Five ways to navigate the evolving R&D funding landscape

As the landscape of research and development (R&D) funding continues to evolve in the early days of President Trump’s second term, research institutions must adapt to new realities shaped by changes in federal policies, economic pressures and industry demands. For example, the recent announcement by the National Institutes of Health (NIH) that it will slash indirect cost rates (also known as facilities and administrative, or F&A, rates) to 15% is raising concerns across the academic research community. In some cases, academic institutions are already taking rapid actions, including pausing PhD program admissions. The 15% proposal is significantly lower than the average pre-negotiated rates, which generally range from 25% to 60% or greater. In addition, this rate reduction could drive the loss of access to hundreds of millions of dollars in federal research funding overnight, with potential cuts translating to an 18%-30% or more reduction in total NIH funding.

The anticipated impact of the new administration’s policies on federal research funds is just one example of the shifting dynamics institutions must navigate. As legal challenges to these proposed changes continue, institutions need to evaluate five key steps to respond to increasing uncertainty across the research funding landscape.

3. Be prepared to navigate increased scrutiny for federal funding.

Increasing competition for R&D funding is anticipated to intensify sponsors’ scrutiny around compliance and appropriate use of funds. As such, institutions must validate that their proposal submissions are robust and well-justified, providing clear budgetary rationale and demonstrating the potential impact of the proposed research. Furthermore, establishing controls to maintain compliance with applicable regulations and sponsor requirements, along with upholding transparent financial practices, is essential for proactive risk mitigation, preparation for rigorous audits, and prevention of funding loss, financial penalties and reputational damage.

4. Develop new revenue streams via net-new services.

To supplement traditional funding sources, research institutions should explore establishing new revenue streams by offering new, differentiated services. These services, ranging from clinical trial management to regulatory compliance and data management, can leverage currently available research assets and generate tens of millions of dollars in profit and high-margin revenue. Additionally, by leveraging in-house knowledge and resources, institutions can provide valuable research services to external clients, creating additional income while enhancing their research capabilities.

5. Reduce costs while protecting impact.

In light of looming budget constraints, research institutions should explore ways to reduce costs and improve efficiency. This approach may include consolidating select research administration functions (e.g., budgeting, contracting, regulatory support), outsourcing select research functions, exploring new business models through collaborations with other institutions and industry partners (e.g., joint ventures), and adopting emerging intelligent automation technology (e.g., agentic AI)) to unlock shared resources, reduce overhead and increase research capacity.