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Subawards (Subgrants, Subcontracts)
Subrecipient vs. Contractor
Documentation Required at Proposal Stage
Subrecipient F&A Restriction
Subrecipient Costs on the Prime Award Budget
Fixed Price Subaward
Prime Proposal F&A Costs
A subaward is normally budgeted as part of a prime award received at the University of Arizona. It provides funds to a third party to achieve the research goals outlined in the scope of work and budget. The collaboration between the two parties involves a lead principal investigator/co-investigator at the University of Arizona and a principal investigator/co-investigator at the other entity. It is the responsibility of the University of Arizona to determine if the collaboration meets the definition of a subaward. There are Federal guidelines, as well as University policies, that must be followed. The Sponsored Projects & Contracting Services (SPCS) Subawards Team is available to answer any questions or discuss a situation that might require additional guidance.
It is important to differentiate between subrecipients and contractors to ensure requests are properly routed to the SPCS Subawards Team or Procurement & Contracting Services. For example:
- Determine what type of work is needed by the University of Arizona proposed project.
- Type of collaborative relationship between the University principal investigator and the outside entity’s principal investigator.
OMB Uniform Guidance (2 CFR, 200), Section 200.93 defines a subrecipient as follows:
"Subrecipient means a non-Federal entity that receives a subaward from a pass-through entity to carry out part of a Federal program; but does not include an individual that is a beneficiary of such program. A subrecipient may also be a recipient of other Federal awards directly from a Federal awarding agency."
Contractor costs are direct costs for procurement of supplies, materials, or services. Consultants/Independent Contractors are typically contractors, not subrecipients. See Consultants for more information.
Guidance on distinguishing between a subrecipient and a contractor is provided in OMB Uniform Guidance (2 CFR 200), Section 200.330 Subrecipient and Contractor Determination.
Characteristics indicative of a subrecipient include when the other organization:
- Has its performance measured in relation to whether objectives of a Federal program were met
- Has responsibility for programmatic decision making
- Is responsible for adherence to applicable program compliance requirements specified in the award
- Uses the funds to carry out a program for the pass-through entity, rather than to provide goods or services for a program of the pass-through entity
Characteristics indicative of payment for goods and services received by a contractor include when the other organization:
- Provides goods and services as part of their normal business operations
- Provides similar goods and services to many different purchasers
- Operates in a competitive environment
- Does not participate in the intellectual direction of the project and are therefore not included as authors on publications
- Is not subject to compliance requirements
OMB Uniform Guidance allows grantees to use judgment in determining whether a relationship is that of subrecipient or contractor. Therefore, the substance of the relationship is more important than the form of the agreement. Not all of the characteristics listed above will be present so judgment must be used in determining whether the relationship will be that of a subrecipient or contractor. A checklist for Subrecipient vs. Contractor can be used to assist principal investigators and business/finance offices distinguish subrecipient vs. contractor relationship at the proposal stage.
When it is determined that a subaward will be issued under a prime award, the forms referenced below should be completed by either the University of Arizona principal investigator or the business/finance office during the prime award proposal stage:
- Subaward Budget Negotiation Documentation Form: required per OMB Uniform Guidance (2 CFR 200), Section 200.323 and Federal Requisition Regulation (FAR), Subpart 12.209. (Information and Instructions)
- Subaward Sole Source vs. Competitive Bid Request Form: required per OMB Uniform Guidance (2 CFR 200), Section 200.320 and Procurement & Contracting Services, Purchasing Policies Manual IV. Supplier and Solicitations, Sole Source, Policy Number 4.8
The following documents should also be obtained from the subrecipient organization prior to submitting the prime proposal:
Documents to be retained by the business/finance office:
- Subrecipient Commitment Form - If the subrecipient is an FDP Expanded Clearinghouse participant, only the first page of the subrecipient commitment form is required.
- NASA Assurance of Compliance– China Funding Restriction (only applicable if prime award is NASA funded)
Documents to be included in the prime proposal in accordance with the sponsor’s guidelines:
- Scope of Work to include work to be performed by subrecipient as well as deliverables and milestones
- Detailed budget*
- Budget justification or budget narrative
- Performance period
- List of key personnel
- Letter of support as required by Request for Proposal (RFP)
- Copy of F&A rate agreement (if applicable)
*Budget cost categories should be broken down in the same manner as that of the prime organization. See Subrecipient F&A Restriction section below regarding subrecipient’s options available for the F&A rate.
The subrecipient organization cannot use the University of Arizona’s F&A rates. The two options available are:
- Use of the Subrecipient's Federally Negotiated Facilities & Administrative (F&A) Rate
- A 10% de minimus rate—per OMB Uniform Guidance (2 CFR 200), Section 200.331 Requirements for Pass-Through Entities.
*For NIH prime funded awards for which an outgoing subaward will be issued to a foreign subrecipient, with the exception of the American University of Beirut and the World Health Organization, F&A cost reimbursement is limited to 8% of modified total direct costs, exclusive of expenditures for equipment.
Costs in the various categories (personnel, operations, capital, etc.) are outlined in the subrecipient’s budget. The total cost of the subaward is entered as a single line item on the budget of the prime organization and included in the total costs for the project. Only the first $25,000 of each subaward will be subject to the University of Arizona F&A rate application.
The budget for the primary organization should include the name of the subrecipient as well as an explanation on the selection of the specific subrecipient in the budget justification.
The period of performance of a subaward may not be budgeted outside of Univeristy of Arizona’s period of performance allowed under the prime award. Subawards may be issued for shorter periods of time than University of Arizona’s full period of performance. A new subaward should be budgeted whenever University of Arizona is applying for a competing renewal.
There are two possible scenarios for issuing a fixed price subaward.
If the prime award is issued as a grant or cooperative agreement:
- The subrecipient must propose the work as fixed price and it should be clearly noted as such in the budget justification to the prime organization at the prime award proposal stage.
- No cost sharing is required on the prime award.
- The amount requested is below the Simplified Acquisition Threshold defined by OMB Uniform Guidance (2 CFR 200) under Section 200.332, Fixed amount subaward. Currently, the Simplified Acquisition Threshold is at $150,000 (effective 10/1/10).
If the prime award is issued as a contract:
- FAR clauses of the prime award will apply to the Fixed Price Subaward, NOT the above-referenced OMB Uniform Guidance.
For prime proposals that include subrecipients and the modified total direct cost (MTDC) calculation is being used, the University of Arizona’s F&A cost amount for the subrecipients is calculated as follows:
- If the first year subrecipient amount is more than $25,000, the F&A cost is calculated on the first $25,000 for the first year and no F&A costs are budgeted in subsequent years.
- If the first year subrecipient amount is less than $25,000, the F&A cost is calculated on the full amount. In the next budget year, the F&A cost is calculated only on that portion up to a cumulative amount of $25,000. In the following years, no F&A costs are budgeted on the subcontract.
See the Modified Total Direct Costs/Total Direct Costs page for more information.
As soon as the principal investigator and/or the business/finance office receives notice from the prime sponsor of the impending award, the required subaward paperwork and forms should be gathered and completed. Once the prime award is processed in Sponsored Projects & Contracting Services and assigned a UAccess Financials account number, the subaward initiation process should start. Please move to the next section – Subaward Initiation and Setup.