Exactly - and the amount of effort this consumes is immense. You end up with grant-writing and paper-publishing institutions where the actual advance of knowledge is squeezed between the two.
But what is the alternative? You need a generic way of deciding who gets how much money and I don't see another way except for the whole project application process. The only alternative is someone gives money to things he likes... Companies can afford that but the public sector cannot because it is ripe for corruption.