The interactions between the federal government, colleges, and industry in U.S. research and higher education in the areas of science and engineering were examined by a special panel of the White House Science Council. Recommendations to retain U.S. leadership in areas of science and technology are offered by the panel, which is composed of members of the academic/nonacademic research community. Concerns included: graduate education and research, federal support of university research, restoring the university infrastructure, multidisciplinary science and technology centers, costs of university research, indirect costs, the problem of documenting costs, micromanagement of university research, mandatory cost sharing, indirect cost reimbursement, stability of research support, the peer review process, the structure of grants and contracts, undergraduate scholarships, graduate fellowships, the universities and industry, the universities and the federal laboratories, and the role of state governments. Appended materials include: a list of witnesses appearing before the panel in 1984 and 1985; questions sent to different groups (university presidents, foundations, industrial chief executive officers, principal investigators); correspondents providing input to the panel; and data on indirect costs. (SW)