The Nuances and Niceties of Fixed Price Awards - Sponsored ...

Pamela Webb
02.14.2012

Definitions and Uses
University and Federal Policy
Budgeting
Managing
Closing out
Fixed
Price

Cost-Reimbursement
(Agency assumes greatest risk)
Work cannot be precisely defined
or cost precisely estimated (much
of what we do!)
Allows greatest flexibility (add $$
or time as mutually agreed and
perform work within scope until
funds/time are exhausted)
Common for other educational
institutions, hospitals, and nonprofits
Fixed Price
(Contractor assumes greatest
risk)
Appropriate if there can be a
clear work scope, solid cost
estimate and well-articulated
deliverables
Lower administrative burden for
agency

The Agency
Contracting
Officer
decides!

Fixed Rate
◦ Capitation
◦ Per Unit
Fixed Price
◦ Per Deliverable
◦ Per Task
◦ Per Award (aka, the Whole Hog)
Which of these
is the most
dangerous?
Why?

Capitation with Fixed Costs
Capitation with Cost Reimbursable Elements
Capitation with Fixed Costs AND Cost Reimbursable
Elements
Time and Material with Cost-Reimbursement Elements

Look at FAR clause list for:
52.216-1 Type of Contract (Apr 1984)
The Government contemplates award of a _________
[Contracting Officer insert specific type of contract]
contract resulting from this solicitation.

Firm Fixed Price
◦ Price is not subject to any adjustment on the basis of the contractor’s
cost experience in performing the contract
Firm Fixed Price - Level of Effort
◦ Investigation or study in a specific research and development area
◦ Deliverable is usually a report showing the results achieved through
application of the required level of effort.
◦ Payment is based on the effort expended rather than on the results
achieved.
◦ Can only be used when:
(a) The work required cannot otherwise be clearly defined;
• (b) The required level of effort is identified and agreed upon in advance;
• (c) There is reasonable assurance that the intended result cannot be achieved by
expending less than the stipulated effort; and
• (d) The contract price is $150,000 or less, unless approved
by the chief of the contracting office.

Fixed Price Contract with Economic Price Adjustment
Fixed Price Incentive Contracts
Fixed Ceiling Price Contract with Prospective Price
Redetermination
Fixed Ceiling Price Contract with Retroactive Price
Redetermination

1. Carefully estimate all direct costs you anticipate
(including out-year escalation factors)
◦ Include appropriate PI salary (minimum 1%)
2. Ascertain if there are any additional potential direct
costs that may reasonably arise and if so, add those
costs
3. Add F&A costs
4.

Agency dictates the price they will pay
◦ Calculate your costs to determine if you can afford to do the
study
◦ It is acceptable in this circumstance to end up with a large
unexpended balance (provided that all applicable costs are
direct charged)
◦ It is acceptable to have some cost items “overpaid” and others
“underpaid” as long as the bottom line is acceptable
Agency dictates a price for a “category” of individuals,
but doesn’t care who actually provides the service
◦ Identify your cohort of individuals who *may* perform the
services and average or weight their salaries
◦ Determine your “fall-back” plan

1. NOGA = estimated maximum cost of the award if all
patients were to be enrolled
2. EFS Budget Allocation = upon receipt of check from
the sponsor
3. EFS Expenses = actual costs charged to project (will
be in arrears if payment has not yet been made)
ITEM 2 SHOULD EQUAL OR EXCEED ITEM 3 BY THE END
OF THE STUDY

Review the payment terms!
Make sure PI salary is charged/adjusted appropriately
Make sure only applicable expenses are charged
◦ (Fixed price awards that terminate early can “convert” to costreimbursement)
Monitor deliverable schedule or payment “triggers”
Ascertain how deliverables will be accepted
Tell SFR when deliverables are reached (next slide)
Watch revenue carefully – alert the PI and SFR if
payment delays are excessive or there is a problem
with progress
Monitor end date!

Department should send email to: deliver@umn.edu
The message must contain the following information:
◦ Program number (CON#)
◦ Sponsor
◦ Sponsor account number (Chart string)
◦ Principal investigator
◦ What benchmarks have been met (e.g., number of patients
who had case report forms submitted)
◦ Anticipated payment
SFR will book a receivable and send out an invoice for
payment.

Proposed policy revision will NOT be
going into effect … instead we anticipate:
Notice from SPA 60 days in advance of end date to
encourage PIs to obtain a no cost extension from their
sponsor if the work is not complete
Form 1613/central review is eliminated and replaced
with a department internal “checklist” to facilitate final
reconciliation and identification of documents needed
to retain an auditable file

SFR will closeout a fixed price award beginning 90 days
after its end date (or as soon thereafter as their
workload permits)
◦ 100% of the balance is returned to the department (or, if the
department designates, to the PI) – same as happens today
◦ NOTE: Because of the large backlog of existing closeouts, it
will take SFR some time to get to a steady state
RIOP conducts review periodically to identify large
balance/overdraft trends for departments/PIs, where
additional discussion or review may be desired

Make sure applicable PI salary is direct charged
Have PI attest to the fact that all applicable costs have
hit the account (no pending costs or costs charged or
“parked” elsewhere)
Retain a detailed description of both scope of work and
budget variances that resulted in a significant balance
or overdraft
Retain evidence of agency approval of any scope
changes
Retain evidence of agency approval of all deliverables
Retain (if possible) copy of deliverables

Work with SFR to verify direct cost balance to be
transferred and to provide applicable
◦ Step 1: Was an F&A waiver granted? The University will first
recover foregone F&A before determining the balance to be
transferred
◦ Step 2: Take remaining balance after Step 1 and divide by 1.51
(or whatever F&A rate is applicable to the award) to know the
direct cost balance that will be transferred.
◦ Step 3: Provide applicable chart string to SFR (after obtaining
internal departmental approvals as needed)

POLICY:
Fixed Price Contracts, Including Clinical Trials
http://www.policy.umn.edu/Policies/Research/CLINICALTRIALS.html
PROCEDURES
Clinical Trial (Industry-Sponsored) Research
Agreements and Payments
http://www.policy.umn.edu/Policies/Research/CLINICALTRIALS_PROC02.html
Fixed Price and Fixed Fee Closeouts
Will be changing
http://www.policy.umn.edu/Policies/Research/CLINICALTRIALS_PROC01.html

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This presentation is available in alternative formats upon request. Direct requests to genox003@umn.edu or 612.624.5599.