Proposed changes to how federal research indirect costs are recovered, commonly referred to as the FAIR (Financial Accountability in Research) model, have been gaining attention across the higher education and research communities. While the model is still under review and not yet finalized, early discussion signals a potential shift in how research-related costs, including facilities and administrative expenses, may be tracked, allocated, and reported.
For institutions that rely heavily on sponsored research funding, even incremental changes to the reimbursement framework can have wide-ranging implications across finance, facilities management, property control, and compliance teams. As conversations around FAIR continue, many organizations are beginning to ask what preparation might look like if the model ultimately moves forward.
Understanding the Intent Behind the FAIR Model
The FAIR model was developed as a response to long-standing debate around the transparency and consistency of facilities and administrative cost reimbursement. Under the current F&A structure, reimbursement rates are negotiated at the institutional level and applied broadly across all research projects. The FAIR proposal introduces a more granular, project-specific approach intended to align reimbursement with actual project costs.
Key goals of the proposed model include increasing transparency, improving accountability, and providing greater visibility into the true cost drivers behind federally funded research. Rather than applying a uniform rate across all research activity, FAIR seeks to tie reimbursement more closely to the specific type of research being conducted and the facilities and resources required to support it.
It is important to note that the model remains under active discussion at the federal level. Legislative language has appeared in several appropriations bills, but final implementation timelines and requirements have not yet been established.
Why Room-Level Data May Become More Important
One of the consistent themes emerging from FAIR-related discussions is an increased emphasis on the accuracy and defensibility of cost attribution. As costs become more tightly aligned to specific research activities, the precision of underlying data becomes more critical.
Room-level valuation and cost segregation naturally play a role in this environment. Construction projects, renovations, and equipment installations are rarely uniform across a building. Wet labs, clean rooms, imaging suites, and other specialized research spaces often carry materially different costs than administrative offices or classrooms. Capturing these differences at the room level allows institutions to better align depreciation, operating expenses, and maintenance costs with the spaces that actually drive them.
Under a more granular reimbursement framework, institutions may need to demonstrate not just what assets they own, but where those assets reside and how they support specific research functions.
Potential Impacts on Depreciation and Asset Attribution
From what has been discussed publicly to date, the FAIR model is not expected to dramatically alter how depreciation is recovered. Instead, the emphasis appears to be shifting toward the accuracy of underlying asset data and space assignments.
As more advanced analytics tools become standard within federal oversight, inconsistencies in asset records, space usage, and cost allocation are more readily identified. This increases the importance of maintaining current, validated asset records and defensible depreciation schedules.
Allocating depreciation based on construction project data rather than incremental building value changes allows institutions to better associate capital costs with the specific spaces impacted by renovation or expansion. This approach supports more precise depreciation allocation at the room or space-type level, which becomes increasingly relevant if reimbursement models shift toward greater specificity.
Capitalization Thresholds and Inventory Strategy
We have also highlighted the change in the Uniform Guidance capitalization threshold, which increased from $5,000 to $10,000 and could directly affect equipment depreciation allocations. Any such change requires careful analysis of impacts on F&A rates, write-offs, and existing sponsored asset agreements.
From an asset management perspective, a threshold change can be an opportunity to reassess tagging strategies, inventory methods, and technology adoption. The use of RFID and automated inventory tools can help streamline compliance requirements, especially when institutions are managing multiple threshold classes of assets.
For assets that fall within transitional ranges such as $5,000 to $10,000, institutions must determine whether prospective application, write-offs, or phased retirements make the most sense based on financial leadership guidance and audit recommendations.
Why Preparation Matters Even While FAIR Is Pending
Although FAIR remains under legislative review, it is already influencing how institutions are thinking about cost visibility and documentation. The national dialogue has underscored the importance of data that is:
- Accurate at the asset level
- Defensible at the space level
- Traceable to construction and renovation projects
- Consistent across finance, facilities, and sponsored programs
Even if the final version of FAIR evolves from its current form, institutions that invest in stronger room-level data and asset attribution are better positioned to respond to regulatory change with minimal operational disruption.
HCA’s Perspective and Experience in Room-Level Cost Segregation
At HCA Asset Management, supporting higher education institutions with room-level cost segregation and asset validation has been part of our core methodology since our founding. Our approach has always emphasized accurate asset attribution, defensible depreciation, and alignment between physical space and financial reporting.
When institutions ask how pending FAIR concepts may affect their environment, our guidance remains consistent. Maintain accurate asset records. Validate space assignments. Tie capital costs to construction projects rather than generalized building values. These best practices support compliance today and flexibility tomorrow.
If FAIR implementation moves forward in any form, we’ve got processes already designed to support institutions at the level of detail that would be required.
If your institution would like to discuss how room-level cost segregation, asset validation, or RFID-enabled inventories fit into this evolving environment, HCA is always available as a resource.