University of Southern California


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:

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: