When Should I Use a Subaward vs. Vendor Contract?
Before entering into a relationship with another entity under a sponsored award in which the other entity will provide goods or services or substantive, programmatic work to USC, a determination must be made as to the nature of the legal relationship between USC and other entity, which in turn will determine the type of agreement required to document the relationship. This is a significant decision because it determines the allocation of responsibilities and influences the appropriate application of indirect cost rates.
In the case of a subaward, it is incumbent upon USC to ensure that a subrecipient conducts its portion of the programmatic work in compliance with all applicable terms and conditions of the sponsored award and project costs incurred by a subrecipient are reasonable and allowable. A subaward is likely appropriate under the following circumstances:
- The entity performing the statement of work will use their own facilities, employees and resources;
- The entity performing the statement of work will contribute substantively to the scholarly and scientific conduct of the project and will have responsibility for programmatic decision making;
- Performance is measured against whether the objectives of the sponsored program are met (e.g. technical progress or final reports);
- The entity performing the statement of work will provide unique knowledge and expertise to the project and conduct their work independent of USC’s direct supervision or control with only general technical direction and coordination from USC; and
- The entity does not provide the same goods and services as identified in the statement of work to others as part of its normal business operations.
In the case of a vendor contract, USC will be purchasing goods or services. Typically, vendors are not bound to the full set of sponsor terms and conditions, and are subject to competitive bidding procurement practices, to assure that funds paid to vendors do not exceed fair market value. A vendor contract is likely appropriate under the following circumstances:
- The entity is providing the same goods or services to USC as it provides to others as part of its normal business operations;
- The entity provides similar goods or services to many different customers;
- The entity operates in a competitive environment to provide the types of the goods or services to be procured;
- The goods or services being provided are ancillary to the operation of the sponsored program; and
- The entity is not subject to the compliance of the sponsored program terms and conditions