The Scottish Funding Council has been forced to back down in a long-running row with universities over how funding for knowledge transfer should be allocated.
After five months of wrangling, the SFC has finally published a consultation outlining its proposals to overhaul the way that cash to help universities boost the Scottish economy will be distributed.
A first version of the consultation was due to be published in December 2009, but was withdrawn before it had reached vice-chancellors' desks after the funding council was told it would face mass opposition from universities if it went ahead.
The initial plans drawn up by the SFC involved replacing the formula for calculating each university's knowledge-transfer allocation with a bidding process in which institutions would compete against each other for project-based funds.
The drafting of the new proposals, a compromise combining both approaches, has been hailed as a victory for universities.
One negotiator involved in the stand-off, who asked to remain anonymous, said universities were willing to compromise from the off, but claimed that the SFC had been determined to "play chicken".
Under the rejigged plans, the SFC will channel all £21 million for knowledge transfer through its Horizon Fund in 2010-11.
Of this, £6 million will be distributed on a project-by-project basis judged by a committee, while the remaining £15 million will be allocated by formula to support university engagement with small and medium-sized businesses.
But the plans also state that the SFC believes formulaic allocations "have not resulted in a strong, strategic focus on Scotland's biggest challenges or opportunities", and indicate that it intends to increase the proportion of funds allocated through the "strategic projects scheme", which awards funding to ventures that match funding council priorities.
"Given the uncertainty about future budgets and the need to assess the effectiveness of these proposed new arrangements, we propose further discussion with the sector over the appropriate future balance between funding for strategic projects and allocations to individual institutions," the consultation paper adds.
The funding council also confirmed that activities supported by both funding streams would be "assessed, measured and reported on against their potential and actual contribution to improved productivity and innovation in Scotland".
Unveiling the consultation after a six-month wait, Mark Batho, chief executive of the SFC, said it marked the first step in an ongoing process to stimulate knowledge transfer in the country.
"Our university research base is a national asset and is one of the many reasons Scottish universities will play such an important part in the country's future," he said.
A spokesman for Universities Scotland, the representative body for the country's academy, welcomed the compromise. "Universities were keen to see the SFC keep red tape to a minimum so that universities and business can get on with the important job of working together. The proposal put on the table is an acceptable basis for consultation."
Funding for knowledge transfer from the SFC's core grant, which amounts to £70,000 for each institution per academic year, will not be affected by the proposals.
The consultation will close on 11 June.