Awards or sponsored agreements are formal mechanisms through which sponsors engage with Northwestern to provide research funding. Sponsored agreements include information about level of funding, period of performance, the mechanism for receiving funds, and reporting requirements. In many cases, sponsors incorporate a standard set of terms and conditions in their agreements (e.g. FDP sponsors), but may also include additional project-specific requirements. The most common types of award funding mechanisms found in sponsored research are: grants, cooperative agreements, and contracts.
A cooperative agreement is a financial assistance instrument under which substantial involvement is anticipated between the sponsor and the recipient during performance of the contemplated project or activity. “Substantial involvement” means that the recipient can expect federal programmatic collaboration or participation in carrying out the effort under the award. Like a grant, a cooperative agreement is an “assistance” mechanism principally designed to accomplish a public purpose.
In a cost-reimbursable contract, the sponsor agrees to pay for all allowable costs incurred by the University in the process of doing the work or research to the amount prescribed in the contract. If the project costs less to complete than the original amount budgeted, the sponsor is obligated to reimburse the University only up to the allowable incurred costs of the project. If the project costs more, the sponsor may choose to accept only the smaller portion of research that had been completed, or to provide additional funding for the remaining research. The recipient is obligated to inform the sponsor in advance if the funds are anticipated to be insufficient. The deliverables in a cost-reimbursable contract are often theoretical or intangible, such as data and project reports.
A fixed-price contract commits the principal investigator to a defined scope of work for a set sum; that is, the sponsor pays the University a fixed sum to complete a specific job, regardless of actual costs incurred. The principal investigator is obligated to perform the work specified in the contract and to complete that work in accordance with the negotiated time schedule. The sponsor is obligated to pay the specified price, regardless of the actual costs of completing the project. This contract type places upon the contractor maximum risk and full responsibility for all costs and resulting profit or loss. It provides maximum incentive for the contractor to control costs and perform effectively and imposes a minimum administrative burden upon the contracting parties. Accurate cost pricing is critical in preparing the proposal budget for a fixed-price contract. If the cost elements of a fixed-price contract are audited, it occurs at the proposal stage, not after completion of the project. Triple damages may result for any intentional misrepresentation of costs. If the project costs less to complete than the contract price, the funds remaining at project completion are discretionary. The deliverables in a fixed-price contract may be more tangible than in a cost-reimbursable contract, such as a prototype or a component for implementation in a product or system.
A grant is one of several award mechanisms that sponsors use to support projects under the direction of a principal investigator. Grants are the most common award mechanism at Northwestern. A grant typically provides funding to the University to carry out an approved project or activity when the principal objective is to accomplish a public purpose. The sponsoring entity will use a grant (as opposed to a cooperative agreement) when it does not anticipate substantial programmatic involvement with the recipient during performance of the financially assisted activities. Typically, sponsors award grants on a competitive basis to recipients responding to a sponsor’s solicitation, funding opportunity announcement, request for applications or program announcement. The scope of work and expected outcomes in a grant are less defined than in a contract. Grants are associated with “assistance” type of funding (wherein the sponsor is “assisting” the University accomplish activities central to its mission); contracts are associated with “procurement” (wherein the sponsor is “procuring” activities at the primary direction and benefit of the sponsor).
A contract is a mechanism for procurement of a product or service with specific obligations for both the sponsor and the recipient. Typically, the research topic and the methods for conducting the research are specified in detail by the sponsor in the request for proposal (RFP) that announces the funding activity. Contract performance is closely monitored by the sponsor and there are greater performance expectations with contracts than with grants, including milestones and detailed deliverables. There are two basic types of funding mechanisms for contracts: cost-reimbursable and fixed price.