In a cost-reimbursement contract, the sponsor agrees to pay for all allowable costs incurred by the University in the process of doing the work or research up to an agreed upon ceiling/maximum. 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 costs of the project.
A fixed-price contract pays the University a fixed sum of money to provide a deliverable, service, or specified level of effort.
A fixed-price contract for billing purposes disregards the actual costs incurred by the University to perform the contract. If the project is completed with less spending than the contracted amount, the University can usually keep unexpended funds for unrestricted use. The University assumes the risk of over spending.
The billing term for a fixed-price contract usually includes pre-payment of a fixed amount, fixed quarterly payments, or payments in fixed amounts based on schedules such as milestones, tasks, or deliverables.
The University assumes the risk of over spending.