On January 27, 2026, the Department of Energy (DOE) issued Policy Flash PF-2026-30, announcing that prior policy flashes limiting indirect cost recovery (including the widely debated 15% cap) are no longer in effect. The change was triggered by H.R. 6938, the “Commerce, Justice, Science; Energy and Water Development; and Interior and Environment Appropriations Act, 2026.”
Section 313 of the Act directs DOE to apply indirect cost rates as described in 2 CFR 200.414, and to do so to the same extent and in the same manner as in FY 2024; it also bars DOE from using appropriated funds to develop, modify, or implement changes to such negotiated indirect cost rates.
Bottom line: Negotiated indirect cost rate agreements (NICRAs) and Uniform Guidance rules govern again for DOE financial assistance, restoring pre-cap practices and removing the 15% ceiling (and the 10% for state/local) that DOE attempted to implement in 2025 through several policy flashes now rescinded.
Background: DOE’s Treatment of Indirect Cost
For decades, for-profit companies receiving DOE financial assistance awards operated under a consistent framework that allowed recovery of actual indirect costs, provided those costs were allowable, allocable, and reasonable under the Federal Acquisition Regulation (FAR) and the Code of Federal Regulations (CFR).
Historically, DOE did not impose a ceiling on indirect rates, acknowledging that for-profit entities — especially early-stage innovators and commercialization-focused firms — naturally operate with high overhead structures.
A Significant Policy Shift: Introduction of the Indirect Rate Cap
In April and May 2025, the DOE began issuing a series of policy flashes stating the Agency would no longer use NICRA for determining indirect costs when making awards. Instead, DOE was implementing a new cap on the total reimbursable indirect and fringe costs for new financial assistance awards, including grants and cooperative agreements, issued on or after April 11, 2025, for Institutes of Higher Educations (IHEs) and May 9, 2025, for for-profits, nonprofits, and state and local governments.
But rather than limiting an organization’s rate, the DOE limited the total dollar amount of indirect and fringe costs it would reimburse, calculated as a percentage of the total award amount (federal share + required cost share). The policy flashes instructed recipients to continue to use “their negotiated and approved indirect cost rate(s) in applications for Awards,” but DOE will limit the amount of indirect costs reimbursed to the capped dollar amount.
The Policy Flashes affected the various types of award recipients:
- 15%: IHEs-PF-2025-22 issued on April 11, 2025. On June 30, 2025, this Policy Flash was vacated by the U.S. District Court for the District of Massachusetts.
- 10%: State and local governments – PF-2025-25 issued on May 8, 2025.
- 15%: Nonprofit organizations – PF-2025-26 issued on May 8, 2025.
- 15%: For profit organizations– PF-2025-27 issued on May 8, 2025.
The indirect cap effectively re-shaped the landscape of indirect rates.
Before DOE introduced the indirect cost caps, recipients had flexibility to propose indirect rate structures aligned with their actual business operations. Organizations could tailor their rates — for example, using a two-tier structure that applied a fringe rate to direct labor to cover employee benefits and a separate overhead rate to capture broader administrative costs. This approach generally allowed recipients to recover the full amount of allowable indirect costs needed to support their projects.
The caps introduced through the 2025 policy flashes fundamentally altered this system. Instead of limiting the rate, DOE limited the total reimbursable dollars for both indirect costs (IDCs) and fringe benefits combined. In practice, the cap reimbursed only a small fraction of actual indirect and fringe costs — often just pennies on the dollar. Many early-stage and commercialization-focused recipients lacked the cash reserves to absorb these unreimbursed costs, forcing them to fill large funding gaps. As a result, numerous innovative startups were discouraged from participating in DOE programs.
The impact extended beyond prime recipients. Because the cap had to be flowed down, subrecipients were also subject to the same limitations, further complicating budgeting, subaward negotiations, and subrecipient monitoring responsibilities for prime recipients.
Another major shift involved cost share treatment. Under the prior rules, indirect cost overruns — costs incurred above a negotiated rate — could be counted toward a recipient’s cost share requirement. The new cap policy eliminated this option, asserting that above-cap indirect costs could not qualify as cost share because they were not “amounts which could have been charged” to the award under 2 CFR 200.306(c). Removing this flexibility increased financial pressure on recipients, who previously relied on the ability to apply indirect overruns to reduce their remaining cash cost-share obligations.
Finally, the caps did nothing to reduce compliance workloads. Recipients were still required to prepare detailed invoices (SF-270), quarterly financial reports (SF-425) and annual incurred cost submissions. In other words, organizations were expected to maintain the same level of financial and administrative rigor — even though the caps prevented them from being fully reimbursed for the overhead needed to perform this work.
DOE Rescinds 15% Indirect Cost Cap
The indirect rate caps — and the wave of litigation, injunctions and vacated policy flashes that followed — created a prolonged period of regulatory uncertainty for DOE awardees. Program offices, recipients, and subrecipients were operating under shifting rules that differed across award types, time periods, and legal jurisdictions, making long-term planning nearly impossible. This instability ultimately proved unsustainable. The cumulative effect of inconsistent policy directives, court interventions, and mounting financial strain on recipients prompted Congress to step in.
On January 27, 2026, the DOE issued PF-2026-30, formally rescinding all prior policy flashes that imposed indirect cost caps — including the 15% ceilings applied to nonprofits and for-profits and the 10% cap applied to state and local governments.
The rescission was triggered by H.R. 6938, the “Commerce, Justice, Science; Energy and Water Development; and Interior & Environment Appropriations Act, 2026.” Section 313 of the Act directs DOE to apply indirect cost rates exactly as applied in FY 2024 and prohibits DOE from using appropriated funds to modify, develop, or implement changes to negotiated indirect cost rates.
For for-profit, nonprofit, and state/local prime recipients, PF-2026-30 restores a familiar regulatory environment rooted in 2 CFR 200.414 — requiring federal agencies to accept negotiated indirect cost rates unless a deviation is required by statute or properly approved.
What PF-2026-30 Really Means
The recent DOE Policy Flash implementing Section 313 of H.R. 6938 makes several important changes to how indirect cost rates are treated. First, DOE has fully rescinded all prior policy flashes that imposed indirect or fringe reimbursement caps, including PF-2025-22, -25, -26, -27, and PF-2025-38/FAL 2025-05.
With those policies no longer in effect, DOE reverts to the guidance used in FY 2024 under 2 CFR 200.414, which requires federal agencies to accept negotiated indirect cost rates unless a deviation is required by statute or properly approved by the Office of Management and Budget (OMB). As a result, recipients may once again rely on their NICRA — or, where applicable, the de minimis rate under §200.414(f) and §200.414(c)(1) — unless a lawful, approved deviation is issued.
The Policy Flash also prohibits DOE from using appropriated funds to change negotiated indirect cost practices, effectively locking agencies into the FY 2024 framework. In practical terms, this means that indirect rate caps — such as the previously imposed 15% and 10% ceilings — no longer govern budgets or reimbursement for most current and future awards. Even where award documents contain the old caps, PF-2026-30 and the underlying statute gives recipients strong grounds to request modifications restoring NICRA-based or Uniform Guidance-aligned treatment.
While DOE programs may continue applying standard allowability and program-specific considerations under the Uniform Guidance, they can no longer enforce the rescinded indirect cost caps. Recipients who followed DOE’s instructions and used their NICRA in their application have a compelling case for requesting additional funding to cover incremental indirect costs. Additionally, those recipients may be able to bill the difference between their NICRA and previously billed indirect costs at the DOE capped rate.
What DOE Award Recipients Should Do Now
1. Review All Awards Issued April 2025 – February 2026
Identify any DOE awards or subawards that reference:
- PF-2025-22, PF-2025-25, PF-2025-26, PF-2025-27, PF-2025-38/FAL 2025-05
- 15% or 10% indirect cost limits
- Special terms imposing indirect or fringe caps
Flag these for correction.
2. Request Administrative Modifications
Contact your DOE grants or contracting officer and request:
- Removal of all indirect/fringe caps
- Restoration of NICRA-based indirect cost treatment in line with FY 2024 rules
- Updated terms reflecting PF-2026-30 and H.R. 6938
3. Re-budget Using Your NICRA
Rebuild your award budget using:
- Your current NICRA
- The de minimis rate (if eligible)
- Or your approved indirect structure
Ensure the revised budget captures full allowable indirect costs.
4. Request Additional Funding (If Applicable)
Where the former cap reduced your reimbursable indirects:
- Request supplemental funding
- Provide calculations showing the NICRA-based difference
- Reference PF-2026-30’s retroactive restoration of FY 2024 practices
5. Bill Previously Unreimbursed Indirect Costs
If you billed indirects at capped levels:
- Calculate NICRA-based allowable indirects
- Submit adjustment invoices where DOE processes allow
- Document your rationale referencing the rescission
Protect Your Indirect Cost Recovery for 2026 and Beyond
With DOE’s indirect cost caps now formally rescinded, recipients have a critical window of opportunity to restore full cost recovery, strengthen budget strategies, and ensure their organizations are positioned for success under the reinstated FY 2024 framework. Taking action now will help prevent cash-flow constraints, recover previously unreimbursed indirect costs, and prepare for upcoming funding opportunities.
We invite all DOE awardees, applicants and subrecipients to join us for an upcoming webinar focused on indirect rate projection strategies for FY 2026 and beyond. We will provide more information and registration information once finalized. The webinar will walk through:
- How to model indirect rates under the restored Uniform Guidance framework
- How to assess the financial impact of uncapped NICRA-based reimbursement
- How to structure rates to improve cost recovery and maintain compliance
- How to prepare for proposal submissions in a post-cap environment
- Common pitfalls and standard approaches used by successful DOE-funded organizations
If you have any questions regarding how to maximize indirect cost recovery — or avoid being cash-constrained, Cherry Bekaert’s Government Contracting advisors are available to discuss your situation with you.
