Subawards, Subcontracts,
Submarines – What’s Below
the Surface?
NCURA FRA X 2009
La Quinta, CA
February 10th
Concurrent Session, 1:15 p.m. – 2:15 p.m.
Panelists: Marti Preston, Administrator, Department of Pediatrics, University of
Rochester and Brenda Kavanaugh, Senior Research Administrator, Office of
Research and Project Administration, University of Rochester
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Learning Objectives:
This session will focus on the nuts and bolts of subaward
management and administration
By the end of the session we will have provided tools showing:
• How to prepare and administer subawards, including
– Appropriate flow-down from prime awards
– Cost analysis and subrecipient monitoring
– Closeout
– Tips when working with industry or foreign sites
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INTRODUCTION:
What is a subrecipient (subawardee, subcontractor)?
Per A-133: Any person or government department, agency,
establishment, or nonprofit organization that receives
financial assistance to carry out a program through a
primary recipient or other subrecipient, and
– Has its performance measured against whether the objectives of the
project are met
– Has responsibility for programmatic decision-making
– Has responsibility for adherence to applicable federal program
compliance responsibilities
– Uses federal funds to carry out a program of the organization as
compared to providing goods or services for a program of the
passthrough entity
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INTRODUCTION:
What is a vendor? It is an organization that:
• Provides goods and services within normal business operations
• Provides similar good and services to many different purchasers
• Operates in a competitive environment
• Provides goods and services that are ancillary to the operations of the
federal program, and
• Is not subject to compliance requirements of the federal program
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INTRODUCTION:
Vendor or subaward – how can you tell?
• Is there an identified investigator at the lower-tier
organization?
• Is the lower-tier organization free to decide how to
carry out the activities requested of it?
• Will there be potentially patentable or copyrightable
technology created or reduced to practice from the
activities of the lower-tier entity? Will the lower-tier
organization have rights?
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INTRODUCTION:
Vendor or subaward – how can you tell?
(cont.)
• Are publications anticipated from the lower tier
entity? Will individuals at the lower-tier be coauthors on articles?
• Is the lower-tier organization providing cost sharing
or matching funds?
• Is the activity to be performed a series of repetitive
tests or activities requiring little or no discretionary
judgment on behalf of the service provider?
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INTRODUCTION
There are many types of subrecipients
• Universities, hospitals, research institutes
• For-profit companies
• Non-profits
• Foreign institutions
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Pass-through Entity Responsibilities
• Identify federal awards by CFDA title and number, award
name and number, award year, if award is R&D, name of
federal agency
• Subrecipient monitoring
• Ensure subrecipient has met audit requirement for the fiscal
year
• Issue management decisions
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PREPARATION: RESEARCH PROPOSAL
SUBMISSION – GETTING OFF TO A GOOD
START
What is needed from the subrecipient?
• Statement of work (SOW)
• Project budget and justification (with all appropriate costs + F&A)
• Written evidence that an authorized institutional official has endorsed
the subrecipient’s proposal
• Other documents such as resources/facilities/equipment page,
checklist, biosketches, other support and a signed application face page
• All this should be received at prime institution in advance of agency
deadline
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PREPARATION: RESEARCH PROPOSAL
SUBMISSION – GETTING OFF TO A GOOD
START
Meanwhile, what should the “prime” institution’s PI do?
• Check out that Statement of work (SOW) – is it what was discussed and
agreed to with subrecipient PI?
• Review the budget – are the costs what was expected and are they
reasonable?
• Nag subrecipient PI to get proposal information in ASAP!
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PREPARATION: RESEARCH PROPOSAL
SUBMISSION – GETTING OFF TO A GOOD
START
What should you do?
• As a department administrator, work with your PI to make sure that the
subrecipient budget makes sense, adds up and contains the
appropriate information, such as:
– Fringe benefit rates
– Salary (NIH cap?)
– F&A rate and costs
– Equipment and supplies
– Special needs – mandatory cost sharing , program income, etc.
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PREPARATION: RESEARCH PROPOSAL
SUBMISSION – GETTING OFF TO A
GOOD START
What should you do?
• You should be meeting with your PI as early as possible
(my department guidelines require a minimum of 1 ½
months prior!)
• Your PI will already have been in touch with Sub PI and will
have discussed personnel and general budget items
• You, the department administrator will be filling in the
blanks in the budget and collecting all the details
• Be sure to make contact with your equivalent at the Sub
PI’s institution, explaining the project from your point of
view and letting them know the documents will require –
this is your collaborator
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PREPARATION: RESEARCH PROPOSAL
SUBMISSION – GETTING OFF TO A
GOOD START
What should you do?
• Let the Sub PI’s administrator know exactly who will be
working on their part of the proposal and obtain the
following information:
– Salary and FTE status of faculty and staff involved at Sub site
– Benefit rate(s)
– Institutional F&A rate
• What else? Screen dump the electronic form to be used for
key personnel and site location and send it to the site DA
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PREPARATION: RESEARCH
PROPOSAL SUBMISSION –
GETTING OFF TO A GOOD START
What should you do?
• The information you generally need (varies by
agency) from the subrecipient DA’s are:
–
–
–
–
–
–
Face page
Subaward contacts page (FDP form)
Checklist and rate agreement
Resources and Environment information
Site location informaiton
Senior Key Personnel information
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PREPARATION: RESEARCH
PROPOSAL SUBMISSION –
GETTING OFF TO A GOOD START
What should you do?
• The information you generally need (varies by
agency) from the subrecipient DA’s are:
– Sub’s DUNS # and cognizant agency information
– If this is a Multiple PI’s submission, will require
Commons USERID for Senior Key Personnel page of
SF424 form.
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PREPARATION: RESEARCH
PROPOSAL SUBMISSION –
GETTING OFF TO A GOOD START
What should you do?
• Prepare a draft of the overall budget with linked
budget worksheets of all subrecipient budgets
rolling up to the prime.
• Clearly show at all stages where the budget is if
there are direct cost caps or you want to stay away
from that $500,000 figure.
• Send Sub those worksheets for review, correction,
addition, etc.
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PREPARATION: RESEARCH
PROPOSAL SUBMISSION –
GETTING OFF TO A GOOD START
What should you do?
• This kind of oversight insures consistency in the
budget preparation, e.g.,
– Same escalation rate for outgoing years
– Appropriate FTE’s budgeted for studies that are
occurring in several sites such as clinical studies
– Comparable non-salary costs budgeted across all sites
for multicenter studies, etc.
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PREPARATION: RESEARCH
PROPOSAL SUBMISSION –
GETTING OFF TO A GOOD START
What should you do?
In many cases, when preparing electronic
proposals, the Sub is happy to have you
prepare the electronic subaward attachment
budget form.
Makes you happy too, because in allows you
to control your destiny, timelines and quality
controls
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PREPARATION: RESEARCH PROPOSAL
SUBMISSION – GETTING OFF TO A GOOD
START
If the subaward is planned under a Federal contract, there are
more things to worry about! The subcontractor must:
• Include a completed Contract Pricing Proposal Cover Sheet (Standard
Form 1411)
• Include completed and signed Representations and Certifications
• Include Small Business Subcontracting Plan (if sub costs exceed
$500,000)
Deadlines are even more important!
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PREPARATION: RESEARCH PROPOSAL
SUBMISSION – GETTING OFF TO A GOOD
START
Foreign Subcontracts – General Considerations:
1. Can you work with the entity at all?
OFAC restrictions
Denied Party Screenings
2. How much experience does the foreign subrecipient have with
contract research?
3. Does the foreign subrecipient have the infrastructure necessary to
document payroll, purchases, overhead costs?
4. Are there tax restrictions associated with working with that entity?
5. Do you have someone “on the inside” who knows the unique rules,
restrictions, and challenges of that country?
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PREPARATION: RESEARCH PROPOSAL
SUBMISSION – GETTING OFF TO A GOOD
START
Foreign Subcontracts – Financial Considerations:
1. How stable is the subrecipient’s currency? Some countries (e.g.,
Zimbabwe) have experienced bizarre currency fluctuations in recent
years, so a proposal budget prepared now may be completely
inadequate six months from now.
**Always request budgets in U.S. dollars**
2. How do you intend to verify the subrecipient’s expenditures?
Consider audit and subrecipient monitoring responsibilities.
**When in doubt, propose a Firm Fixed Price sub**
3. Avoid asking a foreign subrecipient to cost-share. If the sponsor
requires cost-sharing, you are better off shouldering it all yourself.
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PREPARATION: RESEARCH PROPOSAL
SUBMISSION – GETTING OFF TO A GOOD
START
Foreign Subcontracts – More Financial Considerations:
4. Will the subrecipient face cash-flow challenges? If you are working
with developing countries, you may need to consider cash-advances,
up front payments, and other similar approaches.
– You’ll need to balance the risk to your institution with the needs
of the foreign subrecipient.
– You should establish reasonable caps for cash advances.
– You should make sure this payment structure is explicit in your
proposal.
– If the project is not fixed price, you’ll need to establish
mechanisms for reconciling cash advances with expenditures.
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PREPARATION: RESEARCH PROPOSAL
SUBMISSION – GETTING OFF TO A GOOD
START
Foreign Subcontracts – More Financial Considerations:
5. What additional costs should you include in your prime budget to
manage your foreign subs?
–
–
–
–
–
Translation costs
Shipping costs
Communication costs
Wire transfer costs
Additional administrative costs (A-21: “Major Project”)
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PREPARATION: RESEARCH PROPOSAL
SUBMISSION – GETTING OFF TO A GOOD
START
Foreign Subcontracts – Export Considerations:
Physical exports – Does the proposed collaboration involve shipping
anything abroad? Computers? Laptops? GPS equipment?
Foreign travel – Will your researchers be travelling abroad? With
whom will they be interacting?
Deemed exports – Will your foreign collaborators be visiting you
during the course of the project? What technology will they be exposed
to?
Defense services – Will your project involve training foreign personnel
in the use of any technology included on the Munitions List?
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PREPARATION: RESEARCH PROPOSAL
SUBMISSION – GETTING OFF TO A GOOD
START
Foreign Subcontracts – Other Considerations:
Human Subjects/Animal Subjects - If human or animal subject research
will take place abroad, please consider what measures will be taken to
ensure compliance. (The same standards of care are required regardless
of whether the research is performed in the U.S. or abroad.)
F&A - Please check your sponsor guidelines to see if additional
restrictions apply to foreign subrecipients. For example, NIH will only
pay 8% F&A on foreign subs, even if the domestic organization is
charging full F&A.
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PREPARATION: RESEARCH PROPOSAL
SUBMISSION – GETTING OFF TO A GOOD
START
• For Profit Subawards – General Considerations
– Will the sub entity consider financial
information confidential?
– Does the sponsor allow for a fee?
– Will an IP agreement be required at the time
of proposal?
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PREPARATION FOR THE SUBAWARD
Congratulations, you got the award. What happens next?
• Check the prime award document – has the subaward been approved
by the sponsor (or not specifically disapproved)?
• Is the budget intact or has it been reduced
– Revised or detailed budgets will be needed
• Are the required assurances and certifications in hand for the
subrecipient?
– IRB and IACUC approvals
– Certification on education in the use of humans in research
• If this is a foreign subaward, there may be additional hurdles to jump
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PREPARATION FOR THE SUBAWARD
Congratulations, you got the award. What happens next?
For the department administrator (DA), a lot!
• DA meets with prime PI to discuss account/budget setup and provides
Request to Issue Subcontract form
(http://www.rochester.edu/ORPA/Forms/
– This form provides your sponsored programs office with the basic
information they need to set up the subaward
•
•
•
•
•
Statement of Work
Additional terms and conditions they may need in subaward
Budget information (including account number, not to exceed amount, etc)
Contact information
Prime PI’s cost assurance (he/she must sign!)
– Do you have all of your approvals and assurances from your sub in hand?
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PREPARATION FOR THE SUBAWARD
Foreign Subcontracts
• You should always seek explicit approval from your sponsor before
issuing a foreign sub. Do not assume it is acceptable simply because it
was proposed and not expressly disallowed.
• In addition to needing your sponsors approval, you may need the
approval of the foreign government before performing work.
• Some countries have complex legal authorities with overlapping
jurisdictions (including tribal authorities, etc.)
• How will language barrier issues be resolved for programmtic and
administrative oversight? Are translators available? Have they been
budgeted for?
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PREPARATION FOR THE SUBAWARD
If subrecipient is a for-profit or small non-profit, you will need to know:
• Are they qualified to receive Federal funds?
• Do they have internal controls in place to manage and track the funds?
• Have they every received Federal funds?
• Perhaps a pre-qualifying questionnaire to determine all this is
necessary (see http://www.rochester.edu/ORPA/Forms/
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ISSUING THE SUBAWARD
There are three main components to all subawards
Statement of Work (SOW) – can be difficult to get
1.
–
A poorly prepared SOW can lead to disputes between
collaborating institutions
–
Not advisable to just reference the approved proposal for the
overall award or the budget justification in place of a detailed
SOW
–
Name specific deliverables, if required
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ISSUING THE SUBAWARD
2.
Budget
–
Should be at least as detailed as required by prime sponsor
–
Cost-reimbursable
• Costs reimbursed against actual expenditures up to a not-toexceed amount
–
Fixed price
• Based on project performance or completion of milestones
• Paid based on fixed price amount, regardless of actual costs
–
Per research subject
• Clinical trials
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Order of Precedence
Statute
OMB Circulars
Administrative
Regulations
Program Regulations
Special Terms and Conditions of Award
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ISSUING THE SUBAWARD
3.
Terms and conditions
– Federal Demonstration Partnership (FDP) Template
• Used for most Federal assistance subawards – NIH,
NSF, DOE, AFOSR, AMRMC, ARO, EPA, NASA,
ONR and USDA (AHRQ and HRSA are not
participating agencies in FDP)
• Contain basic flow-down terms from Federal
sponsors and consists of the following sections:
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ISSUING THE SUBAWARD
3. Terms and Conditions, cont.
– If you not using the FDP terms and conditions, the
prime institution will need to develop its own template.
The FDP terms may not be suited to some awards.
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ISSUING THE SUBAWARD
Other considerations when setting up the subaward,
invoices
– Submission of invoices and payments
• Invoice intervals
• Invoice format and requirements
• Payment intervals
• Special requirements for final invoice
– Carryforward of unobligated balance from
budget period to budget period
• Indicate whether or not this is allowed
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ISSUING THE SUBAWARD
Other considerations when setting up the subaward, invoices,
cont.
–
Mandatory cost sharing (voluntary does not have to be tracked by
prime grantee institution)
• Must be identified in invoices to prime
– Display total actual costs for reimbursement by major
budget category
– In addition, subrecipient’s actual costs incurred to meet
cost share commitment made to prime sponsor must be
labeled as cost sharing, displayed and totaled by major
budget category on each invoice
– Final invoices will not be paid until mandatory cost sharing
is certified
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ISSUING THE SUBAWARD
Other considerations when setting up the subaward, invoices, cont.
–
Advance payments
• Payments are normally made after service is rendered and
associated costs are reviewed and approved
• Under unusual circumstances advance payments may be
made
– Small or foreign entity does not have the cash reserve to
initiate work
– Sponsor actually allows cash advances to prime and
subrecipients
– National laboratories
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ISSUING THE SUBAWARD
Other considerations when setting up the subaward
–
–
Records and audit
• Subrecipient must maintain acceptable financial systems and
accurate records to identify the expenditures of the sponsored
funds
Intellectual property: patents, inventions, and copyright
• Rights granted in accordance with U.S. patent and copyright
law and additional sponsor requirements
• Subrecipient maintains ownership rights to IP it develops
• Exception: subrecipients under an industry initiated clinical
trial
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ISSUING THE SUBAWARD
Other considerations when setting up the subaward
•
Indemnification
•
•
•
Institutional or state policy of subrecipient may dictate what
type of indemnification provision will be included in subaward
agreement
Typically, the agreement states that each party indemnifies the
other party for negligent acts or omissions
If the sponsor provides a certain level of indemnification to
prime awardee, subrecipient should receive the same level
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ISSUING THE SUBAWARD
Other considerations when setting up the subaward
•
Issues under Federal contracts
–
Flow-down Federal Acquisition Regulations (FARs)
–
Specific deliverables
–
Rebudgeting restrictions, etc.
–
Small business plans
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ISSUING THE SUBAWARD
Foreign Subcontracts – Legal Issues
Buy American Act. This Act requires that you purchase domestic
products, unless doing so imposes an unreasonable cost or is not in
the public interest. However, to avoid export control issues, it is
generally better to purchase equipment abroad if it is available rather
than shipping domestic products overseas.
Anti-terrorism requirements. Many foundations (Ford) and some federal
agencies (USAID) require such provisions. You must complete
denied party screenings of foreign persons involved in the project to
comply.
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ISSUING THE SUBAWARD
Foreign Subcontracts – More Legal Issues
Trafficking in Persons. This clause is found in contracts (FAR 52.222-50)
and more recently in ONR grants. It is important to research foreign
organizations to make sure they comply with this clause.
Foreign Corrupt Practices Act (FCPA). Bribery of foreign officials is
illegal (obviously). However, corruption is widespread in many
countries, and you may be asked to pay all sorts of “transaction fees”
to make things happen. Check with your legal counsel before paying
any cost that does not pass the smell test.
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ISSUING THE SUBAWARD
Foreign Subcontracts – More Legal Issues
Anti-Boycott Laws. Certain countries participate in boycotts against
Israel. If you receive documentation or invoices from a foreign
organization that requires you to indicate your compliance with Israel
boycotts, you are required (under U.S. law) to insist on deletion.
Choice of Law. U.S. law and venue are always preferred. Only agree to
foreign law and venue if your legal counsel has indicated an interest
in travelling abroad (and you are willing to pay). Please note that you
are unlikely to win any disputes settled in a foreign venue.
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ISSUING THE SUBAWARD
Foreign Subcontracts – Certifications & Representations
Most public policy requirements apply to foreign subs:
Research misconduct
Animal welfare/Human subjects
Inclusiveness in research design (NIH)
Lobbying
Some requirements do NOT apply to foreign subs:
Civil rights
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ISSUING THE SUBAWARD
Foreign Subcontracts – Certifications & Representations
Some public policy requirements may or may not apply:
Drug-free workplace can sometimes be eliminated, if the U.S. federal
government judges that the inclusion of this provision is in conflict
with foreign laws.
Some additional requirements may apply:
Foreign governments and government agencies are NOT subject to
debarment and suspension requirements, but they may have to
provide a certification that they are not delinquent on any debts owed
to the U.S. (Other foreign entities ARE subject to debarment
certification requirements.)
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ISSUING THE SUBAWARD
Foreign Subcontracts – Relational Considerations
The terms and conditions of the subcontract may prove difficult to
enforce, no matter how much time you spend negotiating them.
At the end of the day, establishing a good relationship with your
foreign subrecipient is more important than anything else.
Avoid talking down to your foreign subrecipients, even if they seem
confused or overwhelmed by the U.S. contracting process. Even
a hint of condescension can undermine months of hard work.
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ISSUING THE SUBAWARD
Other considerations when setting up the subaward
•
Issues with clinical trial subrecipients
–
More problematic terms and conditions
• If industry sponsored, can be problematic as you will have to
flow-down the same you received
• Consequently, negotiations can be drawn out
• Sponsor pressure to meet enrollment goals
–
Different payments terms
–
IRB approvals and reapprovals
–
Additional costs
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ISSUING THE SUBAWARD
Other considerations when setting up the subaward
•
Issues with commercial organizations
–
–
–
–
–
–
–
Administrative requirements
• F&A rate (No federally negotiated rate? See Appendix E,
Administrative Overhead Costs Worksheet)
• Fringe benefit rates (see Appendix F, Fringe Benefit Costs
Worksheet)
Cost principles
Inspection and audit clauses
Profit and fees
Intellectual property
Indemnification
Flow-down terms
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POSTAWARD – Keeping up and moving forward
•
Verification of subrecipient F&A rate
–
–
•
Copy of current rate agreement at time of initial award
Rate should be fixed for life of award if under federal award
Monitoring requirements
–
A-133 audit
• If subrecipient is not subject to A-133, other types of audits (as
agreed to in the subaward) may be effective tools for
monitoring
–
Financial reports
• Timeliness of reports or invoices
• Content of reports
–
Performance reports
–
Routine contact with subrecipient
–
Site visits
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POSTAWARD – Keeping up and moving forward
•
Technical monitoring by prime PI
–
–
Annual progress reports with discussion between PI and sub PI
• Include proof of current IRB or IACUC approvals
• Detailed budget for upcoming year
• Updated other support for key personnel
Prime PI’s responsibility to ensure performance of subrecipient
• Notify sponsor if subrecipient is not performing and SOW is
affected
• But first notify the sponsored programs office at prime
institution
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POSTAWARD – Keeping up and moving forward
Department Administrator (DA) will be responsible for:
•
Setting up a cumulative (project period) tracking
document for each subaward that indicates:
–
–
–
–
–
–
Name of Institution/PI
Total amount awarded
Total amount of current award
Invoices as received are ented into the worksheep so that a
cumulative (total invoiced” and cumulative “balance available” is
obvious at all times
Invoices are reviewed for accuracy by DA/accounting staff (dates
of service, correct math, correct F&A calculation as awarded) and
give to Prime PI for review and approval/signature. Then invoices
are sent to Finance Department for payment
If invoicing is not timely, get in contact with Sub DA or have Prime
PI contact Sub PI
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POSTAWARD – Keeping up and moving forward
•
Early termination
–
–
–
Failure of subrecipient to perform
Relocation or illness of subrecipient’s PI
Termination by project sponsor
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POSTAWARD – Keeping up and moving forward
•
What if anything (everything?) goes wrong?
–
–
–
–
–
No work done, but regular invoicing
No invoicing, no work done
Per subrecipient, work done, invoicing done, per prime PI, work
not done or done improperly
Monitor, monitor, monitor
Communicate with sponsored programs office about problems
ASAP, your’s and their’s
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CLOSE-OUT PROCEDURES
–
Prime PI must certify that all technical reports and/or
deliverables have been received and that subrecipient
has fulfilled its obligations
– Final invoice is required at the end of the subrecipient
project period and indicates that:
• All work has been done and all deliverables have
been received by prime PI
• Mandatory cost sharing (see sample form
Certification of Cost Sharing at
http://www.rochester.edu/ORPA/Forms/ )
• This is usually required 45 to 60 days after the
project has ended and is dependent upon the
subrecipient closing out the subaward
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CLOSE-OUT PROCEDURES
Foreign Subcontracts
•
•
•
•
•
Foreign subrecipients are generally subject to the same audit
requirements as for-profit organizations (45 CFR 74.26(d)).
Foreign organizations are NOT subject to A-133, but an audit that
meets the standards of an A-133 audit will satisfy the 45 CFR
74.26(d) requirements.
If a foreign organization spends less than $500K/year in U.S. federal
funds, audits are not usually required. However, the U.S.
Government reserves the right to request “grant-related records” for
review.
USAID sometimes requires independent audits.
Reporting and record retention requirements are generally the same
as for domestic organizations.
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CLOSE-OUT PROCEDURES
Remember, the prime award cannot be closed out until the subaward is
closed out.
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QUESTIONS?
University of Rochester Subcontract Manual can be accessed at:
http://www.rochester.edu/ORPA/publications/index.htm
Some use subcontracting forms can be found at:
http://www.rochester.edu/ORPA/Forms/
brenda.kavanaugh@rochester.edu
martha_preston@urmc.rochester.edu
© NCURA FRA X Conference La
Quinta, CA 2009
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