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 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.
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.
Associate Vice President for Research and Innovation, Administration
Director of Sponsored Financial Reporting
April Coon
Director - Sponsored Projects Administration
Nicole Pilman
Director of Sponsored Financial Reporting
Definitions
Clinical Trial
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
In a "fixed fee" contract, the PI agrees to accomplish certain objectives within a specific timeframe for a set dollar amount per patient, per hour, or other unit. These types of contracts are often clinical trials or surveys. The total amount is based on an estimated number of units and is subject to downward adjustment based on the actual number of units completed. Sponsor approval is required to exceed the estimated number of units. The fee per unit remains constant, even if the actual cost per unit is above or below that amount. Any over expenditures are the responsibility of the department, and earned unspent revenue does not revert to the sponsor. If the deliverables are not completed within the period of performance, the contract must be extended. Residual balances are retained by the department.
Fixed Price Contract
In a "fixed price" contract, the PI agrees to accomplish certain objectives within a specific timeframe for a set dollar amount. If the deliverables are not completed within the award period, the contract must be extended. The contract amount also remains constant, even if actual costs for the work are above or below it. Any over expenditures are the responsibility of the department. Residual balances are retained by the department.
Residual Balance
Funds that remain in the sponsored project after deliverables have been completed and accepted by the sponsor, after all costs needed to fulfill the requirements of the contract have been charged to the sponsored project, after any final adjustments to recoup under recovered indirect costs have been made, and after all payments from the sponsor have been received.
Residual Program
A residual program is a non sponsored account string whose sole purpose is to hold balances from fixed price sponsored projects. Use of funds in the residual program is the discretion of the department head consistent with departmental policy.
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
Principal Investigator (PI)
Prepare proposal budget worksheets. Complete the Proposal Routing Form (PRF) and other compliance forms. Obtain preliminary or draft contracts from potential sponsor. Request preaward account. Charge costs appropriately. Review the related sponsored project account on a monthly basis to ensure that expenses are being charged correctly and the research is progressing at an expected pace. Complete and submit deliverables. Request that SPA to obtain extensions when needed. Work with unit administrator to complete Form UM 1767 (at departmental discretion.)
Unit Administrator
Assist the PI with preparing and routing budget documents, the PRF, compliance forms and draft contracts. Monitor activity on the sponsored project account. Assist with requesting preaward account. Charge costs appropriately. Send invoice information to Sponsored Financial Reporting. Work with PI to complete Form 1767 (at departmental discretion).
Department Head
Review and approve PRF and preaward account requests. In the event residual balances exist, determine their disposition. Provide problem resolution.
Dean
Provide general oversight and problem resolution. Review and approve PRF and preaward account requests.
Sponsored Projects Administration (SPA)
Negotiate final contract and any extensions. Set up sponsored project in the financial system. Send 60-day notices to PIs and unit administrators before expiration.
Sponsored Financial Reporting (SFR)
Send invoices to sponsor. Monitor invoice activity and send notices to PI/department if sponsored project account has had no activity. Collect receivables and apply payments. Monitor project end date. Transfer any residual balances and close out sponsored project in financial system.
Compliance, Integrity, and Security (CIS)
Periodically review fixed price contracts to verify appropriate pricing and management of these types of sponsored projects. Create corrective action plans if needed.
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