Definition

Sponsored activities are secured and paid in two ways:  cost reimbursable or fixed price.

Cost Reimbursable

For activities that are cost reimbursable, the University fronts the expenses and the sponsor is then invoiced accordingly for allowable and reasonable expenses, in accordance with the terms of the contract.  Such agreements may include language such as "not to exceed" or refer to "time and materials."  

The majority of the University's sponsored activity is cost reimbursable.

Fixed Price 

If the grant or contract is fixed price, the activity is negotiated at a pre-set amount, regardless of actual costs.   (A sponsor may occasionally refer to this as a "deliverables-based" or "lump-sum" contract.) 

When contracting with a private sector entity on a fixed price basis, the University may request an up front payment of 25 percent of the total project amount, and three consecutive advance payments of 25 percent as the project is expended. 

Fixed price grants and contracts are negotiated at the best estimate of the PI. However, seldom is a PI able to negotiate such grants and contract activity to the exact amount of expenditure. 

As a result, if the estimate falls short and a fixed price grant or contract concludes with the project over budget, the PI and department are expected to cover any overrun costs. If any funds remain (under budget), they are moved into a fixed price clearing account under the Vice President for Research. In rare circumstances, the PI may officially request funds from the clearing account in proportion to the residual. The request must  be in writing and include detailed justification to assist in decision-making.