Management Fee Comments

Responses To Comments on Section 4.2.2.2 Management Fee of the NSF Large Facilities Manual

Organization & Topic

Comment

Resolution

Management Fee to Nonprofit vs For-profit Organizations

For-profit institutions may be awarded up to 15% profit on R&D work or 10% on other work. The less than 1%
average management fee for non-profits presents a substantial challenge in remaining competitive with such other
entities which have many diverse sources of income and typically much more reserve funding. Elimination of
management fees, or sharp limitation on the flexibility for using them exacerbates this inherent competitive
disparity.

The policy has been revised to apply to all entity
types. Therefore, fee to for-profits would not
be considered on a different scale than for nonprofits.  NSF also plans to clarify this fee/profit
limitation with a sentence in solicitations stating
the specific limitations of our fee policy.

Negotiations per Agreement

NSF should consider a fee proposal for each cooperative agreement and enter into negotiations that best suit that
agreement and the managing organization's needs. When an organization has more than one operation receiving a
management fee, the fee should be negotiated based on the organization's overall needs.

For purposes of consistency and transparency, a
standard management fee policy is necessary.
Each management fee is individually negotiated
using the basic principles outlined in the policy.

Since there was no requirement to segregate or justify the use of these funds in the past, the organization would
likely not be able to fully comply with the new requirement.

NSF recognizes that it would be challenging to
an organization to retroactively impose this
record keeping requirement. As such, the
language has been clarified by insertion of the
term "available" to address such issues. A new
sentence also has been added to address
inclusion of an award term for all new awards
subject to this requirement.

For-profit organizations may request up to 10-15% fee and have multiple sources of income - further limitations on
fee will exacerbate an existing competitive distortion.

For purposes of consistency and transparency, a
standard management fee policy is necessary.
Each management fee is individually negotiated
using the basic principles outlined in the policy.

Since there was no requirement to segregate or justify the use of these funds in the past, the organization would
likely not be able to fully comply with the new requirement.

NSF recognizes that it would be challenging to
an organization to retroactively impose this
record keeping requirement. As such, the
language has been clarified by insertion of the
term "available" to address such issues. A new
sentence also has been added to address
inclusion of an award term for all new awards
subject to this requirement.

Association of Universities for Research in Astronomy, Inc. (AURA)

Accounting for Uses of Management Fee over Past Five Years

Associated Universities, Inc. (AUI)

Management Fee to Nonprofit vs For-profit Organizations

Accounting for Uses of Management Fee over Past Five Years

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Responses To Comments on Section 4.2.2.2 Management Fee of the NSF Large Facilities Manual

Organization & Topic

Comment

Resolution

Charitable Contributions

Charitable contributions should be excluded from the list of expenses NSF regards as not benefiting the agency. AUI
has made donations to organizations promoting diversity and broadening participation in science and technology,
which is an example of social responsibility that brings concrete benefits to NSF.

Charitable contributions was removed from the
prohibited use list after consideration of the
public comments. Rather than prohibit all such
contributions, NSF would consider whether
there is an appropriate direct or indirect benefit
to the funded activity.

Relationship between Fee Amounts and Budgets

Management fee expenses do not neatly scale with the expenses incurred in the cooperative agreements, either
when project budgets rise or fall, or when project scope changes. AUI urges caution about assuming a precise,
linear relationship between appropriate management fee level and overall funding.

Noted.

Risk vs Cost

OMB Circular A-123 includes introductory language that there be an "appropriate balance between the strengths of
controls and the relative risk" and that "the benefits of controls should outweigh the cost." Based on this, NSF
should take into consideration the small amount of management fee and controls already in place.

NSF has considered the relative risk in
development of this policy.

IRIS prefers NSF continue to provide management fees that are at the sole discretion of the receiving organization.
Without the management fee they may not be able to compete with organizations with greater resources.

NSF has determined that a management fee
policy, which includes restrictions on types of
cost, and imposes use requirements is
appropriate.

Management Fee to Nonprofit vs For-profit Organizations

For-profit organizations may request up to 10-15% fee and have multiple sources of income - further limitations on
fee will exacerbate an existing competitive distortion.

The policy has been revised to apply to all entity
types. Therefore, fee to for-profits would not
be considered on a different scale than for nonprofits.  NSF also plans to clarify this fee/profit
limitation with a sentence in solicitations stating
the specific limitations of our fee policy.

Clarity on Benefits to NSF

While the proposed policy is clear on what expenses do not benefit NSF, it isn't clear on what does. This ambiguity
should be removed.

Language has been clarified to refer to
benefiting the NSF-funded activity.

What is the impact on proposed new policy on existing awards?

The policy will be applied to all new and
continuing awards. The award term will clearly
specify the expected use of the fee as well as the
requirement for record keeping purposes going
forward.  

Incorporated Research Institutions for Seismology (IRIS Consortium)
Recipient Discretion

Current vs New

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Responses To Comments on Section 4.2.2.2 Management Fee of the NSF Large Facilities Manual

Organization & Topic

Comment

Resolution

Retention of Funds

If management fees received during an award are not expended by the end of the award, would the recipient be
allowed to retain funds to build its reserves? Would unexpended management fee funds be seen by NSF as a basis
for not continuing of reducing future management fee amounts?

Awardees will be permitted to retain nonexpended fees to build a reserve.  With respect
to whether an unexpended fee would lead to
stopping or decreasing fee, NSF believes that
such response would be fact-specific and
dependent on the justification provided. 

impact on Review

How would fee proposals and organization's historical use of management fees impact reviews of competitive
proposals? Will NSF communicate its assessment of fee proposals to awardees with the criteria and basis for its
decision?

For purposes of negotiating a fee, information
available on actual uses of management fee
previously awarded by NSF in the preceding fiveyear period under any award shall be included in
the proposing organization’s fee proposal.

New Administrative Burden

With the new policy it appears NSF is shifting towards treating management fee as a type of reimbursable cost. The
implication that NSF will perform periodic reviews of management fee usage under an award and the need to report
on actual uses of management fee creates a new set of ambiguous standards for a category of unallowable
expenses that fall outside the federal cost principles, and introduces an increased administrative burden and new
risk to NSF and the awardee.

Noted.

Public Availability

Will fees be publicly shared?

NSF does not typically release fee information
publically.

UNAVCO Board of Directors (Penn State University)

Management Fee to Nonprofit Organizations

Unallowable costs for which management fee has been used includes bank fees, interest costs, cost-sharing on
proposals, continuing operations in case of delayed awards, government shutdowns or other disruptions, starting
new science, education and diversity programs, etc. Nonprofit management entities have also used private funds, of
which management fees have been a part, to cover modest entertainment, food, and beverage costs for its
volunteer unpaid advisory committees, Board of Directors and scientific workshop participants. These are vital in
supporting community interactions and development of collaborative professional relationships.

NSF has determined that a management fee
policy, which includes restrictions on types of
cost, and imposes use requirements is
appropriate.

Urge NSF to return to the practice of awarding management fees without restrictions or specific guidelines about
their use. Such decisions should be left to the judgement of the awardee. In the rare event that an awardee misuse
the fee, NSF should address the specific issue with the awardee with appropriate actions specific to the occasion.

Acceptable Use of Management Fee

To imply that fees must be "allowable" contradicts the fundamental principle that fees may cover all unallowable
costs without restriction by the agency.

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NSF has determined that a management fee
policy, which includes restrictions on types of
cost, and imposes use requirements is
appropriate.

3/16/2015

Responses To Comments on Section 4.2.2.2 Management Fee of the NSF Large Facilities Manual

Organization & Topic

Calculated Management Fee Should be Separate from Consideration of Other
Sources of Income

Comment

Requiring any entity to provide its proprietary business information to NSF to justify the payment of fees violates
most procurement standards.

Resolution
NSF has determined that a management fee
policy, which includes restrictions on types of
cost, and imposes use requirements is
appropriate.

Universities Space Research Association (USRA)
USRA concurs with the seven considerations for providing a management fee that were recently added to the Large
Facilities Manual.

Management Fee to Nonprofit Organizations

Organizational considerations for providing a management fee include 1) assuming management and performance
risks, 2) litigation risk, 3) self-initiated activities such as research, education and outreach, 4) managing Government
funding shortfalls, 5) interest payments on bank loans, 6) attracting and retaining professional staff and 7) relocation
expenses for employees.

Noted.

Operational considerations which impact the nonprofit's ability to function effectively include 1) self initiated
activities such as research, education and outreach, 2) managing government funding shortfalls, and 3) interest
payments on bank loans.
Program considerations which impact the ability of the nonprofit function effectively include 1) attracting and
retaining professional staff, and 2) relocation expenses for employees.
NSF should use Management and Operations (M&O) contracts under FAR 17.6 for the Operation of Major Facilities.
The type of work necessary to construct and operate NSF large facilities is more aligned with M&O contracts than
cooperative agreements.

Management and Operations Contracts

Use of an M&O contract would appropriately shift risk to the nonprofit operator. The contract can be structured to
share risk and incentivize the nonprofit operator, for instance by structuring the fee with an award fee component.
NSF could structure M&O contracts to meet its needs for operating large facilities including; provision of fee in a way
to support NSF goals, recognition of significant NSF involvement in labor relations, integrated involvement in
management controls and purchasing processes, etc.

NSF’s choice of cooperative agreements for
these efforts is supported by the Federal Grant
and Cooperation Agreement Act. The purpose
of the awards are to carry out a public purpose
of support or stimulation, rather than acquiring
a direct benefit to NSF.

USRA believes M&O contracts provide an improved funding method over cooperative agreements.

Management Fee Calculation

NSF should use a structured analysis for determining appropriate management fee, assigning values for each
identified factor used to determine management fee. Factors for calculating the fee should include 1) performance
risks, 2) financial risk including working capital adjustment, and 3) other considerations.

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NSF determined categories of appropriate uses
in the policy and recognizes the need to
maintain some flexibility to negotiate fees on a
case-by-case basis.

3/16/2015

Responses To Comments on Section 4.2.2.2 Management Fee of the NSF Large Facilities Manual

Organization & Topic

Comment

Resolution

Calculated Management Fee Should be Separate from Consideration of Other
Sources of Income

The calculated management fee should be separate from consideration of how previous fee was allocated.
Requiring information on how management fee is being used by an awardee is inconsistent with the purpose of
management fee and violates the intent of OMB guidelines, which expressly excludes fee from the cost principles
and from government oversight and direction.

NSF has determined that a management fee
policy, which includes restrictions on types of
cost, and imposes use requirements is
appropriate. It also should be noted that the
reporting/review of fee use is commensurate
with DOD’s practice for its FFRDCs.

USRA recommends NSF analyze the appropriate management fee for each award considering the risk and other
considerations for that specific operation. A structured fee should be used to ensure all relevant considerations are
included and analyzed.
Calculated Management Fee Should be Separate from Consideration of How
Previous Fee was Allocated

NSF should not be involved in other activities of the nonprofit organization and should not be involved in reviewing
management decisions on how to use the organizations institutional resources.

NSF determined categories of appropriate uses
in the policy and recognizes the need to
maintain some flexibility to negotiate fees on a
case-by-case basis.

Use of a nonprofit organization's institutional resources is properly within the province of the nonprofit's
management and Board.
University Corporation for Atmospheric Research (UCAR)

Fees are viewed by the government as discretionary funds, and once awarded, OMB treats those funds as belonging
to the recipient. Therefore, awardees are not required to submit to an accounting of the fee.
The policy should not include a list of exclusionary items, as this is inconsistent with the Uniform Guidance and the
FAR. Implying that fees must be “allowable” is inconsistent with cost and audit principles.
Justification, Award and Use of Management Fee

Recommend removal of any requirement by NSF of review of an awardee's "other sources of income" beyond what
is already made available by nonprofit organizations through existing audits, provision of annual audited financial
statements, annual audited reports under the Uniform Guidance and IRS Form 990 filings.

NSF has determined that a management fee
policy, which includes restrictions on types of
cost, and imposes use requirements is
appropriate. It also should be noted that the
reporting/review of fee use is commensurate
with DOD’s practice for its FFRDCs.

Recommend NSF establish percentage guidelines for the amount of fee to provide certainty to the awardee and any
competitors during an RFP process.

Scrutiny of Awarded Management Fee

UCAR is concerned with the approach of review or audit of the use of management fees since the management fees
are not auditable.

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NSF has determined that a management fee
policy, which includes restrictions on types of
cost, and imposes use requirements is
appropriate. It also should be noted that the
reporting/review of fee use is commensurate
with DOD’s practice for its FFRDCs.

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Responses To Comments on Section 4.2.2.2 Management Fee of the NSF Large Facilities Manual

Organization & Topic

Acceptable Use of Management Fee

Comment

The examples of acceptable use contained in the draft policy are restrictive and do not recognize appropriate uses
such as investments in new programs, initiatives and strategic hiring, or new business processes.
The draft policy does not address the use of fee to account for cost of money and to support cash flow.

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Resolution

Examples are not meant to be exhaustive, as
stated in the policy. These issues will be
reviewed during assessment of the fee proposal.

3/16/2015