Policy Statement
The University may enter into fixed price contracts, including clinical trials. Principal investigators (PIs)must make reasonable efforts to price these contracts appropriately. Their pricing must ensure that all University costs are covered unless special permission is obtained, and the University may accept higher rates offered by the sponsor. Departments are responsible for any over expenditures resulting from inaccurately-costed contracts. After verification that all costs were accurately charged to the fixed price contract and all deliverables were accepted by the sponsor, residual balances are retained by the department.
The PI must obtain the appropriate departmental, collegiate, and administrative reviews and approvals for conducting the research, regardless of any tentative understanding between the PI and the sponsor. The PI cannot begin any research until these approvals are obtained, and, for clinical trials, patients cannot be enrolled until the contract is signed.
Exceptions to the policy
The Vice President for Research and the Controller may grant exceptions to this policy based on written justification. To request an exception, the PI should submit the request and justification via email to these individuals.
Reason for Policy
"Performance-based" fixed price contracts such as clinical trials are often financed differently from other types of sponsored research agreements. The level of funding the sponsor provides for the work depends on industry norms rather than actual costs of doing the research. In addition, in a fixed price contract the PI agrees to perform the work regardless of the actual cost of conducting the research. If the PI underestimates the cost of the research, the department must provide other University funding to complete the work. If payments from the sponsor exceed actual costs, residual balances will remain after the work is completed. As a result, the University handles these contracts differently to meet the unique financial needs of these types of contracts.
Fixed price contracts pose other risks to the University. The terms of fixed price contracts typically require the University to satisfactorily perform (as judged by the sponsor) all or a designated part of the research before payment. Unless care is taken, the sponsor may equate "satisfactory" with "positive outcome," a situation that conflicts with the University's policies on academic freedom. Disputes about performance can result in the University not being paid.
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