Fixed-Price Agreements Policy

1. Purpose of the Policy

   Policy established to outline the administrative requirements for formulating, monitoring, and closing-out fixed-price agreements.

2. Stakeholders Impacted by the Policy

   This policy applies to all faculty and staff engaged in sponsored research and creative scholarship projects and activities conducted under the auspices of Western Michigan University whether the activities are conducted on or off campus.

3. Key Definitions

   1. Fixed-price agreement

      an agreement where the contractor pays a firm price for the agreed-upon work, regardless of the ultimate cost to complete the project.

4. Full Policy Details

   There is a level of risk involved in these types of agreements because the institution must complete all work, even if there are cost overruns. However, the institution may retain any unexpended balance that remains after the contracted work is complete. The Principal Investigator should work through the Office Research and Innovation during the planning stages of contract development and negotiation to ensure the accuracy of the contract terms and conditions.

   1. Characteristics of Fixed-Price Agreement

      Fixed-price agreements will typically have the following characteristics:

      1. are similar to purchase orders where a work product is delivered, i.e., container of chemicals or a computer;

      2. are routine in nature;

      3. have a well-defined statement of work;

      4. the outcome is relatively certain;

      5. have a failure rate of next to zero;

      6. the University bears the risk that a routine project does not come within the “costs” and the University has to cover those costs;

      7. normally short-term in nature (less than 1 year);

      8. costs are normally known; and

      9. costs include all fringe benefit costs and the appropriate facilities and administrative (F&A) costs.

   2. Monitoring and Close Out of the Fixed-Price Agreement is the responsibility of the Principal Investigator to properly monitor the timing of tasks, deliverables, and final reporting of results.

      1. Residual Balances

         If there is a residual balance in the fixed-price account, any uncollected F & A will first be recovered from the balance by WMU.  The remaining balance minus any F & A will be transferred to the fund and cost center designated to the Principal Investigator’s research discretionary account (i.e. WRAP account) unless the project was initiated as part of a research center and will be designated to that center in writing at the time of contract execution following any required approvals

      2. Cost Overruns

         If there is a cost overrun in the fixed-price account, the amount must be covered by the Principal Investigator and/or department.

      3. Non-Receipt of Sponsor Funds

         If the sponsor does not pay in full, the Principal Investigator and/or department must cover the deficit amount.

5. Accountability

   If there is a cost overrun in the fixed-price account, the amount must be covered by the Principal Investigator and/or department. If the sponsor does not pay in full, the Principal Investigator and/or department must cover the deficit amount.

History

Authorization