two rates the federal government negotiates. The fixed rate is a projected rate, negotiated with ONR prior to the start of a fiscal year, and is the rate charged to sponsored awards. The actual rate is determined after the fiscal year ends based on the actual expenses of the fiscal year. Carryforward is the difference between the fixed (charged rate) and actual rate. The carryforward is applied to a subsequent rate negotiation.

The negotiated FY22 rates became effective on July 1, 2021.  All awards received with a start date on or after July 1, 2021 must use the FY22 rates.