Consultants (Independent Contractors) provide expertise or a service to a particular project, consistent with their normal course of business. They are independent contractors who are not employees of the University of Arizona. The University controls only what the consultant/independent contractor must do in order to receive remuneration, not how. Unlike a subrecipient, a consultant/independent contractor does not have responsibility for programmatic decision making, is not subject to compliance requirements, and is not providing more than goods or services.
The Financial Services Manual, Chapter 9.12 Independent Contractor Services, provides guidelines on how to distinguish between employee and independent contractor status. The Independent Contractor Form, available on E Forms page, can assist departments in determining if an individual meets the independent contractor criteria.
The Internal Revenue Service presumes that all individuals who provide a service are employees unless there is evidence to support the classification of the individual as an independent contractor. Therefore, if a University department engages an individual as an independent contractor, the department must supply the necessary evidence to support this position.
When preparing your budget:
- Review the sponsor’s instructions for guidance on the inclusion of consultants/independent contractors.
- List each consultant, their area of expertise, and service to the project separately.
- Include a breakdown of the consultant’s daily, weekly, or monthly cost and amount of time to be spent on the project.
- Show the consultant’s total project cost. Consultant costs are included in the Facilities & Administrative Cost calculation.
- If required by the sponsor’s guidelines, include a letter of collaboration and curriculum vitae or biosketch from the consultant.
The University procurement process requires competitive bidding before issuing a purchase order to the independent contractor. The director of procurement is authorized to waive the bidding requirement, based on an adequate justification for sole source procurement. Naming a consultant in the proposal budget is not necessarily sufficient support for sole source justification. It is good planning for the investigator to start the bidding process at the proposal stage, before the project is awarded.
The principal investigator is responsible for monitoring the technical progress of the consulting work to ensure that all technical requirements are being met. The principal investigator also must review and approve the consultants' invoices prior to submitting them to Accounts Payable for payment.
Additional guidance on the inclusion of independent contractors may be found in OMB Uniform Guidance, (2 CFR 200.459). The following should be considered when determining if the costs are allowable:
- The nature and scope of the service rendered in relation to the service required.
- The necessity of contracting for the service, considering the institution's capability in the particular area.
- The past pattern of such costs, particularly in the years prior to sponsored agreements.
- The impact on the institution's business (i.e., what new problems have arisen).
- Whether the proportion of Federal work to the institution's total business is such as to influence the institution in favor of incurring the cost, particularly where the services rendered are not of a continuing nature and have little relationship to work under Federal grants and contracts.
- Whether the service can be performed more economically by direct employment rather than contracting.
- The qualifications of the individual or concern rendering the service and the customary fees charged, especially on non-sponsored agreements.
- Adequacy of the contractual agreement for the service (e.g., description of the service, estimate of time required, rate of compensation, and termination provisions).