Guarantees

All contracts and agreements must be written between the sponsor and the University. As described in Policy R10.01, there is an approval process for research contracts and agreements that involves review at many levels prior to signature on behalf of SFU. Before a contract is signed, the principal investigator will be asked to agree in writing to its terms.

SFU Policy R 10.01 requires that results of research undertaken under the auspices of the University must be fully publishable at the discretion of the principal investigator.  SFU will not enter into a research funding agreement that puts undue restrictions on the ability to publish.   SFU does permit protection of a sponsor's proprietary information contributed to a research project and does allow a short publication delay for the purpose of protecting patentable intellectual property.  Research requiring additional publication restrictions may be more appropriate to a personal consulting arrangement for work to be undertaken in non-university facilities and not under the auspices of SFU.

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Research contracts normally involve some sort of performance obligation on the part of the University. Principal investigators, on whose behalf the University enters into research contracts, agree to provide specified deliverables (e.g. products, reports). Payment by the "sponsor" (i.e. the external agency or company) is usually made in arrears (i.e. after the expenditures are made) according to an agreed-upon schedule, as the deliverables are met. In all such arrangements there is risk to the University of non-payment for these expenditures; for example, deliverables may not meet the satisfaction of the sponsor, or payment may be refused because of bankruptcy or other financial difficulties.

With confidence in its principal investigators and with the Office of Research Services (ORS) taking care to obtain the most favourable terms and conditions in each research agreement, the University generally accepts some level of risk of non-payment on the part of the sponsor. However, the University is reluctant to accept contracts under which payment will be made only on the basis of satisfaction on the part of the sponsor with the work performed, since satisfaction can be an elusive, subjective judgment often dependent upon unspecified criteria.

Despite efforts to negotiate such "subject to satisfaction" payment conditions out of research agreements, ORS is seeing more and more sponsors insisting on not paying the University if they are not satisfied with the research work. Other variations of this theme are inclusion in the terms of the contract of a 10% holdback until all reports have been received (this is acceptable to ORS); non-payment of amounts owed in the case of termination (not acceptable to ORS); and even asking SFU to accept a provision in the contract language that should termination occur, the University will repay all amounts previously provided (definitely not acceptable to ORS).

When the University does accept contracts where payment is made on the basis of satisfaction of the funding sponsor, we try to limit our risk of non-payment by negotiating the best possible payment schedule and fairest termination clauses. When payment in reimbursement of our costs is delayed or stopped due to sponsor dissatisfaction, the University may exercise its option of terminating the work. Nevertheless, a certain portion of the work performed up to the time of termination would have already taken place. Some of that work may have been paid for by the funding sponsor, but some may not. In such cases, when the University cannot obtain payment in full, it must absorb a loss. In the past, the University has absorbed significant losses of this type. Now, especially in the current fiscal climate, this is not acceptable.

The Vice-President, Research and the Vice-President, Finance and Administration have instituted measures to minimize the risk to the University. They have agreed not to approve some research contracts unless the Chair, Director, or Dean is willing to guarantee payment for work performed under the contract, if the sponsor refuses to make payment for expenditures incurred. In most cases, the Department Chair or Faculty Dean concerned will accept this risk by becoming the "guarantor." They do this because to some extent they can control the progress of work and monitor the satisfaction of the sponsor in an effort to reduce the risk of non-payment. In addition, when principal investigators are being paid personal honoraria, these payments will be released by the university only after contract payment is received and with the approval of the funding guarantor.

At the time a research agreement is submitted to the principal investigator and the department for internal approval prior to University signature, the following additional sentence may appear in the signature box for either the Chair, Director or Dean to sign: "I also agree to be responsible for arrangements concerning non-payment of amounts expended, should non-payment occur."

This guarantee is normally required on all research agreements and especially on those whose terms and conditions allow the funding sponsor to withhold payment for subjective reasons, such as unspecified 'satisfaction'. Should it be determined that no administrator is willing to accept this risk and provide a guarantee of non-payment, the principal investigator and the funding sponsor will be informed that unless the terms and conditions are modified, the University will not be able to accept the agreement.