We also need to develop some policy on managing fixed price agreements, so I
would like to add these questions to the fixed price discussion:

1.  THIS QUESTION IS AIMED AT INSTITUTIONS WHO HAVE NEGOTIATED IDC VIA SHORT
FORM AND HAVE A RATE BASED ON SALARIES ALONE OR SALARIES PLUS FRINGES RATHER
THAN MTDC (BUT LARGER INSTITUTIONS, PLEASE RESPOND WITH YOUR ADVICE, TOO):
In my working past with "short form" institutions, I have encountered
"sharp" PIs who budget heavily in the personnel line, with resultant heavy
IDC, in the pre-award phase.  Then, when the project gets funded, they
decide to hire consultants to do the work and move large chunks of money
from personnel to contractual services.  Since the IDC rate was based only
on salary plus fringe, this frees up a large chunk of IDC--which the PI
wants to rebudget for travel, equipment, supplies, etc.--things the sponsor
never anticipated.  I'm not sure that this practice is very ethical when
done intentionally and with large chunks of money, as the sponsor may end up
paying more in direct costs for the results and the institution loses IDC
revenue.  Assuming any necessary approval of the sponsor, I know there is
nothing that can be done about this on cost reimbursement grants.  Fixed
price agreements, however, may be a different story.  How do other "short
form" institutions handle this situation?  Is it permissible for the
institution to automatically take the full IDC used by the PI to determine
the price of a fixed price agreement (which is inherently approved by the
sponsor as part of the fixed price) regarless of how the PI may decide to
move funds around in the post-award phase?  Is that a politically smart
thing to do?  (Note that this may mean that the indirect costs collected may
be in excess of the established rate, but does this matter on a fixed price
agreement when the sponsor is paying X dollars for certain deliverables?
Does it make a difference if the sponsor is governmental or private?)

2.  TO THE SAME GROUP OF INSTITUTIONS:  What about the other way around?  If
the PI budgets heavily in contractual for consultants and later decides to
hire personnel instead, do you charge more IDC?  My thought is to say no
because I would not want to take away from the direct costs that are needed
to complete the project.  However, how do you keep the "sharp" PIs from
doing this as a way to keep from paying full indirect costs to the
institution on the project?

3.  FOR CONSIDERATION BY ALL INSTITUTIONS:  At what point does the
discrepancy between the proposed (and funded) amount of a fixed price
contract and the costs actually incurred become a problem?  I know if a
sponsor paid us $10,000 to do a job, and only $5,000 was spent by the time
the project was completed, either (1) some of the project costs did not get
charged to the project account or (2) the PI grossly overbudgeted in the
proposal phase.  In the first case, we can find those charges, but how do we
handle the second?  Are we in trouble because we have a "profit" of sorts
(here, I'm specifically talking about state institutions)?  Does it make a
difference if the sponsor is governmental or private?  Do UBITs come into
play here?  When should we raise the red flag, if at all--at 5% underrun,
10%, 20%...?

4.  FOR CONSIDERATION BY ALL INSTITUTIONS:  We have had many small fixed
price agreements which, when completed, have negligible amounts of funds
remaining ($10 to $300 range).  We call these "fixed price remainders."  PIs
aren't very good about spending these accounts out, so many stay on the
books for a long time and just clog up our accounting system.  We would like
to "sweep" these remainders into another institutional account to make them
easier to manage.  First, can we legally do this?  Second, who should have
control of that account?  My first impression is to give the PI control, but
then we may have lots of the little accounts for lots of PIs and not gain
much in streamlining our accounts.  Should the instiution take a share (or
all) of these remainders, especially if full indirect costs were not
collected on the project?  (Note:  At our institution, we split IDC 50/50
between the Administrative Affairs and Academic Deans, with each Dean having
an account.  Would the same split make sense for the fixed price remainders?)

Any written policies you can share, either by list, Web, mail, or fax, which
we can use for a model would be greatly appreciated!!

Barbara H. Gray                           Telephone:  803-953-5673
Director of Sponsored Programs            FAX:        803-953-6577
University of Charleston, SC              e-mail:     xxxxxx@cofc.edu
Charleston, South Carolina  29424