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Grant Management

Subcontract vs. Independent Contractor/Consultant/Vendor

There often exists substantial confusion when an investigator attempts to determine if the collaboration with another organization constitutes a subcontract, or independent contractor/vendor relationship. ORA provides the following guidance.

An organization is considered to be a sub-contractor of an award when it:

  1. Determines who is eligible to receive financial assistance.
  2. Has its performance measured against whether the objectives of the program are met.
  3. Has responsibility for programmatic decision-making.
  4. Has responsibility for adherence to applicable program compliance requirements.
  5. Uses the funds to carry out a program of the organization as compared to providing goods or services for a program of the pass-through entity.

In contrast, an organization is considered a vendor when it:

  1. Provides goods and services within normal business operations.
  2. Provides similar goods and services to many different purchasers.
  3. Operates in a competitive environment.
  4. Provides goods or services that are ancillary to the operation of the program.
  5. Is not subject to compliance requirements of the program.

Following are a series of questions that will help you understand the difference between a subcontractor and an independent contractor/vendor as you decide which procurement mechanism is most appropriate for your specific situation.

  1. Is there an identified investigator at the lower-tier organization? If yes, is he/she a co-investigator on the primary award.
  2. Is the lower-tier organization free to decide how to carry out the activities requested of it?
  3. Will there be potentially patentable or copyrightable technology developed from the activities of the lower-tier entity? If yes, does the entity have rights to its technology?
  4. Are publications anticipated from the lower tier entity?
  5. Will individuals at the lower-tier organization be co-authors on articles?

The above questions must be considered collectively in order to determine the appropriate business relationship. Additionally, there may be specific circumstances not addressed in this guidance that must be considered in order to make a fully-informed decision.

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