Chapter 7-500

Fixed Price Agreements

The most common form of fixed price agreement supporting University research is the fixed price contract in which defined deliverables (usually reports) are produced by the University and the sponsor pays a pre-set amount for each deliverable. The financial terms of fixed price agreements should establish a payment schedule which provides reasonable advance payments so that the University is not inappropriately financing the research. See Chapter 6-610 through 6-650 for additional information on advance payments.

Fixed price agreements should only be entered into when the University is reasonably certain that the total cost (including direct and indirect costs) to produce all deliverables will not exceed the total fixed price.

7-510 Applicability of Federal Cost Principles

For fixed-priced agreements, Contracts and Grants Officers should use 2 CFR 220 (OMB Circular No. A-21) (see 7-F01) as a guide to determine the allowable costs of the project. Use of A-21 at the proposal stage will ensure that cost estimates are comparable to budgeting procedures used with other University contracts and will provide a basis for determining the reasonableness of the total contract price. With respect to awards, A-21 is incorporated into federal grants and cost-reimbursement contracts, but should not be incorporated into fixed price agreements, whether federal or non-federal. This is because such agreements should not be bound by the prior approval requirements in A-21. The fixed price is the basis for payment. The costs incurred are not subject to compliance with cost principles after award and incurrence of costs is not subject to post-award audit. However, the pricing itself in a fixed price contract is subject to Federal Acquisition Regulation (FAR) on the development of costs and pricing.

7-520 Applicability of University Direct Charge Policies

Funds provided under fixed price agreements are subject to the University's direct charge policies and procedures contained in Business and Finance Bulletin A-47. In applying rules for expenditure adjustments (see section V. of A-47), funds provided under fixed price agreements should be considered as "unrestricted University funds."

7-530 Disposition of Unexpended Indirect Balances

Indirect costs on funds that remain unspent after the close-out of a fixed price agreement may be retained by the campus and used at the Chancellor's discretion to support educational and research programs. (See Accounting Manual Chapter C-557-23, "Contracts and Grants: Federal Contract and Grant Administration Funds--Allocations for Administration and Disallowed Costs."