A COST-CONTAINMENT INCENTIVE FOR A UNIVERSITY-RESEARCH CONTRACT WITH A COMMERCIAL SPONSOR

A clash of cultures occurs when university and industry meet. Universi ties are non-profit, diffuse, and multifaceted, while commercial conce rns tend to be tightly focused and oriented toward the bottom line. Ma nagers and purchasing agents of commercial firms work in an environmen t where requirements are likely to be well defined, subject to competi tion, and procured on a fixed-price basis. The things universities pro vide do not usually fit this approach to acquisition. Results cannot b e guaranteed, or sometimes even measured, in the world of research and development, and universities have no profits to act as a cushion aga inst performance risk. When universities propose to work on a best-eff orts, cost-reimbursement basis, they often encounter resistance from i ndustrial sponsors that are unaccustomed to such arrangements and may even have formal procedures to discourage them. This case study descri bes a research contract cost-containment incentive clause that helped to bridge the gap between the expectations of an industrial sponsor an d the needs of a university.