Hostname: page-component-78c5997874-4rdpn Total loading time: 0 Render date: 2024-11-03T02:42:00.976Z Has data issue: false hasContentIssue false
  • English
  • Français

Technically Allowed: Federal Scrutiny of Stanford University's Indirect Cost Expenditures and the Changing Context for Research Universities in the Post-Cold War Era

Published online by Cambridge University Press:  31 January 2019

Brent D. Maher
Get access Rights & Permissions [Opens in a new window]

Abstract

Stanford University's indirect cost rates for federally sponsored research dramatically increased from 58 percent in 1980 to 78 percent in 1991. Faculty frustration with increasing rates and scrutiny from a zealous government contracting officer culminated in a congressional inquiry into Stanford's indirect cost accounting practices in 1990 and 1991. The investigation revealed controversial luxury expenses charged to the government, including a yacht and antiques for the Stanford president's home, which attracted extensive public attention. Stanford president Donald Kennedy admitted some expenses were accounting errors but defended many expenses as permissible under government rules. Stanford's aggressive overhead recovery practices represent the institution's struggle to adapt to a changing economy for sponsored research in the twilight of the Cold War. The congressional response, which included a cap on administrative cost recovery for all universities, highlighted how shifting federal priorities—from defense research to deficit reduction—strained the relationship between the federal government and academic science.

Type
Articles
Information
History of Education Quarterly , Volume 59 , Issue 1 , February 2019 , pp. 97 - 127
Copyright
Copyright © History of Education Society 2019 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

1 Donald Kennedy, “Indirect Costs and the Health of Universities,” Oct. 16, 1987, 1, box 8, folder 315, Donald Kennedy Personal Papers, SC0708, Stanford University Archives.

2 Bozeman, Barry and Anderson, Derrick M., “Public Policy and the Origins of Bureaucratic Red Tape: Implications of the Stanford Yacht Scandal,” Administration & Society 48, no. 6 (Aug. 2016), 736–59CrossRefGoogle Scholar.

3 Barinaga, Marcia, “Stanford Erupts over Indirect Costs,” Science 248, no. 4953 (April 20, 1990), 293CrossRefGoogle ScholarPubMed; and Kennedy, Donald, Academic Duty (Cambridge, MA: Harvard University Press, 1997), 166Google Scholar.

4 Goldman, Charles A., Williams, Traci, Adamson, David M. and Rosenblatt, Kathy, Paying for University Research Facilities and Administration (Santa Monica, CA: Science and Technology Policy Institute, Rand Corporation, 2000), 6Google Scholar.

5 Bush, Vannevar, “Science: The Endless Frontier,” Transactions of the Kansas Academy of Science (1903-) 48, no. 3 (1945), 231–64CrossRefGoogle Scholar; Kevles, Daniel J., “The National Science Foundation and the Debate over Postwar Research Policy, 1942–1945: A Political Interpretation of Science—The Endless Frontier,” Isis 68, no. 1 (March 1977), 4–26CrossRefGoogle ScholarPubMed; and Geiger, Roger L., Research and Relevant Knowledge: American Research Universities Since World War II (New York: Oxford University Press, 1993), 14–19Google Scholar.

6 Kevles, “The National Science Foundation,” 4–7.

7 Guston, David H. and Keniston, Kenneth, “The Social Contract for Science,” in The Fragile Contract: University Science and the Federal Government, ed. Guston, David H. and Keniston, Kenneth (Cambridge, MA: MIT Press, 1994), 1–35Google Scholar.

8 Leslie, Stuart W., The Cold War and American Science: The Military-Industrial-Academic Complex at MIT and Stanford (New York: Columbia University Press, 1993)Google Scholar; and Geiger, Research and Relevant Knowledge, 173–74.

9 Geiger, Research and Relevant Knowledge, 173.

10 Leslie, The Cold War and American Science, 12. For a detailed account of how Stanford administrators orchestrated this rise, see Lowen, Rebecca S., Creating the Cold War University: The Transformation of Stanford (Berkeley: University of California Press, 1997)Google Scholar.

11 Geiger, Research and Relevant Knowledge, 132.

12 Leslie, The Cold War and American Science, 251.

13 Lowen, Creating the Cold War University, 6.

14 Geiger, Research and Relevant Knowledge, 197.

15 Guston and Keniston, “The Social Contract for Science,” 1–33.

16 Markusen, Ann and Yudken, Joel, Dismantling the Cold War Economy (New York: Basic Books, 1993), 7, 242–43Google Scholar.

17 Nadrone, Thomas, Herz, Diane, Mellor, Earl, and Hipple, Steven, “1992: Job Market in the Doldrums,” Monthly Labor Review 116, no. 2 (Feb 1993), 8–9Google Scholar.

18 Peter Likins and Albert H. Teich, “Indirect Costs and the Government-University Partnership,” in The Fragile Contract, 188.

19 Geiger, Research and Relevant Knowledge, 134, 97; and Geiger, Roger, “What Happened after Sputnik? Shaping University Research in the United States,” Minerva 35, no. 4 (Jan. 1997), 363CrossRefGoogle Scholar.

20 For more about allowable expenses, see Knezo, Genevieve J., “Indirect Costs for R&D at Higher Education Institutions: Annotated Chronology of Major Federal Policies,” in CRS Report for Congress (Washington, DC: Congressional Research Service, 1994)Google Scholar; and Goldman, et al., Paying for University Research Facilities and Administration.

21 Goldman et al., Paying for University Research Facilities, 11–12; Likins and Teich, “Indirect Costs,” 180; and Knezo, “Indirect Costs for R&D,” 1.

22 Goldman et al., Paying for University Research Facilities, 16.

23 Knezo, “Indirect Costs for R&D,” 19.

24 Goldman et al., Paying for University Research Facilities, 78; and Knezo, “Indirect Costs for R&D,” 17.

25 Barinaga, Marcia, “John Dingell Takes on Stanford,” Science 251, no. 4995 (Feb. 15, 1991), 734CrossRefGoogle Scholar.

26 Barinaga, “Stanford Erupts over Indirect Costs,” 292.

27 Likins and Teich, “Indirect Costs,” 187.

28 Barinaga, “Stanford Erupts over Indirect Costs,” 293.

29 Barinaga, “Stanford Erupts over Indirect Costs,” 293.

30 Barinaga, “Stanford Erupts over Indirect Costs,” 293.

31 Barinaga, “Stanford Erupts over Indirect Costs,” 292.

32 Joel Shurkin, “Faculty Protest Rising Costs of Doing Research,” Stanford University Campus Report, Feb. 7, 1990, 8, box 5, Government and Community Relations Records 1977–1997, SC0568, Stanford University Archives (hereafter cited as GCR).

33 Barinaga, “Stanford Erupts over Indirect Costs,” 294.

34 Barinaga, “Stanford Erupts over Indirect Costs,” 292.

35 Rich Jaroslovsky, “Called to Account,” Stanford Magazine (June 1991), 20.

36 Barinaga, “John Dingell Takes on Stanford,” 735.

37 As cited in Barinaga, “Stanford Erupts over Indirect Costs,” 294.

38 Huddart, Steven, Stanford University (A): Indirect Cost Recovery, Case No. A155a (Palo Alto, CA: Stanford Graduate School of Business, 1994)Google Scholar, 6, https://www.gsb.stanford.edu/faculty-research/case-studies/stanford-university-indirect-cost-recovery.

39 Veronique Mistiaen, “‘Hell on Wheels’ Hasn't Stopped at Stanford,” Peninsula Times Tribune (Palo Alto, CA), Aug. 9, 1991, A1.

40 Mistiaen, “‘Hell on Wheels’ Hasn't Stopped at Stanford,” A11.

41 Testimony of Paul Biddle in U.S. Congress, House of Representatives, Committee on Energy and Commerce, Financial Responsibility at Universities: Hearings Before the Subcommittee on Oversight and Investigations, 102nd Cong., 1st sess., Serial No. 102–33 (Washington, DC: Government Printing Office, 1991), 126.

42 Stanford University Controller's Office, “SU Response to DCAA Audit Report Number 7311-90U43510004 (0353) ‘DCAA Review of the SU Library Studies and Related Office of Naval Research Study,’ Volume 1: Stanford Response,” Nov. 19, 1990, 10–13, box 2, folder 3, GCR ; and “Stanford Concerns with ONR Office: Lunch with Thomas Dolan,” Oct. 1989, 1–3, box 4, folder 1, IDC Collection of Janet Sweet, Assistant Controller, GCR, ARCH-1999-172 Additional Records (hereafter cited as Sweet IDC Collection).

43 “Stanford Concerns with ONR Office,” 2, Sweet IDC Collection.

44 Janet Sweet to Paul Biddle, memo, May 8, 1989, 1, Sweet IDC Collection.

45 Janet Sweet to Robin Simpson, “Off-the-Record—Not for Further Distribution,” May 11, 1990, 3, Sweet IDC Collection .

46 Paul Biddle to Robin Simpson, Aug. 3, 1990, 2, Sweet IDC Collection .

47 Biddle to Simpson, Aug. 3, 1990, 2, Sweet IDC Collection.

48 Janet Sweet to Paul Biddle, Aug. 8, 1990, 1–6, Sweet IDC Collection.

49 Frank Riddle's notes on luncheon with Paul Biddle, Aug. 15, 1990, 1, box 5, GCR .

50 Donald Kennedy to Jim Rosse and Bob Byer, memo, “Subject: Conversation with Paul Biddle,” Aug. 15, 1990, 2–3, box 5, GCR.

51 Kennedy to Rosse and Byer, memo, Aug. 15, 1990, 4.

52 “Stanford Concerns with ONR Office,” 3; and Rojstaczer, Stuart, Gone for Good: Tales of University Life after the Golden Age (New York: Oxford University Press, 1999), 108–13Google Scholar.

53 David Rosenbaum, “Washington at Work; Michigan Democrat Presides as Capital's Grand Inquisitor,” New York Times, Sept. 30, 1991, A1.

54 Frank Riddle to Eileen Walsh and Rich Kurovsky, memo, “Meeting on Indirect Cost Issue,” Aug. 20, 1990, 1, box 5, GCR.

55 John Dingell to Donald Kennedy, Aug. 20, 1990, 1, box 5, GCR.

56 Riddle to Walsh and Kurovsky, “Meeting on Indirect Cost Issue,” 1; and Larry Horton to Frank Riddle, Eileen Walsh, and Rich Kurovsky, memo, Aug. 20, 1990, 1, box 5, GCR.

57 Stanford News, “Stanford and Federal Government to Review Indirect Costs on Federal Research Grants and Contracts,” Sept. 12, 1990, 30, box 5, GCR.

58 Paul Biddle to Thomas Dolan, March 6,1990, SU Campus Report, Sept. 12, 1990, 8, box 5, GCR; and Huddart, Stanford University (A), 3.

59 Office of Public Affairs, Stanford University, “Indirect Cost Issue,” n.d., 1, box 5, GCR.

60 Office of Public Affairs, “Indirect Cost Issue,” 1–2.

61 Donald Kennedy, “Statement on Indirect Costs,” SU News Service, Sept. 12, 1990, 1, box 5, GCR.

62 Jeff Gottlieb, “Probe Costs Stanford Big Bucks,” San Jose Mercury News, Sept. 15, 1990, 1.

63 Donald Kennedy, “Statement to the Stanford Faculty Senate on Various Reviews of Indirect Costs Recovery,” Sept. 27, 1990, 3–7, box 5, GCR.

64 Donald Kennedy to the Stanford Board of Trustees, Sept. 25, 1990, 2, box 5, GCR.

65 Kennedy to the Stanford Board of Trustees, Sept. 25, 1990, 2.

66 Frank Riddle to Robin Simpson, “Negotiation concerns in relation to FOIA disclosures on the memoranda written since 1988 representative at Stanford through 30 May 1990,” Aug. 29, 1990, box 5, GCR, 1.

67 Riddle to Simpson, “Negotiation concerns,” 2.

68 Frank Riddle to Joseph Riden, “Confirmation of Our Discussion on Friday, September 14, 1990,” Sept. 17, 1990, 1, box 5, GCR.

69 Larry Horton, “Meeting with Congressman Don Edwards”, Aug. 28, 1990, 1, box 5, GCR; and Marcus E. Howard, “Don Edwards, Who Championed Civil Rights During 32 Years in Congress, Dies at 100,” Los Angeles Times, Oct. 3, 2015, B6.

70 Stuart E. Eizenstat to Donald Kennedy, Sept. 8, 1990, 1–2, box 5, GCR.

71 “Stanford Admits Charging Taxpayers for Yacht Costs,” Wall Street Journal, Dec. 6, 1990, n.p.; and Paul Biddle to Donald Kennedy, Dec. 12, 1990, 3, box 5, GCR.

72 Douglas Frantz, “U.S. Questioning Millions in Stanford Research Bills,” Los Angeles Times, Dec. 14, 1990, A1; and Financial Responsibility, 3–4, 184–215.

73 “Stanford Admits Charging Taxpayers for Yacht Costs.”

74 Paul Biddle to Janet Sweet, Oct. 24, 1990, 2, Sweet IDC Collection.

75 Biddle to Sweet, Oct. 24, 1990, 2, Sweet IDC Collection.

76 Janet Sweet to Paul Biddle, Nov. 9, 1990, 1, Sweet IDC Collection; and Sweet to Simpson, “Off-the-Record,” May 11, 1990, 3, Sweet IDC Collection.

77 Frank Riddle to Paul Biddle, Nov. 9, 1990, 1, 9, Sweet IDC Collection.

78 Paul Biddle to Frank Riddle, “Return of Stanford Vouchers,” Nov. 30, 1990, 1, Sweet IDC Collection.

79 Paul Biddle to Donald Kennedy, Dec. 12, 1990, 3, Sweet IDC Collection.

80 Biddle to Kennedy, Dec. 12, 1990, 8–10.

81 Marshall S. Smith to Donald Kennedy, Bob Freelan, and Bill Massy, Jan. 19, 1991, 2, Sweet IDC Collection.

82 Financial Responsibility, 1–2, 5.

83 Financial Responsibility, 3–7.

84 Financial Responsibility, 55.

85 Financial Responsibility, 104.

86 Financial Responsibility, 111–38.

87 After the hearing, Robin Simpson was terminated from his ONR post, though he appealed and was eventually reinstated. For more on Simpson's termination and reinstatement, see Kennedy, Academic Duty, 173–75.

88 Testimony of Donald Kennedy, Financial Responsibility, 136, 144–45.

89 Kennedy, Financial Responsibility, 146.

90 Kennedy, Financial Responsibility, 148.

91 Kennedy, Financial Responsibility, 156.

92 Kennedy, Financial Responsibility, 158.

93 Kennedy, Financial Responsibility, 184–85, 199.

94 Testimony of William T. Keevan, Financial Responsibility, 167.

95 Kennedy, Financial Responsibility, 199.

96 Kennedy, Financial Responsibility, 195.

97 Financial Responsibility, 201.

98 Donald Kennedy, A Place in the Sun: A Memoir (Palo Alto, CA: Stanford University Libraries, 2017), 153.

99 Kennedy, A Place in the Sun, 198.

100 Kennedy, A Place in the Sun, 167–68.

101 Kennedy, A Place in the Sun, 201–203, 213–14.

102 “Episode 1111,” aired March 15, 1991, on ABC, 20/20 Transcripts, 1, folder 2, box 13, GCR.

103 Likins and Teich, “Indirect Costs,” 184–88.

104 Stanford University Office of Public Affairs, “ABC's 20/20 Interview with Donald Kennedy,” Jan. 30, 1991, 1–22, folder 2, box 13, GCR.

105 “Episode 1111,”20/20 Transcripts, 8.

106 Harlow, Keith, Brodie, Hammond, and Banner, Leslie, The Research University Presidency in the Late Twentieth Century: A Life Cycle/Case History Approach (Westport, CT: Praeger Publishers, 2005), 121Google Scholar; Jeff Gottlieb, “Stanford's Image: It's One of a Greedy School that Sees the Government as a Reservoir to Be Tapped,” San Jose Mercury, March 17, 1991, 6C; “Turning Labs into Cedar Chests,” Newsweek 117, no. 5 (Feb. 4, 1991), 70; Samuelson, Robert J., “Turning Labs into Cedar Chests,” Newsweek 117, no. 13 (April 1, 1991), 45Google Scholar; and “Top Scientist Pays for University High Life,” New Scientist 131 no. 1781 (Aug. 10. 1991), 14.

107 Karen Grassmuck, “How Donald and Robin Kennedy Handle All That Negative, Often Nasty, Publicity, Chronicle of Higher Education 37, no. 35 (May 15, 1991), A27,”

108 Kennedy, Academic Duty, 175.

109 Kennedy, Academic Duty, 174.

110 Lucas, Christopher J., Crisis in the Academy: Rethinking Higher Education in America (New York: St. Martin's Press, 1996), xGoogle Scholar.

111 Lucas, Crisis in the Academy, ix-xi, 204–206; and Balch, Stephen H., “Political Correctness or Public Choice?,” Educational Record 73, no. 1 (1992), 21Google Scholar.

112 Guston and Keniston, “The Social Contract for Science,” 3.

113 Lucas, Crisis in the Academy, ix.

114 Rosenzweig, Robert M., The Political University: Policy, Politics, and Presidential Leadership in the American Research University (Baltimore, MD: Johns Hopkins University Press, 2001), 40–45Google Scholar.

115 Rojstaczer, Gone for Good, 106–18.

116 Financial Responsibility, 4.

117 Biddle was undeterred and filed a qui tam suit, which allowed whistle-blowers to share financial rewards resulting from findings of fraud. Stanford attempted, and failed, to have Biddle removed as their ONR regional representative, citing the suit as a conflict of interest. The suit was eventually dismissed. See Bozeman and Anderson, “Public Policy and the Origins of Bureaucratic Red Tape,” 13.

118 Bozeman and Anderson, “Public Policy and the Origins of Bureaucratic Red Tape,” 13.

119 Bill Workman, “Stanford Controller Quits in Wake of Billing Scandal: Third Key Official to Resign in June,” San Francisco Chronicle, Sept. 7, 1991, A9.

120 Bill Workman, “Stanford's President to Resign,” San Francisco Chronicle, July 30, 1991, A1 .

121 Larry Gordon, “Kennedy's Resignation from Stanford Called Sad, Necessary,” Los Angeles Times, July 31, 1991, A20.

122 Workman, “Stanford Controller Quits in Wake of Billing Scandal,” A9.

123 David Folkenflik, “What Happened to Stanford's Expense Scandal?,” Baltimore Sun, Nov. 20, 1994, 4F.

124 Bozeman and Anderson, “Public Policy and the Origins of Bureaucratic Red Tape,” 13–14.

125 Financial Responsibility, 281–93, 361–420.

126 Likins and Teich, “Indirect Costs,” 190.

127 Goldman et al., Paying for University Research, 79.

128 Kennedy, Academic Duty, 167.

129 Jeffrey Brainard, “The Ghosts of Stanford: Have Federal Constraints on Reimbursing Overhead for Research Grants Gone Too Far,” Chronicle of Higher Education, Aug. 5, 2005, A16.

130 Smith, Bruce L. R. and Karlesky, Joseph J., The State of Academic Science: The Universities in the Nation's Research Effort (New Rochelle, NY: Change Magazine Press, 1977), 12–26Google Scholar.

131 Loss, Christopher P., Between Citizens and the State: The Politics of American Higher Education in the 20th Century (Princeton, NJ: Princeton University Press, 2012), 156–60Google Scholar.

132 Smith and Karlesky, The State of Academic Science, 162–78.

133 Guston and Keniston, “The Social Contract for Science,” 28–33.