The University may enter into fixed price contracts, including clinical trials. Principal investigators (PIs) must make reasonable efforts to price these contracts appropriately. The pricing of these contracts should ensure that all University costs are covered. Contract prices (or rates) that are higher than the related University costs may be accepted. Departments are responsible for funding any expenditures that cause a deficit in the sponsored project. After Sponsored Financial Reporting (SFR) verifies 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, human participants cannot be enrolled until the contract is executed and Institutional Review Board (IRB) approval has been obtained.
Exceptions to the policy
In consultation with each other, the Vice President for Research and Innovation 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.
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. 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.
There are no appendices associated with this policy.
Frequently Asked Questions
At award closeout, will Facilities & Administrative (F&A) costs be taken from the remaining balance before it is transferred to the department?
Yes. Sponsored Financial Reporting will redistribute the F&A from the remaining balance to the collegiate F&A ChartField string before it is transferred to the department.
What do you do if you know a fixed price award ends earlier than the existing award end date?
Research studies performed in people that are aimed at evaluating a medical, surgical, or behavioral intervention and are the primary way that researchers find out if a new treatment is safe and effective in people.
Fixed Fee Contract
A contract whereby the PI agrees to accomplish certain objectives within a specific time frame for a set dollar amount per unit (such as participant, hour, or other). The total amount is based on an estimated number of units and is subject to adjustment based on the actual number of units completed.
Fixed Price Contract
A contract whereby the PI agrees to accomplish certain objectives within a specific timeframe for a set dollar amount.
Residual Balance
Funds that remain in the sponsored project after deliverables have been completed and accepted by the sponsor, all costs needed to fulfill the requirements of the contract have been charged to the sponsored project, any final adjustments to recoup under recovered indirect costs have been made, and all payments from the sponsor have been received.
Residual Program
A non sponsored ChartField string whose sole purpose is to hold residual balances from ended fixed price sponsored projects.
Sponsored Project
An externally funded activity that is governed by specific terms and conditions. Sponsored projects must be separately budgeted and accounted for subject to terms of the sponsoring organization. Sponsored projects may include grants, contracts (including fixed price), and cooperative agreements for research, training, and other public service activities.
Responsibilities
Controller and Vice President for Research and Innovation
Grant exceptions to this policy based on written justification.
Department Head
Review and approve FP and preaward account requests. In the event residual balances exist, determine their disposition. Provide problem resolution between PI and sponsor as related to deliverables.
Dean
Provide general oversight and problem resolution between PI and sponsor as related to deliverables. Review and approve FP and preaward account requests.
Principal Investigator (PI)
Prepare proposal budget worksheets. Complete the MN-GEMS Funding Proposal (FP) and other compliance forms. Obtain a preliminary or draft contract from a potential sponsor. Request preaward account as necessary. Charge costs appropriately. Review the expenses on the sponsored project on a monthly basis to ensure that they are being charged correctly and the research is progressing at an expected pace. Complete and submit deliverables to the sponsor. Request that SPA obtain extensions when needed. Work with the unit administrator to complete Form UM 1767 (at departmental discretion).
Unit Administrator
Assist the PI with preparing and routing budget documents, the FP, compliance forms and draft contract. Monitor expenses on the sponsored project. Assist the PI with requesting a preaward account as necessary. Send invoice information to Sponsored Financial Reporting. Work with PI to complete Form 1767 (at departmental discretion).
Sponsored Projects Administration (SPA) Grants and Contracts Officer (GCO)
Negotiate final contract and any extensions. Set up sponsored project in MN-GEMS and the financial system. Send 60-day notices to PIs and unit administrators before award expiration date.
Sponsored Financial Reporting (SFR) Accountant
Send invoices to sponsor. Monitor invoice activity and send notices to PI/department if the sponsored project has had no invoicing activity. Collect receivables and apply payments. Transfer any remaining residual balance and close out sponsored project in the financial system.
Sponsored Financial Reporting (SFR) Director
In instances where the residual balance is at least $50,000 and at least 25% of the budget, verify proper costing (pricing and charging of applicable expenses) prior to that balance being distributed to the non-sponsored chartfield string(s).
Made various grammatical edits to streamline policy and procedures
Updated language related to MN-GEMS implementation (ie PRF to FP)
Clarified thresholds for when extra scrutiny will be given for remaining balances and changed responsibility from RIACT to SFR Director
Refined Clinical Trial (Industry-Sponsored) Research Agreements and Payments Procedure and linked to MN-GEMS instructions
Modified Optional UM Form 1767
Amended:
June 2021 - Comprehensive review, minor revisions.
Various grammatical edits to streamline policy and procedure.
Changed one of the policy owners and one of the policy contacts.
Added an "Exceptions to the policy" section.
Moved PI responsibility out of policy statement to the responsibilities section.
Deleted two sentences in policy reason section that had no added value.
Added definitions for "clinical trial" and "residual program".
Replaced RCO with RIACT.
Amended:
December 2016 - Comprehensive Review, Minor Revision. Minor grammatical changes and updated references to links and current systems. Also, change to SFR closeout procedure to reflect actual process (see Fixed Price and Fixed Fee Contract – Closeouts procedure).
Amended:
March 2012 - Comprehensive review completed. Incorporates a planned 60-day notification from SPA to faculty and departments who have fixed price contracts with significant balances that are nearing the end date. The department will oversee the closeout of the awards and determine the disposition.
Amended:
June 2008 - Policy completely revised to address the Enterprise Financial System rollout.
Amended:
April 2008 - Changed title of policy and procedures. Changed significant balance threshold to $6250 and 25% or more of payments received.
July 2005 - Revised procedure on handling industry-sponsored clinical trial research agreements to focus on handling those proposals and payments. Added new procedure on handling fixed price and fixed fee contract payments. Definitions updated.
Administrative Policy