The problem with indirect costs is that it's well documented that the actual costs to the university are less than the amount received from grants. So the university is profiting in a very real sense. This has been written about by former federal agency heads and so forth and so on. Comparing costs to private businesses isn't quite right because some of those costs aren't actually borne by the university, they're done in house, they otherwise get discounts, or they're already covered by other income streams (to a certain extent you get into double charging for the same thing really fast).

You can intuit it just by how it's distributed, as a percent of grant funding. This really doesn't make sense, it's not tied to a line item budget or anything.

The problem with this is that it creates a perverse incentive for faculty to bring in large grants monetarily speaking, rather than to do good science per se. It's one of the reasons for the pyramid scheme we've seen over the last couple of decades at least, and part of the problem with how academics is incentivized.

Indirect costs should be cut completely IMHO (speaking as someone in academics, who has had tenure, and been involved in grants). Yes it will be painful but maybe then there can be a real conversation about what's going on in academics and how people are rewarded. Maybe things should be line item budgeted, maybe universities should just receive a lump sum in exchange for certain practices, maybe states should actually fund public universities in line with what they want them to do, I have no idea but right now the system is broken.