Oregon State University

Is This a Subaward (Subcontract, Subgrant) or a Procurement?

Oregon State University receives grants and contracts for research, scholarship, and creative activities from a variety of public and private sources.  Many of the sources of  funding have specific guidance as to how to process a portion of that money to other organizations and whether that processing is as a subcontract or procurement. The distinctions between subcontracts and procurements are guided by the Federal Acquisition Regulations, OMB Circulars A-110 and A-133, and OUS FASOM.  These distinctions include the purpose of the distribution of funds to a sub-awardee and the necessity to flow-down the terms and conditions of the award from the organization initially receiving the funds.

A procurement process generally is used when OSU buys goods or services for the benefit of the project.  In this instance, the activity is a procurement, and the entity receiving the funds is a vendor.

The subgrant or subcontract process is used when OSU passes-through a portion of the sponsored award to another entity for the purpose of programmatic effort on the project.  All the terms and conditions that are part of the primary award must be included in the sub-award document. Signature of acceptance of these terms by the receiving entity is required.  The entity receiving the funds is a sub-recipient.

When preparing your proposal budgets, we offer the following guidance to be considered in classifying whether an activity is a procurement or a sub-award.

Determining a Sub-award

Does the entity receiving a portion of the funds from you:

  • Have their programmatic involvement identified as a separate scope of work, with separate budget and organization approval?
  • Have their performance measured against whether the objectives of the project are met?
  • Have responsibility for programmatic decision-making?
  • Have responsibility for adherence to applicable program compliance requirements?
  • Use the sponsored funds to carry out a program of their organization as compared to providing goods or services for a program at OSU?
  • Have responsibility for assisting in completion of project deliverable and/or technical report?
  • Have the right to publish project results or serve as a co-author?
  • Have the option to develop patent-able technology?

If your answers to these questions are "Yes," this activity should be classified as a sub-award.


Determining a Procurement

Does the vendor/entity receiving a portion of the funds from you:

  • Provide the goods and services your project requires within their normal business operations?
  • Provide similar goods or services to many different purchasers?   (this includes fabrication of new goods, consultants, editors, etc.)
  • Operate in a competitive environment?   (a for-profit organization or an entity/ university providing a testing service)
  • Not subject to terms and conditions/compliance of the sponsoring agency?
  • Not involved in the programmatic work of the project, including project deliverable or technical report?

If your answers to these questions are "Yes," this activity should be classified as a procurement from a vendor.

Applying the Classification to Your Proposal Budget

Once you have determined whether the funds should be classified as a sub-award or a vendor procurement, the activity should be correctly categorized in your proposal budget.

·        Sub-awards are listed as contractual agreements in the proposal and itemized in your budget, and
are accompanied by a detailed budget from the sub-recipient organization, a copy of their indirect cost agreement (although in some instances certain organizations such as companies may not have this), and a signature from the authorizing official of that organization. When using Modified Indirect Cost Method, overhead would be charged on the first $25,000 of each sub-award.  For agreements that calculate indirect cost using Total Method, overhead would be charged on the entire sub-award. 

·        Vendor procurements are listed as supplies, equipment, or services as appropriate.  An example would be "lab testing services"; "vessel rental"; "fabrication of xxx equipment."  Indirect cost would be calculated on the total amount itemized in your budget.

Incorrect processing of sponsored funds distributed to outside entities can lead to having our procurement and contracting system disapproved, more frequent audits, or in the worst case scenario, loss of an award.

Questions

If while preparing a sponsored programs proposal you need assistance in understanding how to classify a portion of your budget going to another organization, please call the Office of Sponsored Programs (737-4933).

If you anticipate a procurement from a vendor and you have questions on the distinction between a procurement and a subcontract, please call Purchasing (737-4261).

Contact Info

Office of Sponsored Programs
Research Office
Oregon State University
B308 Kerr Administration
Corvallis, OR 97331
Phone 541-737-4933
Fax 541-737-3093
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