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The approach of adopting depreciation rather than use allowance in order to recover more accurately the cost of college buildings and equipment used on federal projects is considered. It is suggested that depreciation will offer most colleges and universities a higher annual recovery rate, and an opportunity for better facilities planning. For buildings, calculating depreciation would involve: identifying and appraising the cost of each building component; calculating depreciation costs based on the life of each component; and allocating such costs to the government according to the space used by sponsored projects. Ten steps in a typical building study are also identified. Conceptual uncertainties persist concerning some important matters, including imputed depreciation, the period of recovery for depreciation accumulated from prior years, acceptable asset lives, and the treatment of the federal contributions to building and equipment costs. Pertinent federal regulations are noted, and it is proposed that accumulated depreciation should be recovered over the remaining useful lives of the assets. For institutions that do not choose to depreciate, it is suggested that use allowance be increased significantly. (SW)