Subrecipients may have some or all of the following characteristics:
- their performance is measured against meeting the objectives of the program
- they have authority for administrative and programmatic decisions
- they provide on-going service for the life of the program
- they carry out a program of the subrecipient as compared to providing services for a program of the prime recipient
- they are responsible for applicable program compliance requirements
Subrecipients should be budgeted as a subcontract in the sponsor proposal. This is then recognized as a budgeted item and approved by the sponsor in the terms and conditions of the subsequent award.
On a federally funded sponsored project, subrecipient funds are passed through from the recipient by a subcontract agreement. This agreement will flow down the various federal regulatory and compliance requirements. Standard subrecipient subcontract terms and conditions which incorporate the regulatory and compliance requirements of OMB Circular A-110 are then used to prepare a subrecipient subcontract.
Vendors have the following characteristics:
- they provide the service as part of their normal business operations
- they provide a similar service to many different purchasers
- they operate in a competitive environment (compete with others who can provide a similar service)
- their program compliance requirements do not pertain to the service provided
A vendor is responsible for providing ancillary services in support of the award for the recipient or subrecipient's use. If the service to be provided can be described and billed according to established rates on a requisition for purchased services, then a subcontract is not necessary. However, if the service is complex, requiring a scope of work and budget, deliverables schedule, or billing requirements, a subcontract should be used.
A vendor is only required to meet the terms of the procurement contract (such as the Office of Sponsored Program's commercial purchase order terms) and the OMB Circular A-110 requirements specified in the vendor subcontract. Compliance requirements should not pass through to vendors. On the other hand, a subrecipient is required to meet various federal regulatory and compliance regulations in accordance with OMB Circular A-133. The recipient is required to monitor compliance.
A subrecipient serves as a co-investigator, is responsible for the end results of the research effort equally with the principal investigator where federal funds are being passed through to another entity. By definition, a subrecipient relationship can only be established where federal funds are involved.
A vendor provides ancillary goods or services that the principal investigator needs to conduct the research effort. A vendor is not responsible for the research results.
It is important to be aware that it is the nature of the relationship that determines whether or not an entity is a subrecipient or a vendor. The dollar amount of the purchase order or subcontract is not a determining factor. A careful review of the nature of services to be provided and an appropriate determination as part of the proposal budget review process will eliminate such post-award problems as:
- obtaining sponsor prior approval for unbudgeted subcontracts;
- delays in processing requisitions for purchased services budgeted as subcontracts;
- meeting audit and compliance requirements with for-profit organizations where a vendor relationship should exist.
By making a proper determination in the proposal stage, the appropriate relationship can be established from the start. This is especially true for an unbudgeted subcontract. If the unbudgeted subcontract is of a subrecipient nature, sponsor approval is required prior to entering into a subcontract. If it is a vendor relationship, no sponsor approval is required unless specified in the award terms and conditions.
Making the determination is also important to the vendor or subrecipient. Additional auditing requirements and other compliance regulations apply if the subcontractor is a subrecipient. It is best to make the determination at the proposal stage so if a subrecipient relationship exists, that relationship is recognized by the awarding agency and approved in advance. It is unlikely that an unplanned subrecipient relationship would arise in the course of a sponsored research effort. If this occurs, sponsor approval is required.