University of California

Office of the President


Senior Vice President—

Business and Finance





Research Administration Office

No. 02-04

October 9, 2002




Subject: California Energy Commission Terms in agreement with UC, & Schedule    of Overhead Rates



RAO and CEC have been negotiating terms for over three years. The process began with terms for the PIER Public Interest Energy Research program which were issued in C&G Memo No. 98-08 dated September 25, 1998. Since that time, terms continued to evolve as subsequent negotiations occurred. A year ago, CEC decided to create a separate set of terms for research projects with UC. The enclosed final UC Research Agreement 500-02-004 contains the result of a 3 year effort. The UC Research Agreement contains terms which are appropriate for research projects, AND also includes administrative terms which the CEC and UC desire to normalize in all awards (whether for research or not) between CEC and UC.

C&G Memo No. 98-08 is cancelled and superceded by the terms provided in this C&G Memo.

Basic Architecture

The UC Research Agreement (UCRA) has several unique features compared to a normal contract for an individual project. The UCRA includes a Work Authorization Procedure. This functions like a task order contract. The UCRA terms do not have to be renegotiated for each award. The Work Authorization is limited to the project variables i.e., scope of work, budget, staffing for performance of the work, and reporting requirements. Work Authorizations may be issued by the CEC program office after approval by the Department of General Services. Work Authorizations will be developed by the CIEE California Institute of Energy Efficiency, an OP Research Unit, in consultation with campuses, and submitted to CEC. CEC will send the WA to RAO for signature. CIEE will implement the fully executed WA by subagreement to a UC Campus, or UC Managed DOE Laboratory or other entity to perform the work. The UCRA also includes a special pre-agreed policy overhead rate of 20% MTDC for all UC campuses. RAO will approve a class OH Waiver for this purpose. The UCRA process was created to vastly simplify the effort required by CEC and UC to make and perform awards.

The UCRA is classified as a contract by the CEC, not a grant, notwithstanding the incorporation of OMB Circulars A-21 and A-110 and Exhibit C terms for interagency agreements. A contract was chosen by the CEC because UC (CIEE) will be providing services to the CEC to implement and monitor WA(s). However, CIEE may make subawards which are grants or grant like instruments.


The CEC PIER program intends to award all of its research projects to UC via the UCRA. The UCRA contemplates an estimated $20 million over the next 4 years. Other programs at CEC will be encouraged to use the terms in the UCRA. The CEC also has several interagency master agreements with UCOP RAO for technical assistance services which may be updated to reflect the new terms in the UCRA.

CEC and UC desire to normalize the contract terms between the parties. Therefore, the terms in the UC Research Agreement shall be accepted by all UC units including campus Sponsored Projects Offices, Campus Business Contracts Offices, and Office of the President Research Administration Office, without further negotiation, wherever the terms are to be included in an award from CEC to UC. Terms specific to research may be deleted if the award is not classified as research by a UC campus. However, terms in the UC Research Agreement covering administrative and financial matters, and intellectual property subjects shall be used where there is need for provisions in non-research contracts. If a sponsored project award from the CEC is classified as a Business Services Contract by a campus, and the Business Contract Office is unable to accept the terms of the UCRA and the OH rates provided in this Contract and Grant Memo, the award should be transferred to the campus Sponsored Projects Office for handling. This will assure consistency in UC contracting terms with the CEC.

There are many improvements in the UCRA terms, summarized below, over the original PIER contract terms.




B. CEC will accept computer generated invoices or equivalent without backup documentation to verify the expenses.

Comment: This represents a major improvement over the previous requirement to submit copies of all source documentation for each invoice. This eliminates a major manual effort.

B. 1. Comment: The invoice categories correspond to UC standard invoice categories compared to invoicing according to the larger number of elements in the budget.


Comment: The clause initially offered gave the CEC the right to annul the contract from the beginning, leaving UC with an unfunded liability for incurred costs. This is contrary to Regents policy as well as patently unfair. The revised clause gives CEC the right to terminate or otherwise amend the contract to the funds available, including payment for costs incurred.


A. CEC has accepted UC travel and per diem rated for UC travel.

Comment: This is as compared to having to comply with State government travel rates. This is a major improvement.

B. Travel not approved in the initial budget requires CEC approval, however, approval may be made by fax or email.

Comment: This is in lieu of a written letter and the time it takes to accomplish the approval by hardcopy.

C. CEC recognizes travel and per diem rates for DOE lab employee travel.

D. UC must have documentation in its files for travel, but is not required to submit copies of all travel source documentation to be reimbursed for travel expenses, as was required in the past.

Comment: This is a major improvement which avoids the costly manual effort to make the copies and send them to CEC.


No retention will be withheld.

Comment: This has been a point of contention for years. Under existing contracts, there is a 10% withholding on each invoice, which is held to the very end of the contract period. This forces a working capital expense onto UC. This is inappropriate for one State Agency to impose this kind of cost on another State entity. This is a major improvement.


B. Indirect Cost Rate.

Comment: The indirect cost rate is fixed at 20% for all Work Authorizations performed by UC Campuses and Office of the President (including CIEE California Institute for Energy Efficiency.) The OH rate will apply to MTDC according to OMB Circular No. A-21. The fixed rate of 20% is a policy rate agreed to by UCOP RAO with the CEC applicable to Work Authorizations using UC Research Agreement No. 500-02-004. All other awards from CEC directly to UC campuses shall bear a 25% rate. This agreement on OH freed up over $25 million in awards from CEC to UC.

E. Disputed Invoices.

Comment: On disputed invoices, CEC will withhold payment only on the disputed portion of the invoice. Typically, a State agency will withhold payment of an entire

Invoice if there is any dispute notwithstanding the amount. This forces a financial expense to UC. Withholding only the disputed amount, and payment of the undisputed amount, is an improvement.

H. Advance Payments.

Advance payments are authorized.

Comment: Advance payments are required when work is performed by DOE laboratories. This provision makes it possible for this requirement to be met.


Allowable costs under this Agreement shall be in accordance with A-21.

Comment: This is a new position for the CEC to accept A-21 as the basis for cost allowability. This improvement resolves issues of reimbursement for termination costs, and maintenance costs for equipment.


RAO made it clear that UC does not use hourly rates for faculty, or use burdened rates as the Exhibit calls for. CEC responded that this is a standard form, and campuses have been able to respond to it.

Comment: For now, try to provide the information requested in proposal budgets, even if it is calculated by formula (because the budget is an estimate). After the award is made, use the standard invoicing procedures. If there are serious issues, inform RAO.

EXHIBIT C Interagency Provisions

Comment: This is standard boilerplate prescribed by State Department of General Services. Although the UC Research Agreement is a “contract” since UC is providing services to CEC, the terms as modified for UC are more akin to an Interagency agreement in recognition that UC is a State entity.

EXHIBIT D Special Terms and Conditions


B. A new sentence was added at the end: “If the parties do not mutually agree to arbitration, the parties agree that the forum to resolve a dispute is State court or Federal court, with the exception of Federal bankruptcy court.”

Comment: This is an improvement because it gives UC access to the court system if it is not satisfied with the outcome of the CEC internal disputes resolution process.


The CEC standard termination clause allows termination costs incurred up to the effective date of termination. It is silent about the allowability of uncancellable obligations which result in costs incurred after the effective date of termination. When this question was raised with the CEC, CEC was VERY clear that such costs incurred after the effective date of termination were not allowable.

Comment: This view created a potential unfunded liability for UC. Further, the view was inconsistent with termination costs as allowed by OMB Circular No. A-21. After much discussion, CEC agreed to accept A-21 as the standard for determining the allowability of termination costs.


Comment: This provision refers to legal notices, e.g termination, formal contract changes. It does not include CEC approvals of travel which can be done by Fax or email.

EXHIBIT E Additional Provisions


D. Budgets may be cost reimbursable or deliverables-based (fixed price.)

Comment: Please note that BOTH cost reimbursement and fixed price budgets are permitted. There are times when cost reimbursement is appropriate, and fixed price may be appropriate. The intention here is to make both available.

E. Budget reallocation.

Comment: The budget reallocation is 15% OF THE TOTAL AMOUNT OF THE WORK AUTHORIZATION or $5,000 which ever is greater. This is a good standard because it refers to the total amount of the WA, as compared to individual budget elements. The $5,000 is intended to eliminate de minimus changes from the advance notice requirement.


B. Comment: UC may use UC purchasing policies in the award of subcontracts, or subawards. The exemption provided in subparagraph B excludes the requirement for UC to go to CEC for approval of sole source awards which involve complex State approval processes. The policy in State Contracting Manual 3.06 permits State agencies to make awards to UC without competitive bidding, and for UC to make subawards to public entities (not for profit entities) without competitive bidding. When awards are made to for profit entities, competition should be sought, or a written justification should be included in the file if there was no competition.

C. Subawards to UC Managed DOE Labs.

CEC negotiated terms directly with DOE for use when CEC desired to contract with a DOE Laboratory. In previous contracts, CEC required UC to use these terms. UC is bound by the terms of the prime contracts it had signed with DOE for management of LBNL, LLNL, and LANL. DOE has approved a Memorandum Agreement for UC campuses and RAO to use to transfer funds to a UC Managed DOE laboratory. RAO is in no position to substitute the CEC negotiated terms for the terms DOE approved for use by UC.

Comment: The Agreement permits UC to use the terms DOE approved for use with UC Managed DOE labs in the Memorandum Agreement, in lieu of the CEC negotiated terms. The CEC negotiated terms with DOE will apply to all non-UC managed DOE labs. This is a major improvement and resolution of this longstanding issue.


Standard CEC policy is for CEC to take title to equipment purchased with CEC funds. Likewise, standard CEC policy is to hold contractor liable for any and all risk of loss or damage to CEC owned equipment regardless of the cause of loss or damage. Standard CEC policy was to disallow the cost of maintenance and repair to the CEC owned equipment, notwithstanding the need to maintain or repair to perform CEC work.

Comment: RAO viewed the cost of maintenance and repair as an allowable cost. Further, it is not appropriate for UC to be liable for any and all causes of loss or damage, when such causes included acts of God, i.e. earthquakes over which UC has no control.

These issues were resolved by CEC agreeing to have title to equipment purchased with CEC funds vest in UC, and incorporating A-21 into the Research Agreement which expressly allows maintenance and repair costs.


Comment: please note that the Exhibits differentiate between UC managed DOE Labs, and non-UC managed DOE labs.


By mutual agreement with the Manager, CEC Contracts Office, terms in research awards made directly to UC campuses will follow the terms negotiated by RAO in the UC Master Agreement. If campuses are offered terms by CEC other than the terms in the UC Research Agreement, the matter should be referred to the Manager, CEC Contracts Office for resolution. If UC campuses believe terms other than those in the UC Research Agreement are needed for topics covered in the UC Research Agreement, the matter should be referred to the Director, UCOP Research Administration Office.


By mutual agreement with the Manager, CEC Contracts Office, terms offered to UC when UC is a subcontractor under a CEC prime contract to a non-UC entity, should be those terms CEC has negotiated with UC in the Research Agreement. CEC has agreed to include a provision in such prime contracts authorizing the prime contractor to use the UC terms, in lieu of the terms of the prime which are intended to apply to the prime contractor not UC. Hopefully, this will resolve the agony experienced when CEC primes flow down their terms which UC cannot accept. If CEC issues an RFP, campuses should be alert to CEC including reference to UC terms. If proposals are submitted to CEC under an RFP, campuses should reference UC terms to remind the CEC contracts staff to include the UC terms either in a prime direct award to a UC campus, or in a prime contract to a non-UC entity where a subcontract is planned to a UC campus. The 25% overhead rate would apply to these subcontracts to UC per item IV.2 below.


The following OH rate schedule is applicable to all CEC agreements with UC, notwithstanding whether UC classifies them as extramural awards, business contracts, or any other type of transaction where UC is required to perform a project. This schedule has been agreed to by CEC Contracts Manager.

1. Work Authorizations issued pursuant to UC Research Agreement 500-02-004.

- 20% of MTDC as defined in A-21 for all UC Campuses

- DOE mandated OH rates for DOE labs

- Non-UC entities full federally approved OH rate, if available; if federally approved rate is not available, customary OH rate used with all other customers

2. CEC new awards made directly to UC campuses outside of UC Research Agreement

# 500-02-004, or Subcontracts to UC received from non-UC CEC prime contractors. Applies to new awards under all CEC programs, not just PIER.

- 25% applied to MTDC

Note 1: If a proposal is submitted assuming the UC Research Agreement will not be used, but at award time ends up coming under the UC Research Agreement, the budget may be adjusted to reflect the 20% rate.

Note 2: The 25% rate specifically assumes CEC, or prime non-UC CEC contractors issuing subawards to UC, will use general terms virtually identical to those in the UC Research Agreement. If terms vary from this standard, contact RAO. Historically when the contract terms were much more difficult and not uniform, the full OH rate applied.

3. ALL existing CEC awards to UC (including the grant to UCB).

- Full federally approved OH rates incorporated into the award.

- Existing rates will be applicable until the award expires.

4. Rates in subawards made by CIEE, or by campuses under a direct award.

- Subawards under the UC Research Agreement will follow rates per 1. above.

- Subawards under direct prime awards from CEC to UC campus will follow rates per 2., above.

5. OH rates applicable to MTDC incurred by CIEE, as approved by UCOP.

- 21.7% applies to existing CEC WAs in CIEE's current portfolio.

- 20% applies to new WAs under the UC Research Agreement # 500-02-004.

- 25% applies to awards not made under the UC Research Agreement.

Note: Overhead rates applicable to CIEE MTDC are distinct from and in addition to CIEE Core Costs, or the management fee applied to current agreements.

Refer: David Mears (510) 987-9840

  Index: S-050, Subject: 02, 08, 22; Cancel: C&G Memo 98-08
Lourdes DeMattos (510) 987-9850
    David Mears
Enclosure (UC Research Agreement 500-02-004)

Standard Agreement

Exhibit A- Scope of Work

Exhibit B- Budget Details

Exhibit B-1- Personnel Compensation

Exhibit B-2- Calculation of Fringe Benefits, Overhead, General Administrative Expenses, and Profit Rates

Exhibit C- Interagency Provisions

Exhibit D-Special Terms & Conditions

Exhibit E-Additional Provisions

Exhibit F-Sample Work Authorization

Exhibit G- Contacts

Exhibit H1-Rights of Parties Regarding Intellectual Property

Exhibit H-2-Rights of Parties Regarding Intellectual Property for DOE

Exhibit H-2-B Rights of Parties Regarding Intellectual Property for DOE, Patent Rights—Use of Facilities

Exhibit H-2-C Rights of Parties Regarding Intellectual Property for DOE

Exhibit H-3 Definitions

Exhibit H-4 Definitions and Additional Contract Terms for DOE