The term “negotiations” implies reaching an agreement to establish rates. This is in part true for the indirect cost rate negotiation process, but it isn’t the full perspective. The process of negotiating indirect cost rates for your grant award is about building a case through documentation, analysis, and an understanding of your business and then presenting it to the cognizant agency.


Prior to the negotiation meetings, it is important for the grant recipient to gather and review the facts and figures associated with the specific grant and the entire organization. Another aspect of preparing for the meeting is to examine the proposal and business to identify issues and formulate solutions or responses to mitigate or eliminate those items.


Once the organization has a clear picture to present and support, the appropriate negotiation strategy should be identified and practiced. The organization may choose to have a single negotiator or a team of negotiators. Whichever approach is taken, the principal negotiator should be prepared to:

  • Ensure that the proposal and nature of the organization is clear
  • Ensure that the management and financial control requirements are met and communicated
  • Be able to review the types of costs and the consistency of treatment of costs is understood
  • Be able to communicate the assumptions and bases for cost decisions
  • Be able to convey the fairness of cost allocation methods and bases


In preparing your organization and negotiation “team” for the process, there are several areas to review:


  • Is this the first award with the agency and/or with any agency?
  • Is this negotiation a negotiation of the first rate or are you seeking a change in rates?
  • What financial and supporting data is available for review and analysis?
  • Has your organization ever been audited (financial, tax, or program audits)?
  • Have you submitted multiple proposals to a single or multiple agencies?
  • What is the current cost structure?
  • How do you anticipate the current cost structure changing?
  • Does your accounting system distinguish between allowable and unallowable costs?
  • Are you complying with cost principles? Financial controls?
  • Have costs been treated consistently across proposals and awards?
  • What allocation bases have been used?


There are many more questions that need to be answered prior to negotiating your rates. These are the same critical areas that your organization needs to have in place to comply with the “business” aspects of being a grant recipient. Understanding the full scope of requirements beyond performing the technical aspects of the grant is critical to an organization satisfying the award requirements. Remember that while grants are not normally required to be repaid, an organization may at a minimum be asked to repay the full amount of a grant, if they haven’t satisfied the terms and conditions associated with all aspects of the award, including the business and financial controls.

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