Implementation of "Fixed Rate" Requirement in A-21

Definition of Competing Segment for Common Award Types

The May 1996 revision to OMB Circular A-21 (subsequently included in the OMB Uniform Guidance,)  incorporated a requirement to hold the indirect costs to the rates in effect at the time of the award for what the government states is “the life of the award or the competitive segment thereof.” At that time, RAS offered guidance on how the federal “fixed rate” policy would be administered. Attached is a copy of that general implementation guidance. In response to requests for additional information about the concept of federal competitive segments, RAS provides the following summary of how “competitive segment” is generally defined for common award types. Please note that this guidance is based on the current grant practices of our major Federal Demonstration Partnership (FDP) sponsors—guidance may change in response to sponsor changes in these practices. Federal contracts, cooperative agreements, and grants from other federal sponsors should be evaluated by applying the general implementation guidance on a case-by-case basis.

In addition, please note that no-cost extensions, approved within the guidelines of the sponsoring agency, are considered extensions of the current competing segment and within the “life of the agreement.” Rates that are potentially applicable to the competing segment, based on the original effective date of the competing segment, will be applied through the no-cost extension period.

NASA Assistance Awards 

The National Aeronautics and Space Administration (NASA) policy makes maximum use of multiyear grants generally spanning three years. For the periods covered, neither a new proposal nor another technical evaluation is required. This type of award will contain a clause anticipating the multiyear commitment and will result in the rates being fixed for the multiyear duration of the award. A research grant, continuing beyond this three-year commitment, will require a new proposal, will be subject to peer evaluation, and will result in a new competing segment with rates being fixed on the effective date of the modification awarded to extend the grant.

However, NASA often does not make a multiyear grant commitment in response to a multiyear proposal. NASA sometimes provides the funding for only the first year and then requests a new proposal for each subsequent year. In those cases, the grant does not include a clause anticipating the multiyear commitment. Therefore, each year is considered a competing segment, and rates are fixed on the effective date of each grant modification extending the grant. 

DOE Assistance Awards 

Most Department of Energy (DOE) awards are written with multiyear (usually three) project periods, with the negotiated estimated budgets for the full multiyear period incorporated in the award. In those cases, rates should be fixed on the effective date of the grant for the life of that multiyear project period, which constitutes a single competing segment. Funded extensions of the original multiyear period will require new proposals and will constitute new competing segments, even though DOE most likely will retain the same funding instrument.

For those few DOE awards where budgets must be submitted and approved annually, each annual period is considered a competing segment; rates will be fixed on the effective date of each annual period.

DOD Assistance Awards

Most Department of Defense (DOD) awards reflect multiyear commitments where budgets are negotiated prior to award, and funding is provided on an annual basis. Some of our DOD sponsors—such as the Office of Naval Research (ONR) and the Air Force Research Laboratory (AFRL)—use the standard incremental funding language; others—such as the Army Research Office (ARO) and Air Force Office of Scientific Research (AFOSR)—use the standard option period language to express the multiyear commitment. All of these awards anticipate a multiyear commitment to a budget negotiated prior to the initial award and represent a single competing segment. Rates therefore should be fixed on the effective date of the award for the multiyear period. Funded extensions of the originally anticipated multiyear period will require new proposals and will be treated as new competing segments.

NIH Assistance Awards

The National Institutes of Health (NIH) defines a competing segment as “the initial project period recommended for support (up to five years) or each extension of a project period resulting from the award of a competing continuation grant that establishes a new competing segment for the project.” Rates are fixed as of the effective date of each competing segment.

The following explanation of NIH Award Number codes is offered as an aid to determine where in a competing segment the individual grant year falls.

Award Numbers appear as: X Ann Aannnnn-nn where A = alpha and N = numeric

Where X = 1     …       this is the first year of a new grant

Where X = 2     ...       this is the first year of a subsequent competing segment

Where X = 3     …       this is a supplemental award to an existing grant

Where X = 4     …       this is an extension to an existing award

Where X = 5     …       this is a non-competing grant year within a competing segment

Where X = 6

through 9          ...       this indicates various changes to institution codes

NSF Assistance Awards

The National Science Foundation (NSF) defines the grant period as “the period of time between the effective date and the expiration date of an NSF Grant shown as the duration.” The effective date and the expiration date will be stated within the award letter. This grant period is the time period within which expenditures may be charged to the grant without submitting another proposal for competitive review. Note that for continuing grants, annual progress reports are required, but are not considered proposals.   

Supplemental funding proposals to existing NSF awards should be proposed at the rates applicable to the original award. Proposals for renewal funding will be competed as if new, and therefore should be proposed at the applicable rates at the time the proposal is submitted.

Subrecipient Agreements

If MIT is not receiving good information from the prime awardee regarding the “life of the prime agreement,” implementation of the “Fixed Rate” requirements of OMB Uniform Guidance may be confusing. For subawards, “Time of the Initial Award” is the effective date of the MIT subaward. The effective date of MIT’s subaward may be the same as or later than the effective date of the prime awardee’s federal agreement. For subawards, “Life of the Sponsored Agreement” is the multiyear portion of the prime competing segment that is awarded to MIT. Occasionally, a prime awardee solicits a single-year proposal from MIT and makes a single-year commitment, only to subsequently solicit another single-year proposal and make another single-year commitment. Generally, we would evaluate each single-year commitment as an individual competing segment. However, if MIT is informed via the solicitation that the subsequent period is within the same prime award competing segment as the prior period, MIT should propose and apply rates that were applicable based on the effective date of our initial subrecipient agreement. 

Questions should be directed to RAS Contract Administrators and agency specialists.

Implementation of "Fixed Rate" Requirement in Uniform Guidance

Requirement of OMB Uniform Guidance: Federal agencies shall use the negotiated rates for the indirect (now F&A) costs in effect at the time of the initial award throughout the life of the sponsored agreement. For the purpose of this subsection, “life” means each competitive segment of a project. A competitive segment is a period of years approved by the federal funding agency at the time of the award. If negotiated rate agreements do not extend through the life of the sponsored agreement at the time of the initial award, then the negotiated rate for the last year of the negotiated rate agreements shall be extended through the end of the life of the sponsored agreement. Award levels for sponsored agreements may not be adjusted in future years due to changes in negotiated rates.

MIT’s latest rate agreement is unique this year as it contains negotiated fixed rates for two years instead of one, as we normally see. This agreement is effective January 15, 2019, and fixes our FY19 rates at 55% On campus (which was the provisional rate) and 5.8% Off campus (an increase over the provisional rate). The new agreement and also provides a fixed FY20 rates of 50.6% On/6.2% Off.  Because of this, some awards will be subject to two different fiscal year F&A rates.

RAS is currently processing awards containing effective dates both before and after 1/15/2019. To determine which rate applies, please see the following guidance:

Any award with an effective start date of 7/1/2018 through 1/14/2019 with be charged 55%/5.8% for the life of the award (competing segment), per the single FY19 rate in place on start date.

Any award with an effective start date of 1/15/2019 through 6/30/2019 will be charged 55%/5.8% from the start date through 6/30/2019 and 50.6%/6.2%  “fixed for the remainder of the life” of the award.

Any award with a start date on or after 7/1/2019 will be charged 50.6%/6.2% for the life of the award.

NOTE:  Fixed for the life provisions are only applied to federal and federal prime awards. Foundation, industrial and other non-federal awards are subject to the rate in affect at the time that expenses post.

Definitions and Interpretations

“Time of Initial Award”

This is defined as the effective date of the agreement rather than the execution date, since agreements can be signed by both parties well before or after the effective date of the agreement. If pre-award costs are authorized that cut across the first day of a fiscal year, indirect cost charges will reflect the rates in effect at the time of the expense.

“Life of the Sponsored Agreement”

(a) If the federal agency has committed to a multiyear award and has provided the allocations and/or estimates for the individual out years, then the rate should be fixed for the life of the agreement. Generally, but not always, this applies to the NSF, NIH, and DOD.

(b) If the federal agency has committed to a multiyear award but only provides funding for the first year and then requests a proposal for the second year, only the first year should have fixed rates. When the second-year funding comes in, then the rate will be fixed again at the time of the second-year award. Generally, but not always, this applies to NASA and the Environmental Protection Agency (EPA). Any request for proposal beyond what has been defined as the period of performance will result in a proposal that will contain the new rates.

(c) If an organization is submitting a proposal for a supplement to an existing award that does not extend the period of performance and the existing award has fixed rates for the life of the agreement, the proposal for the supplement should contain the rates established for the life of the agreement. 

Additional Information

  • The Institute will cover under-recoveries generated by applying fixed rates that are lower than the currently negotiated rates.
  • Fixed rates apply only to projects funded by the federal government either directly or as flow-through funds. Rates are not fixed on non-federal awards.