There is clearly a problem with the process by which universities recover their indirect costs of research. Congressional hearings, media reports, and discussion by university scientists and administrators all reflect a widespread loss of confidence in the present process, and that loss of confidence is in itself a significant problem. Universities must regain public confidence that the expenditure of public funds is handled in a fair and prudent fashion.

The fact that there are problems in the indirect costs system does not come as a complete surprise to university presidents, administrators, and principal investigators. In 1987 the Association of American Universities appointed an Ad Hoc Committee on Indirect Costs, chaired by Cornelius Pings, provost of the University of Southern California in Los Angeles. The Pings Committee was charged with studying indirect costs and recommending ways to simplify the system and to reduce variations in the rate. It is hard to...

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