Distinguishing between subawards and contracted services can be difficult for many research administrators. The purpose of the blog today is to outline the differences between the two and why it is important to make the proper distinction. If the proper distinction is not made during the proposal stage, it could affect Facilities and Administration (a.k.a F&A, IDC, etc.). In addition, it could hinder the start of the project. There are resources available that will aid in the proper distinction of the two as you will soon see noted below.
What is a Subaward?
According to the Omni Circular, 2 CFR 200.92, Subaward is an award provided by a pass-through entity to a subrecipient for the subrecipient to carry out part of a Federal award received by the pass-through entity. It does not include payments to a contractor or payments to an individual that is a beneficiary of a Federal program. A subaward may be provided through any form of legal agreement, including an agreement that the pass-through entity considers a contract. These are typically used when a principal investigator at one institution collaborates with a principal investigator at another institution.
What are Contracted Services?
A contracted service is a written agreement with an outside contractor to provide professional services and deliverables of a professional, creative, or intellectual nature for a fee. The contractor may be required to provide work in a specialized field and have decision-making abilities. These services may be required to complete work on a sponsored project or support specific organization projects or goals. These are typically used for consultants.
Determining Factors and Characteristics of Subawards and Contracted Services
Below are lists of determining factors and characteristics of both subawards and contracted services that will aid in the proper determination between the two.
Determining Factors – Institutions will typically issue subawards in these cases:
- Collaborator will perform the work as part of their institutional appointment
- Collaborator will have programmatic decision-making responsibility
- Collaborator will manage administrative and technical aspects of the scope of work
- Collaborator will use the employees and facilities of the subcontracted organization
- Collaborator will provide publication of results
Characteristics of Subawards:
- Prime funding is received from a contract or grant mechanism
- Collaborative effort is involved
- Issued to another institution or entity
- Contain a defined scope of work
- Contain a detailed budget with specific effort
- F&A is only allowed on the first $25K for the subawarder, subawardee is allowed their full negotiated rate
Determining Factors – Institutions will typically issue a contracted services agreement when the consultant:
- Provides services of a specialized nature
- Provides services for a fee
- Will not have programmatic decision-making responsibility
Characteristics of Contracted Services:
- Issued to organizations or individuals
- Operates in a competitive market
- May or may not be identified in the proposal
- Does not contain a detailed budget with specific effort
- Full F&A is allowed for the subawarder, no F&A costs are reimbursed to the consultant as it is included in their fee or rate
Why is it Distinguishing Between Subawards and Contracted Services Important?
Distinguishing between subawards and contracted services is important because it can affect your institution’s F&A, the subaward may be subject to auditing and monitoring requirements, and it may also be subject to the terms and conditions of the prime award. If the proper distinction is not made, it can put your institution at risk for audit as well as result in a decrease in your institution’s F&A. Reductions in F&A may mean less money recovered by your institution for overhead expenditures.
If your award specifies the use of a consultant, but actually needs a subaward, you will need agency approval before proceeding. In addition the subrecipient would need to submit a proposal for the scope of work to be performed and it will need to be submitted through your institution to the sponsoring agency. This not only hinders the ability to start work right away, but is also subject to disapproval by the sponsoring agency.
If your award specifies the use of a subaward, but actually needs a consultant, again you will need agency approval before proceeding because your F&A could be affected. Depending upon the amount or fee of the service, approval of the service contract may require a sole source or bid process. Once again, this hinders the ability to start work right away.
Next Steps: Distinguishing between Subawards and Contracted Services
Distinguishing between subawards and contracted services can be difficult, however with the proper tools, the correct determination can be made. Your institution’s Pre-award office can assist you with determination between the two types during the proposal stage. Your institution’s Post award office can assist you with processing invoices and forms at the award stage. Your institution’s Procurement or Purchasing office can assist you with contracted service agreements and processing requisitions to setup the agreements.
While a grants management system may not help make the determination between the two, it can certainly help to manage your subawards. IT Works offers grant management software solutions that provide quick access to primary contractors (or pass through organizations) and subcontractors as well as manages supporting documentation for proper oversight. For more information regarding this product, please contact the IT Works team.