Written By: Craig O’Neill
March 12, 2012
What is a subaward and when do I need one?
A subaward, also referred to as a subcontract or subagreement (depending on the type of award and source of funds), is an agreement that provides sponsor pass-through funds to a lower-tier entity. When MSU receives the award, we are called the prime recipient and the entity receiving a subaward from MSU is considered the lower-tier entity and it is called the subrecipient.
A subaward is needed when MSU enlists another entity to complete a specific project component in a proposal application.The subrecipient and their Principal Investigator (PI) are responsible for their respective part of the project’s design, conduct, and/or reporting of research or educational activities.
Where do I include the subaward in the budget?
When preparing MSU’s budget that includes a subaward, use the line-item labeled “contractual” if the sponsor did not provide a specific category. Usually this category is not exclusive to subawards and may include consultants and price quotes from vendors.
What is generally required when including a subaward in your proposal?
The following information, in the appropriate sponsor format, is normally required at the proposal stage from the subrecipient. A suggested timetable has also been provided given the numerous subaward proposal components.
- Provide the Federally Negotiated Facilities and Administrative (F&A) Rate Agreement, if available and when indirect costs are budgeted. Subrecipients who do not have a federally negotiated F&A Rate Agreement, may elect to charge a de minimis F&A rate of 10% of modified total direct cost (MTDC) if allowed by the prime sponsor. As the subrecipient is making a determination on whether or not to elect using the 10% rate, they should keep in mind that costs must be consistently charged either as direct or indirect costs, but may not be double charged as both. If the subrecipient decides to use the 10% F&A rate, this methodology must be used consistently for all Federal awards.
- For non-federal prime sponsor proposals (i.e. no federal funds involved) where F&A is not limited or capped by that specific sponsor: if the subrecipient does not have a Federally Negotiated F&A rate and they are requesting a rate other than the 10% de minimis rate referenced above, then the box related to “Other rates” on the MSU Subrecipient commitment form under §B should be checked “Yes” and a rate description must be attached. The description should address the following items to assist MSU in determining reasonableness at the proposal or award stage:
- Has the rate been reviewed and accepted by other large institutions (if so, please provide contact information for five of your largest most recent awards)? Is the rate published on the web? Is the rate applied consistently regardless of funding source? Is it applied as a percentage or as an amount per a defined unit? Is this rate independently audited? Is this rate considered a “fee” or is this rate based on actual costs? Is there detailed documentation supporting this rate available for review? Has MSU honored this rate previously (provide MSU reference numbers – account or App number)?
- Providing this information does not guarantee that MSU or the sponsor will be able to accept a rate greater than the 10% de minimis rate referenced above.
- Confirm that the budget doesn’t include a fee or profit line-item (excluding SBIR or other related legislated programs). As documented by Edward Sharp in an article titled “Paying Fee or Profit on Grants and Cooperative Agreements” (Vol. 17 – January 4, 2008), unless there is a specific statute allowing a fee or profit to be paid on a grant, it should not be budgeted/paid on federal projects regardless of whether the recipient is a commercial or non-profit organization. As stated in the article, a fee or profit is not an actual cost and therefore shouldn't be budgeted.
- Provide the Fringe Benefit Rate documentation (e.g. as indicated in the F&A Rate Agreement or as provided at the website http:\\... or as provided in the attachment to the Letter of Commitment, etc.).
- Budget Justification
- Statement of work
- Describe the specific objectives applicable to the subaward. Provide details of the tasks to be performed (in chronological order) by the Subrecipient within the project performance period. Provide a list of anticipated milestones and due dates if known.
- MSU Commitment Form signed by the Subrecipient's Authorized Organizational Representative (MSU required Subrecipient Form link). The form includes:
- The amount of requested total support and committed cost share, if any.
- DUNS Number (required for federal contract and grants): Per 2CFR Chapter I Part 25 and the Office of Management and Budget guidance on FFATA Subaward and Executive Compensation Reporting issued on August 27, 2010, each prime grant recipient may make a subaward only to entities that have DUNS numbers. This number is used in the reporting process as described on the USASpending.gov website. Go to the following web site http://fedgov.dnb.com/webform to opt for a free D&B D-U-N-S number, or call (866) 705-5711 to complete the DUNS application process. Any subrecipient of Federal funds named in a proposal DOES NOT need to be registered in the Federal System for Award Management (SAM) as part of the submission process.
- SAM system (related to federal contract and grants). Generally, subawardees don't need to be registered in the SAM system. For example, a subawardee must register if the subagreement flows-down the requirement that they file a FFATA report directly with the federal government. The SAM website stores the primary registrant's (e.g. MSU as the direct recipient of federal funding) certifications for the U.S. Government. SAM collects, validates, stores, and disseminates data in support of agency assistance and acquisition missions, including Federal agency grant and contract awards.
- Congressional District(s) for Subrecipient and performance site locations - to search districts use the following link http://www.govtrack.us/congress/members/
- Employer Identification Number (Tax ID)
- Biographical Sketch forms for the subaward’s PI(s) and senior personnel
- Current and Pending Support forms for the subaward’s PI(s) and senior personnel
- Conflict of Interest list if required by the solicitation or application guidelines (see USDA-NIFA narrative explanation related to the grant application review process under the heading "Conflict of Interest").
- Description of facilities and equipment available for completion of the project activities if required by the solicitation or application guidelines
- Any other documentation specified in the application/solicitation. Examples: reps & certs, small business plans, USAID Employee Biographical Data Sheet (EDBS) certifications for USAID projects, etc…
Why establish a timetable for the subaward documentation?
MSU’s PI should establish a document due date time-table for the subaward’s PI to follow. In general, the information should be provided 2-3 weeks before the proposal submission deadline to allow for its incorporation into MSU’s proposal application. Missing this deadline could cause significant delays, prevent the submission of the proposal, or result in the removal of the subaward in order to meet the deadline. Special attention should be given to the F&A rate agreement documentation as well. Since some federal agencies may address subrecipient F&A differently, great caution should be taken if a subrecipient budget includes unconfirmed F&A without the input and guidance by the prime sponsor since it might setup a contentious situation with the subrecipient or prime sponsor at the awarding stage.
Why is it important to know the difference between a subaward, consultant agreement, and a vendor quote in my proposal?
All three of these categories can provide services to a project. MSU’s PI should carefully review the proposed nature of services to make the appropriate budget category determination and to understand the necessary related proposal documentation. The review of the substance of the services requested and the type of dependent financial relationship needed is more important than what the contractual agreement is called. In addition, MSU only charges F&A on the first $25,000 of each subaward, but charges full F&A on all consultant and vendor costs. It would not be appropriate to budget a consultant agreement or vendor quote as a subaward in order to avoid budgeting the applicable F&A.
- Subaward – The subrecipient usually performs a programmatic portion of the project activities and must follow all applicable guidelines and compliance requirements. The subrecipient’s PI is responsible for their respective part of the overall project activities usually involving project design, conduct, and/or reporting of research or educational activities. The subrecipient's performance is measured in relationship to whether objectives of the Prime sponsor or Federal program (see link to Federal Guidelines) were met. The programmatic dependence between the sponsor, MSU and the subrecipient usually results in the creation of an “assistance” relationship to accomplish a broader public goal or objective.
- Subrecipient's PI is involved in the development of the research plan in order to avoid potential conflicts in using the results of the research or difficulties in ultimately transferring the technology (NDA/CDA)
- Confidentiality of information
- Proprietary nature of materials, processes and/or research tools
- Retention of rights to any resulting intellectual property
- Copyright, Publication Restrictions, Patents, Proprietary Processes, etc.
- Licensing of related background technologies (MTA)
- PI is responsible for the content included in sponsor project reports and other documents
- PI receives protections offered through their institution
- Conflict of Interest, Human Subject, Animal, etc.
- Consultant – The consultant is hired to provide services for a project where all resulting intellectual property is owned by MSU.
- All resulting intellectual property is owned by the hiring institution
- Not responsible for the project design, conduct, or reporting of research or educational activities
- Provides the consultant services within their normal business operations
- Provides similar services to many different purchasers
- Normally operates in a competitive environment
- Provides services that are ancillary (i.e. secondary) to the performance of the sponsored project
- Vendor – A vendor is acting as a dealer, distributor, merchant, or other seller providing goods or services in their normal business processes to many federally-funded and non-federally funded customers. Vendors usually have published rates, operate in a competitive environment and are not subject to project compliance requirements. A vendor is not responsible for the project design, conduct, or reporting of research or educational activities.
If the signed Subrecipient’s Commitment Form indicates that there are human subjects involved, what should I do?
Before the subaward is issued, the subrecipient should confirm to MSU that they have a Federal Wide Assurance (FWA) certification (see the FWA input field located on the MSU Subrecipient Commitment form) and that they have followed their Institutional Review Board’s (IRB) protocol approval requirements. Evidence of the protocol approval should be provided in a letter from their IRB Compliance Office. Please contact MSU’s IRB Compliance Office for additional information or questions such as how to handle a subrecipient that doesn’t currently have an FWA or an IRB compliance office.
What happens if MSU’s proposal is funded?
A subaward can be issued to the subrecipient after MSU’s account number has been assigned based on the prime award notice. For federal awards, MSU is obligated to include in the subaward the applicable award terms and conditions. Generally, a federal award will include lobbying certification, debarment certification, OMB Circular A-133 assurance, and uniform administrative requirements. For grants and cooperative agreements, agency specific terms and conditions and intellectual property ownership rights are also included. Contracts will include applicable clauses and prescriptions.
Generally, the subaward is monitored to reduce the likelihood of non-performance or non-compliance. Monitoring this risk varies by subrecipient based on relative risk factors, including sponsor, the size of the subaward, the amount of grants and contracts the subrecipient receives, complexity of the subaward’s statement of work, and MSU’s past experience with the subrecipient. An A-133 certification is required for federal funding and the related documentation helps MSU determine how to properly monitor subawards in compliance with our OMB A-133 requirements (see §_.400(d) of A-133). If the subrecipient is not subject to an A-133 audit, then the certification is usually accompanied with additional documentation for the subrecipient to be considered for a status of less than high risk.