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Re: fixed price subawards under NIH grants? Greg and Peg Schmidt 07 Oct 2004 09:52 EST

Price Plus Percentage Fee.  Sorry about that.  More often called Cost
plus...  It's a reimbursement contract with a percentage fee for profit.  I
might have a $100,000 contract which is comprised of $86,957 of costs and a
15% fee.  If I spend the full 86,957, I'll get my full fee.  If I spend only
$80,000, I'll get 15% of that or $12,000.

Greg

----- Original Message -----
From: "Jean M. Murphy" <xxxxxx@WELLESLEY.EDU>
To: <xxxxxx@HRINET.ORG>
Sent: Tuesday, October 05, 2004 11:24 AM
Subject: Re: [RESADM-L] fixed price subawards under NIH grants?

> Hello All!
>        I found this exchange on fixed price contracts helpful, but was
> left with
> one question.  Can someone explain or spell out what a PPPF contract is?
> Thanks much.
> Jean
>
> Research Administration Discussion List <xxxxxx@HRINET.ORG> writes:
>>Greg makes very strong points that should be valued.  His view of how the
>>for-profit looks at things is quite accurate.  I do wish to point out
>>that my statement in my final paragraph was directed explicitly towards
>>grants, as opposed to contracts.  Greg, on the other hand,  describes
>>considerations that are more likely to come about in a contract
>>situation.  There can be considerable differences between the two from a
>>university's point of view when looking at the way to sub- out the work;
>>a subaward under A-110 rules may be quite different from a subcontract
>>under FAR because the purposes and risks of the projects, as proposed,
>>are frequently -- but not always -- different.  The views Greg and I
>>presented should both be studied!
>>
>>Chuck
>>
>>
>>
>>At 10:27 AM 10/1/2004, you wrote:
>>
>>
>>Oh, my gosh!  I'm going to disagree somewhat with Dr. Chermside on his
>>closing point.  Could this be professional suicide?
>>
>>It is possible that there are several potential for-profits that are
>>under consideration to team with you.  You do not necessarily know what
>>the final outcome of your proposal will be.  You could not really forsee
>>the scope that will be finally agreed upon between you and the Agency,
>>and by fiat to the sub, so you couldn't really project the type of award
>>to be negotiated.  The Agency really doesn't care what type of
>>arrangement you have with your subs except to the extent that the
>>required flow-through provisions are in the subaward no matter what the
>>form.
>>
>>Now it is true that some branches of agencies look sideways at FPC's for
>>some reason.  They're really no different than a Purchase Order.  You
>>provide a good/service, I give you a fixed amount of money for that.
>>They don't have problems with those, so they really shouldn't have any
>>problems with a FPC.
>>
>>When should a project be a CRC, CPFF, PPPF,  FPC, or any of the other
>>miriad of types of contracts?  The FAR is a good place to look.  It's all
>>about sharing risks.
>>
>>If I have no idea whether the objectives can be met or how much it will
>>really cost, I would issue a CRC (university) or a CPFF (company).  Think
>>basic research.  The project could be over as soon as it begins with min
>>imalcosts. decades costing many billions.  Here the risks lean most
>>heavily on the prime.  The sub will be paid for their costs.
>>
>>If I'm reasonably sure that the outcomes can be achieved with specific
>>effort, but there are some significant risks involved, I'd lean towards a
>>PPPF where my costs will be coverd and I'll still make my profit on a
>>percentage basis of my costs.  Here the risks are shared equally between
>>prime and sub.  The prime pays for what the sub expends, and the sub gets
>>some or all of their fees.
>>
>>Finally, if you know the outcomes and the efforts involved and can put a
>>price to it with assurance, a FPC is the way to go.  This is like buying
>>a painter's services.  You can shop the job out, get costs to perform and
>>sign a contract.  If the painter can knock off your job in a day and you
>>can accept the quality of work performed, they'll come out ahead.  If it
>>takes them a week, they get the same amount and earn little or lose
>>money.  As the owner, I don't care so long as the quality is there and
>>the other terms of the agreement are met.  Here, the risks are all on the
>>sub.
>>
>>Greg
>
>
> Jean M. Murphy
> Director of Pre-Award Services
> Wellesley Centers for Women
> http://www.wcwonline.org
> E-mail:  xxxxxx@wellesley.edu      Phone:  781-283-2508     Fax:
> 781-283-2504
>
> Wellesley College, Cheever House, 106 Central Street, Wellesley, MA  02481
>
>
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