Guidelines for Budgeting and Managing Fixed Price Contracts

Guidelines for Budgeting and Managing Fixed Price Contracts

Fixed Price Contract Definition: A fixed price contract is a contract which has a firm price for which the University (contractor, grantee, awardee) bears the full responsibility for underruns or overruns incurred as a result of the difference between the firm price and the expenses (charges) incurred.


  1. All contracts should be negotiated through the departmental, school or college and central University administrative offices in order that appropriate guidelines are observed.
  2. Timeframe: Every effort should be made to establish a realistic timeframe for the project. The end date established by the Project Director should allow for sufficient time to complete the project, with allowances for delays. If adjustments are needed to the budget time period or scope of a project, ORSP will assist the Project Director in determining whether or how a sponsor can be approached to negotiate such changes. The department is responsible for notifying the Dean's office and ORSP if the project period should be changed.
  3. The department should develop a budget that realistically incorporates all related project costs. Fixed price funding does not mean that the budget is developed without regard to actual cost to the University.



  1. The contract project/grant should be charged directly as costs are incurred. If costs must be incurred elsewhere, recharging to the contract should be done immediately after these costs have determined.
  2. Effort associated with University personnel performing the project should be charged directly to the contract through a split-appointment or through the time-keeping system.
  3. A number of investigators receive contract funding from one industry source for more than one project. In these instances it may be possible, with the approval of Financial Operations, to combine the funding into one University project/grant, making it easier to charge effort directly to one contract number. It is the department's responsibility to pursue this option with Financial Operations and ORSP.
  4. Resulting unexpended project/grant balances of up to 20% of the total sponsor authorization will be transferred to a discretionary account supplied by the Dean, without indirect costs being withdrawn.
  5. For contracts which end with more than 20% of the total sponsor authorization unspent, the entire balance will be proportionately distributed between direct costs and indirect costs, with the direct amount being transferred to the discretionary account supplied by the Dean.
  6. If a contract is terminated as a partial study or is expanded, the same guidelines will apply to the revised budget amounts.