Thirteen universities and three university associations filed suit against the National Science Foundation (NSF) and its Acting Director, challenging cuts to “indirect cost rates” for NSF-funded research grants. NSF implemented a policy capping indirect cost rates at 15% for all eligible universities, replacing the prior system in which rates were negotiated individually to reflect actual research costs. Plaintiffs argued that the policy unlawfully limited funding and eliminated the negotiated process. The plaintiffs brought claims under the Administrative Procedure Act (APA), asserting that the Rate Cap Policy exceeded NSF’s authority, contradicted existing regulations, and was arbitrary and capricious. They sought to have the policy vacated, declared unlawful, and prevented from being implemented. The court held that the plaintiffs had standing, that the policy was reviewable under the APA, and that NSF exceeded its statutory authority by imposing a uniform 15% cap. The court also found the policy arbitrary and capricious, as NSF failed to explain how the cap would achieve its stated goals. As a result, the court vacated the Rate Cap Policy and issued a declaratory judgment that it was unlawful. The court declined to issue a permanent injunction, concluding that vacatur and the declaratory judgment provided adequate relief.
