Chapter 6 - Contact Proposal Preparation / Negotiatation

A contract is a legal document that binds the RF/UBFS to perform specific tasks outlined in the contract Statement of Work as it was proposed and approved, and within the time frame set out in the contract, and to deliver the agreed-upon results to the sponsor by the end of the project. This is different from a grant, which is made with the understanding that project methodology, time frames and outcomes may vary somewhat from what was originally proposed. These changes are considered acceptable in grant-funded projects as long as the basic objectives of the research are not changed.

Contract Sponsors

Any type of sponsor (i.e., government, foundation, industry) may fund a sponsored project via a contractual arrangement. However, most contractually-funded projects are sponsored by industrial or business concerns which--as federal, foundation, and other traditional research funding streams have remained level or decreased--have begun to represent an ever-increasing percentage of program sponsors. Working with for-profit sponsors is different from working with federal or foundation sponsors, primarily because the objectives of a for-profit sponsor of research (i.e., confidentiality, protection of potential profits) are often at odds with the objectives of a public university (i.e., open exchange, publication and dissemination of information and ideas.) Thus, the terms and conditions of a contract issued by a commercial sponsor usually must be negotiated, and the negotiation period is often somewhat protracted in order to satisfactorily address these competing objectives to each party's satisfaction.

It is important to realize that faculty and staff are not authorized to negotiate the terms and conditions, including funding levels, of sponsored programs. Neither may they accept grant awards or sign binding contracts on behalf of the University, the Research Foundation (RF) or University at Buffalo Foundation Services, Inc. (UBFS). It is the responsibility of Grant and Contract Administrators to review and negotiate all awards, and authorize contracts for official signature and acceptance. It is therefore very important for Principal Investigators to contact the appropriate Grant and Contract Administrator as early as possible in the process.

Work to be supported by contract is generally solicited, either formally or informally. For example, sometimes the sponsor publishes a detailed description of the work it wishes done (Requests for Proposals or "RFPs") and invites the submission of proposals which are then awarded competitively. Other times, the sponsor may approach a faculty member directly with a request to do specific work.

As with grant proposals, Principal Investigators must provide Sponsored Programs with the following information before submission of a contract proposal:

• Request for Proposals (if formal solicitation) RFPs often contain terms and conditions that are deemed accepted by bidders upon submission of a proposal. Therefore, in the case of formal contract solicitations, SPS must receive a copy of the RFP beforehand.
  
• Completed Approval Form
  
• Any Human Subject/Animal Use or other Institutional Approvals (see Chapter 3.)
  
• Statement of Work
  
• Project Budget (an internal budget is required even when the contract will be fixed-price [see below].) - using guidelines in Chapter 5.
  
• Any other documents required by Sponsor.

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Statement of Work

Since the sponsor determines what will be done, very little of a contract statement of work is concerned with convincing the sponsor that the work is of significance. Emphasis is placed instead on establishing the Principal Investigator's expertise and abilities in the field, experience with the prescribed methodology, and history of delivering contracted work on time. In the case of a contract proposal prepared in response to a formal RFP, the Principal Investigator should pay close attention to any content and/or format guidelines contained in the RFP, to ensure that the proper information is being provided to the sponsor in the proper format.

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Types of Contracts

Following are the basic forms contract agreements generally take:

• Contract - As described earlier, a contract generally binds the fiscal administrator (RF/UBFS) to complete the agreed-upon statement of work ("deliverables") at the agreed-upon price, within a very specific time frame. Contracts may be cost-reimbursable or fixed price.
  1. Under a cost-reimbursable contract, similar to a grant, a sponsor will reimburse the RF/UBFS for actual expenses incurred, up to an agreed-upon maximum. If project expenses will exceed that maximum, the contract total can either be increased, or the project will terminate prior to completion of all work. If the sponsor wishes the project to be completed and has funds available, it will have to provide additional funds for completion of the project. Should the Principal Investigator complete the project for less than the total amount agreed to, however, the remaining funds revert to the sponsor.
  2. In the case of fixed price contracts, on the other hand, the sponsor pays a firm price for the agreed-upon work, regardless of the ultimate cost to complete the project. There is a level of risk involved in fixed-price contracts because the RF/UBFS must complete all work, even if there are cost overruns and the project runs into a deficit situation. Conversely, if the Principal Investigator is able to complete all contracted work at a cost less than that agreed to in the contract, the Principal Investigator may retain the unexpended balance as discretionary funds to be applied to his/her general program of research.

• Purchase Order - Many sponsors prefer to fund research activities through a purchase order. A purchase order is really nothing more than another type of contract. The terms and conditions that appear on the reverse side of purchase orders bind the RF/UBFS to the same degree as do articles in a contract. Therefore, purchase orders, like contracts, must be reviewed and negotiated by Grant and Contract Administrators.

  It is oftentimes difficult to convince sponsors to negotiate the terms of a purchase order, because the forms are pre-printed. In these cases, a negotiated contract is always preferable, since neither the RF nor the UBFS will enter into a contract that contains terms and conditions that conflict with the policies of State University of New York. A Principal Investigator who proceeds to do work on a Purchase Order that has not been approved by RF or UBFS runs the risk of not getting reimbursed for expenses incurred should it prove impossible to negotiate an acceptable Purchase Order for the work completed.

• Consulting Agreements - In some cases it may be appropriate for the Sponsor to issue a Consulting Agreement to either the fiscal administrator (RF/UBFS) or to the faculty member as an individual.

  RF and UBFS may accept Consulting Agreements if:

  1. the objective of the project is solely to deliver a product and/or results; that is, there is no direct guidance from the sponsor regarding the way the work will be conducted;
  2. the work is performed as part of the Principal Investigator's University obligation;
  3. SUNY-owned or controlled facilities will be used in completing the proposed work; and
  4. work is performed on a fixed price basis.

  A faculty member may accept a Consulting Agreement as an individual if the work covered by the Agreement does not interfere with his or her University obligations. Faculty members may not use SUNY-owned or controlled facilities when performing private consulting work.  When a faculty member performs private consulting, the payments will be reported to the IRS by the sponsor, and the faculty member is responsible for reporting such payments on his/her annual income tax returns.
  

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The Negotiation Process

As described earlier, the negotiation period for a contract may be quite lengthy. It is during this time that the parties to the contract ensure that all terms and conditions meet their approval, and try to find "common ground" for those terms and conditions on which they differ.

Many times a sponsor will initiate the negotiation process by sending a contract to the University for review and signature. Sometimes, smaller sponsors may not have standard contract agreements. In these cases, SPS can provide standard RF/UBFS agreements (research/testing) as a starting point for negotiation.

Because the missions and goals of universities and for-profit sponsors are not the same, the most common roadblocks to contract negotiation occur with industrial or business sponsors, although they may occur with any type of sponsor. The following are common problem areas in contract negotiation:

• Publication of Research Results - per SUNY Board of Trustees Policy 042, all sponsored programs activity conducted by SUNY personnel at SUNY campuses must be "unrestricted as to the dissemination publicly of the conduct, progress and results" of the activity. This policy is in keeping with the mission of a university, and bars RF/UBFS from entering into any contract that prohibits publication of research activities and/or makes publication contingent on sponsor approval.

  Industrial sponsors in particular may attempt to exert at least some control over publication of research activities they are funding. The reasons generally have to do with their desire to protect their proprietary information and/or patent rights. Usually, SPS is able to negotiate language in contracts that satisfies sponsor concerns regarding confidentiality while avoiding language that would ban or restrict faculty right to publish. This is accomplished by allowing sponsors to review articles before they are submitted for publication and allowing them to delete proprietary information or request delay of publication to protect patent rights.

• Confidential Information - as noted above, industrial sponsors are extremely concerned that their proprietary or confidential information be kept confidential during the course of sponsored research. At the same time, it is not standard practice in universities to keep information confidential. Neither SUNY nor its fiscal agents can guarantee that proprietary information will be kept confidential. We can, agree to use our best efforts to maintain confidentiality. We usually require, however, that sponsors clearly mark all information they want kept confidential, in order to avoid misunderstandings and unintentional disclosure.

  Sometimes, potential sponsors wish to enter into a separate agreement that spells out the responsibilities of each party with regard to confidential information. In those cases, RF/UBFS may enter into a Confidentiality Agreement with the sponsor. Sponsors may also require that staff working on sponsored projects enter into individual Confidentiality Agreements.  Confidentiality agreements provided by sponsors to individuals should be provided to SPS for review before they are executed by the parties.
  

• Ownership of Patents/Inventions - Ownership of inventions made during the course of on-campus research is determined in accordance with Title 8, Chapter V, Section 335.28 of the New York State Code. This section of the Code states that  "All inventions made by faculty members, employees, students, and others utilizing university facilities at any of the State-operated institutions of State University shall belong to State University." The SUNY Patent Policy is a facilities-based policy, which means that if SUNY-owned or controlled facilities are used to make the invention, the invention belongs to the University. There are some cases, however, in which inventions may be jointly owned by the University and the sponsor.

  The NYS Code carries the force of law, and SPS is unable to accept contract language regarding ownership of inventions made on-campus that deviates from the provisions of the Code. We do, however, prefer to license our inventions to the sponsors of the research programs from which they emerge. At the time of contract negotiation, the University is able to provide sponsors with non-exclusive licenses to any invention that may arise out of research activities. We may also provide them with an option to obtain an exclusive license once inventions are made and disclosed. Our status as a public university with public bonding authority bars us from licensing inventions on an exclusive basis prior to the time when an invention is available for use.

Principal Investigators are provided with a copy of the final negotiated contract for review and approval before it is executed by RF/UBFS. Once an approved contract is fully executed, an account will be set up for the contracted activity, as described in Chapter 8.

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