Fixed Price vs. Cost Reimbursable

Page Updated: May 23, 2024

Cost Reimbursable

Under a cost reimbursable subaward, the Subrecipient invoices UW-Madison for expenses incurred under the subaward and then is reimbursed for those costs once the invoiced is approved by RSP and the PI. The expenses, as always, should be allowable, allocable, and reasonable and invoices should include sufficient detail for audit purposes.

A cost reimbursable subaward is appropriate when the deliverables are often theoretical or intangible, such as data and project reports.

Fixed Price

The Uniform Guidance (2 CFR 200.333) mandates that prior written approval from Federal sponsors is required if UW-Madison wishes to issue a fixed price subaward rather than a cost-reimbursement subaward. By federal regulation, the total cost of each fixed price subaward may not exceed the simplified acquisition threshold, which is currently $250,000.

A fixed price subaward must meet the requirements for fixed amount awards in 2 CFR 200.201:

  • Project scope is specific and if adequate cost, historical, or unit pricing data is available to establish a fixed amount award based on reasonable estimate of actual cost
    *Fixed amount negotiated using the cost principles (or other pricing information) as a guide
  • Payments are based on meeting specific requirements of the Federal awards
    *Options include partial payments for milestone or unit price for a defined unit

Under a fixed price agreement, various milestones and/or deliverables are established along with a corresponding price for each. Once a milestone is met or a deliverable received and accepted by the UW-Madison PI, the Subrecipient may invoice for the corresponding amount due. Invoices need not include details of expenses. The first milestone/deliverable may be full execution of the subcontract, which can be beneficial when dealing with entities that do not have the resources to incur expenses for later reimbursement.

A fixed price subaward may be appropriate when there is a very clear work scope, cost estimate & defined deliverables. However, the inherently unpredictable nature of research makes limits the ability to define specific research outcomes in advance. Most subawards do not meet the requirements of fixed price subawards.

If contemplating a fixed price subaward, you should contact RSP during development of the proposal, prior to submission. RSP can assist with determining if a fixed price subaward is appropriate.