Member Article

With the onset of COVID-19, certain areas of academic and government-fueled research are exploding. However, universities and governments at all levels are also scaling down nonessential research tasks and limiting the enrollment of essential new human subjects or new animal experiments.[1] Similarly, private companies may be suspending or cancelling their research projects in an attempt to conserve financial resources and accommodate researchers working from home.

Certain research projects may be on the chopping block, especially if the quality of the results will be compromised by employees working from home or if the parties can no longer meet the schedule. Unless your company is engaged in the fight against the spread of COVID-19, chances are your research project may also be “quarantined.”

In that case, you have options. Depending on the project, it may make sense to scale back the work, extend the deadlines (along with the associated payments), or terminate the project altogether. This article explores these different options and identifies important factors to consider when deciding how to proceed.

Adjusting the Project’s Scope or Schedule

In light of everyone’s new “normal,” some research projects may be saved by simply extending the schedule by a few months. Alternatively, shuffling tasks may allow a collaborative partner to continue the work by conducting literature reviews, analyzing data, or drafting publications or conference submissions. Similarly, the deadlines for tasks or reports may be extended, along with the funding schedule, so lower payments may be made for the shuffled work or delayed altogether. Finally, the scope of the work, the way a project is conducted, and who or what is involved may also need to change if people will be working from home.

All of these items can be addressed by a short and simple written amendment to the governing agreement. This process allows both parties to weigh in on what constitutes a reasonable change to the project timeline, deliverables, and funding, and it is typically a collaborative effort that yields results favorable to both parties. Once the COVID-19 threat has diminished and people are back in their labs, another amendment can be used to get the project back on track.

Terminating the Project

What if your research depends on time-sensitive culture or animal experiments or requires the participation of human subjects? If the research cannot be delayed or adjusted, as explained above, the only feasible solution may be to terminate the governing agreement. Termination may be unilateral or mutual, depending on the specific agreement.

Unilateral: Many agreements allow one or both parties to terminate for any reason (known as terminating for convenience or at will). Unilateral termination clauses typically require the party terminating the agreement to provide advance written notice to the other party (using the specified procedures in the agreement). Up until the point of termination, both parties must continue to perform their related obligations and work to wind down the project. If that is the case, the terminating party may still be on the hook for payments or other obligations it was trying to avoid by terminating in the first place.

If there is no right to terminate for convenience, the agreement may allow a party to terminate for the other party’s material breach. If your collaborative partner is no longer able to perform certain research tasks, you may have the right to terminate because your collaborative partner has materially breached the agreement. However, your collaborative partner may also be able to rely on a force majeure clause to excuse its performance if it is due to the COVID-19 pandemic. For information regarding force majeure, click here.

Mutual: You may also be able to agree with your collaborative partner to terminate the agreement together. In this case, the parties would use the amendment process described above but instead of extending the project schedule, the parties may agree on a customized schedule for winding down the project and set a date for terminating the agreement. The parties may also agree on mutually-acceptable payment obligations for the wind-down process.

General Tips

• Understand all of your options under the agreement. Many agreements include simple processes for amending, modifying, or terminating your agreement. If possible, it may be advantageous to amend the agreement first to extend the deadlines for certain tasks, deliverables, or payments before pursuing termination. If you think your project may be extended, be sure to give yourself enough time under the amended schedule to effectuate termination before any major milestones or payments arise.
• Understand how you are paying for the work and how that fits in with the project schedule. If the project is funded as cost-reimbursable or time and materials, spreading out tasks or scaling certain work back will translate to lower payments. In contrast, if the project is funded as fixed price, follow-on payments can be extended or avoided by amending the schedule. Also, be strategic about when you choose to amend or terminate the project. Is a major piece of equipment supposed to be ordered next week? Are students identified in the budget who will be starting a new term or semester in the next few months? Understand how your decision fits within the project’s timeline, as your agreement may require you to pay costs that are “non-refundable” (like a piece of equipment) or “non-cancelable” (like a student’s tuition) and are incurred before the effective date of termination.
• Communicate early and often with your research partners. The economy and the world around us are changing daily. You may be able to avoid a contentious and painful unilateral termination by simply communicating with your research partners and mutually agreeing on a cut-off date for the project, a method for delivering valuable results, or a reduction in salary or benefits payments or indirect costs associated with winding down the project.
• Be mindful of federal funding. If the research project involves any federal funding or grants from a federal agency, it is important to communicate with the funding agency as soon as the project is negatively impacted. The funding agency will likely work with the parties to find a resolution, but it is imperative that the agency is kept in the loop and included in the ultimate decision.

[1] Colleen Flaherty, “‘Extraordinary Measures,’” Inside Higher Ed, March 18, 2020, available at https://www.insidehighered.com/news/2020/03/18/how-institutions-are-approaching-scientific-research-during-covid-19.