The University enters into agreements to conduct fixed price projects, including
clinical trials. Principal investigators will make reasonable efforts to price
these projects appropriately. Their pricing must insure 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 overexpenditures resulting from inaccurately-costed projects. 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 principal investigator must obtain the appropriate departmental, collegiate,
and administrative reviews and approvals for conducting the project, regardless
of any tentative understanding between the principal investigator and the sponsor.
The principal investigator cannot begin any research until these approvals are
obtained, and, for clinical trials, patients cannot be enrolled until the contract
is signed.
Principal investigators are responsible for reviewing the project accounts
on a monthly basis to ensure that expenses are being charged correctly and the
project is progressing at an expected pace.
"Performance-based" fixed price sponsored projects such as clinical trials
are often financed differently from other types of 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 principal investigator agrees to perform the work regardless of
the actual cost of conducting the project. If the principal investigator underestimates
the cost of the project, the department must pay to complete the work. If payments
from the sponsor exceed actual costs, residual funds will remain after the project
is completed. As a result, the University handles them differently to meet the
unique financial needs of these types of projects. In addition, fixed price
agreements pose a risk to the University. In a fixed price contract the principal
investigator agrees to perform the work regardless of the actual cost of conducting
the project.
Fixed price agreements pose others risks to the University. The terms of fixed
price agreements 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 contract may equate "satisfactory" with
"positive outcome," a situation that conflicts with the University's
policies on academic freedom. Since the University is typically paid only after
it performs part or all of the work, the University is typically always in a
negative cash flow situation. Disputes about performance can result in the University
not being paid. Great care must be taken in budgeting, contracting, and assessing
institutional risk before this type of project is undertaken.
- Fixed Fee Award
- In a "fixed fee" award, the PI agrees to accomplish project objectives within
a specific timeframe for a set dollar amount per patient, per hour, or other
unit. These projects are often clinical trials or surveys. The total award
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 overexpenditures 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 performace, the contract must be extended.
Residual balances are retained by the department.
- Fixed Price Award
- In a "fixed price" award, the principal investigator agrees to accomplish
project 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 award amount also remains constant, even if actual costs
for the project are above or below it. Any overexpenditures are the responsibility
of the department. Residual balances are retained by the department.
- Residual Balance
- Funds that remain in the account after deliverables have been completed
and accepted by the sponsor, after all costs needed to fulfill the requirements
of the award have been charged to the account, after any final adjustments
to recoup underrecovered indirect costs have been made, and after all payments
from the sponsor have been received.
- 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 agreements), and cooperative agreements for
research, training, and other public service activities.
- Principal Investigator
- 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. Monitor project
balance and expenditures. Complete and submit deliverables. Request SPA to
obtain extensions when needed. Complete closeout form, if necessary.
- Unit Administrator
- Assist the principal investigator with preparing and routing budget documents,
the PRF, compliance forms and draft contracts. Monitor start of activity on
the account. Assist with requesting preaward account. Charge costs appropriately.
Send invoice information to Sponsored Financial Reporting.
- Department Head
- Review and approve PRF and preaward account requests.
- Dean
- Provide general oversight and problem resolution.
- Sponsored Projects Administration (SPA)
- Negotiate final contract and any extensions. Set up accounts in the financial
system. Monitor start of activity on the account. Review significant balance
transfer requests if payment exceed expenses by 25% or more.
- Sponsored Financial Reporting (SFR)
- Send invoices to sponsor. Monitor invoice activity and send notices if project
has had no activity. Collect receivables and apply payments. Monitor project
end date. Transfer any residual balances and close account.
- 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.
- Effective:
- July 2004
-
To obtain a copy of a historical policy,
e-mail the U Policy Librarian at policy@umn.edu or call 612-624-4372.
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