Procedures for the Administration of Fixed Price Agreements

Fixed-price agreements are sometimes used in procurement situations. In these agreements the risk shifts to Cornell since the University agrees to complete the performance even if the funds are inadequate. Fixed-price agreements are only acceptable when the work statement is sufficiently broad, or when the costs can be accurately estimated.

With a firm fixed-price agreement it is impossible to get additional funds if the estimate was low. Even in a simple fixed-price agreement it is usually impossible to get additional funds.

When the University accepts a fixed-price agreement in support of a sponsored project it is guaranteeing delivery of any item outlined within the scope of work in exchange for fixed funding. Since there may be considerable financial risk if the budget estimate at the time of proposal submission is inadequate, the Office of Sponsored Programs (OSP) will usually require the department to accept the risk in writing to ensure that the deliverable can be met.

The question then arises as to how distribution will be made should any funds be remaining at the end of the agreement. The following close-out procedures apply to both endowed and contract colleges, and serves as an answer:

At the time of close-out, OSP, with assistance from the Principal Investigator, will determine whether the scope of work has been satisfactorally completed, and if all University obligations have been met as specified in the agreement terms and conditions.

If the F&A cost rate was reduced (in whole or in part) as an effort to secure the original funding, the official making that decision (e.g., college Dean or Director of OSP) will be offered the opportunity to reinstate the F&A cost recoveries.

After the F&A cost rates adjusted, if necessary, or if the project was billed for full F&A costs, the full amount of any unexpended balance will be returned to the Principal Invesgitator's department.

Any questions regarding these procedures can be answered by your OSP Grant and Contract Officer.