Exactly your agency's behavior. If federal grant-writing agencies put a ceiling on overhead (at a high level, such as the level of the entire agency), I have n

Exactly your agency's behavior. If federal grant-writing agencies put a ceiling on overhead (at a high level, such as the level of the entire agency), I have no doubt that universities would start submitting proposals that included less overhead. (I do not intend to indict you personally; as you have said, individuals at your level were executing the mandate of the agency as directed and did not have power to effect change.)