Subaward vs. Procurement or Consultant

It is not always clear when NCSU should issue an entity a subaward to a “subrecipient” or a procurement contract to a “vendor”. For assistance in making these determinations, follow the governing regulation OMB Circular A-133, Audits of States, Local Governments and Non-Profit Organizations. In order to remain consistent, NCSU has adopted this guidance to determine the status of a subrecipient versus a vendor for all sponsored projects, no matter the funding type (federal, state, or industry funding).

A “subrecipient” is an organization that expends funds received from a pass-through entity to carry out a sponsored project. A subrecipient does not include an individual that is a beneficiary of such a program. Under a subaward, a subrecipient generally has a specific scope of work to conduct in conjunction with the proposed project.

Under OMB A-133, Section B210b “Federal Award”, an organization is considered to be a subrecipient of an award when it:

  1. determines who is eligible to receive what Federal 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; and
  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.

Other indications that an organization should be deemed a subrecipient include when:

  • The organization is contributing to the scholarly/scientific conduct of the project as described in a statement of work for the organization (programmatic involvement);
  • The conduct of the organization’s portion of the project requires use of the discretion and unique expertise of the organization;
  • The subrecipient’s principal investigator may be a co-author on publications or may seek patent protection for inventions; and
  • Title to intellectual property created by subrecipient is normally retained by the subrecipient.

In contrast, a “vendor” is a dealer, distributor, merchant or other seller providing goods or services that are necessary for conducting a federal program. These goods or services may be for an organization’s own use or for the use of beneficiaries of the federal program.

A Consultant is an expert advisor who is paid for his/her time at a fixed rate of compensation (hourly or daily and includes travel, expenses and overhead) specified in the consultant agreement. A consultant can be an individual or a company. They must use their own equipment and materials. Be careful for individuals who work full time and consult on the side; they can not use the equipment or facilities at their full time employer for consulting purposes.

An organization is considered a vendor under OMB A-133, Section B210c “Payment for Goods and Services” 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 (contribute) to the operation of the program; and
  5. is not subject to compliance requirements of the program.

OMB A-133, Section B210d, provides guidance in the Use of Judgment in Making a Determination that states that there may be unusual circumstances or exceptions to the above listed characteristics. It is not expected that all of the characteristics will be present, more than likely only a few will be, so use your judgment to determine whether an entity is a subrecipient or vendor. When making the decision remember that the substance of the relationship is more important than the form of the agreement.

It is important to note that the presence of one or more of the above characteristics that describe a subaward versus a vendor does not necessarily indicate that a particular type of relationship exists; however, a preponderance of certain features may very well lead to the conclusion that the transaction represents a particular relationship. Remember, when making the decision, the substance of the relationship is most important.

For additional information on subaward collaborations and vendors/consultant services, go to Consultants and Subawards.