Chapter 16-400

Subawards

16-410 Subawards for Research

The basic policies governing the issuance of such subawards for research are contained in Business and Finance Bulletin BUS-43 and in the conditions of the Presidental delegation DA2100.

BUS-43 defines "Subagreement" as:

A Purchase contract issued by the University, under an extramural prime award, to implement a portion of the scope of work, to perform scholarly or professional instruction, or to perform public service programs relating to research or to scholarly or professional instruction.

Though such a subagreement could be issued using a University Purchase Order with standard terms and conditions as are included in BUS-43, these standard terms and conditions are not tailored to meet the requirements of a subaward to an entity identified as a subrecipient conducting research. In most cases, when the entity receiving the University agreement has been identified as a subrecipient, as opposed to a contractor, it will be necessary to develop subagreements containing flow-down provisions as required by the extramural prime award under which the subagreement is written, and terms and conditions which are unique and appropriate to the individual project. Please see section 16-230 Determination of Subrecipient or Contractor for the federal guidelines on determining if a given purchase is a subaward for research.

University policy requires competition in the placement of its purchases. A purchase may be placed without competition if the purchase is for a unique item or unique service, or is available from only one source. If a purchase is made without competition, the noncompetitive action must be justified. The justification must be in writing and made before the purchase is placed. The purchasing agent for a transaction is responsible for preparing or obtaining the justification for noncompetitive procurement. The foregoing applies to subagreements placed by the University under extramural prime awards.

Subagreements under extramural prime awards are likely to be requested to be placed without competition. Therefore, when a proposal to a sponsor includes a proposed sole source subagreement, the Principal Investigator must provide the facts which justify a noncompetitive subaward prior to submission of the proposal to the funding agency. Such a justification may be on the basis that the subject/scientific/technical expertise is available only from the designated sole source. Given that subrecipients by definition are conducting work that is research and that cannot be obtained from other entities because of its unique intellectual, experimental, and research nature, a simple justification is all that is required. Additionally, most subrecipients are issued subagreements with budgets that are based on the entities’ federally negotiated rates and therefore, an extensive cost analysis is not required. However, in the event an entity does not have a federally negotiated rate agreement or another federally approved rate, a cost analysis may be appropriate, consistent with BUS-43

16-420 Elements of a Standard Research Subaward

The form and format of a subaward is primarily driven by the structure of the incoming award from the prime funding agency. The following elements are the most common components that may be included in a complete subaward agreement. The specific details of the project scope of work, as well as the requirements of the incoming agreement and any applicable laws, regulations and policies will also affect the final language.

Category

Specific Clauses Include

Basic Requirements

Basic Structure

Preamble

Identifies the parties, funding source, and project. It may include key incoming award data as well as internal Campus reference information such as the assigned subaward number. It may provide background for the agreement. It should not contain any terms of the agreement.

Contacts/Notices

Includes the key contact information for all parties for communication regarding the ongoing project. At minimum, the Authorized Institutional Official (AOR) for each party must be included with their contact information.

Endorsement Statement

May include certification statement for the AORs regarding their authority to bind their institution and their endorsement of the agreement as well as any applicable representations and certifications included in the subaward agreement.

Technical Requirements

Scope of Work

Incorporates the final approved scope of work for the project as a legal requirement of the subaward agreement. It should include a prior approval requirement for changes that constitute a change in scope.

Project Management

Identifies the pass-through entity (PTE) Principal Investigator (PI) and designates the Subrecipient PI. It may include language to incorporate a prior approval requirement for change of Subrecipient PI.

Technical Reporting

Specifies the requirements for technical reporting by the Subrecipient to PTE. It should include a specific schedule for reports and designate to whom reports should be submitted. Generally, technical reports are submitted directly to the PTE PI. However, they may be directed to other project staff depending on the specific requirements of the project. It may include invention/patent reporting.

Financial Requirements

Compensation

Obligates the current funding and may specify the total estimated funding.

It also sets the funding framework as cost reimbursement or fixed price. It should include any cost limitations imposed by the Sponsor of the incoming award. It may specify prior approval requirements for rebudget.

Term

Obligates the current budget period and may specify the total estimated project period.

Payment and Invoicing

Specifies the method and frequency of payment. It establishes procedures for submitting invoices for payment. It may include requirements for management of a Working Capital Advance.

Audit and Records

Specifies the requirements for the retention of project records, including financial records. It grants the Sponsor for the incoming award audit rights and access.

Legal Considerations

Governing Law

Specifies the ruling jurisdiction for legal actions under the subaward.

Disputes

Establishes procedures for resolution of disagreements regarding the project. It may include provision for arbitration, mediation, and rules of order. It may also include a statement that the outcome does not prevent the parties from pursuing any legal recourse available to them under the law. It should not commit UC to binding mediation or arbitration.

Prior Approval Requirements

Specifies any actions that require prior approval of the PTE and the appropriate procedure to seek approval. May be a separate provision or incorporated into individual clauses as applicable.

Use of Names/Publicity and Publication

Specifies requirements for when Subrecipient must seek approval to use PTE and/or Sponsor’s name for the purposes of publicity. It should include a provision excluding the requirement for scholarly publications and internal reports in accordance with Subrecipient’s policies, procedures and legal requirements. It may include provision for attribution of Sponsor funding in publications in accordance with the requirements of the incoming award.

Independent Contractor

Specifies that the subaward agreement does not create an employer and employee relationship between the University of California and the Subrecipient, its officers, agents, and/or employees.

Incorporation Clause(s)

Incorporates the applicable terms and conditions of the incoming agreement into the subaward agreement and flows down the required provisions to the Subrecipient.

Integration Clause

Specifies that the subaward agreement is the complete and final agreement and that no prior written or oral representations apply once the agreement is endorsed.

Insurance and Indemnification

Establishes the limitations on liability as agreed to in advance between the parties, as well as the minimum requirements for the Subrecipient’s insurance coverage for the project.

Representations and Certifications

Incorporates any representations and certifications required to be endorsed by the Subrecipient.

Anti-Terrorism and/or Export Control

Incorporates US Federal Anti-Terrorist Financing and Export Control regulations as they pertain to the Subrecipient and/or the source of funding.

Closeout

Provides the specific requirements needed to terminate and close the subaward, including any final financial and technical reports or deliverables.. (Please see C&G Manual Chapter 2-770.)

Intellectual Property and Work Products

Copyright

In accordance with UC IP Policy, specifies that Subrecipient holds ownership of Subrecipient’s copyrightable works and provides for license requirements PTE needs in order to meet the requirements of the incoming agreement.

Patent

Specifies who holds ownership of patent in accordance with the rules for inventorship and UC IP Policy. Generally provides for any future license PTE needs in order to meet the requirements of the incoming agreement.

Data Rights

Specifies Subrecipient holds ownership of the data generated by the Subrecipient’s employees under the agreement and provides for access rights that PTE needs in order to meet the requirements of the incoming agreement.

Compliance Clauses

Conflict of Interest

Specifies requirements for complying with conflict of interest requirements of the incoming award in accordance with the PTE’s policies and procedures.

Human Subjects

Specifies the regulatory requirements and procedures governing human subjects research conducted under the subaward agreement.

Animal Subjects

Specifies the regulatory requirements and procedures governing animal subjects research conducted under the subaward agreement.

16-430 Subrecipient Monitoring

If a subaward is made under a federal prime award, then 2 CFR 200.331(b) requires pass-through entities to evaluate each subrecipient’s risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring described in 2 CFR 200.331 (d) and (e), which may include considerations of such factors as:

  1. The subrecipient’s prior experience with the same or similar subawards;
  2. The results of previous audits, including whether or not the subrecipient receives a Single Audit in accordance with audit requirements described in Subpart F – Audit Requirements, and the extent to which the same or similar subaward has been audited as a major program;
  3. Whether the subrecipient has new personnel or new or substantially changed systems; and
  4. The extent and results of Federal awarding agency monitoring (e.g., if the subrecipient also receives Federal awards directly from a Federal awarding agency.

Pursuant to §200.331 (d), pass-through entities must monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subawards; and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include:

  1. Reviewing financial performance reports required by the pass-through entity.
  2. Following up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient form the pass-through entity detected through audits, on-site review, and other means.
  3. Issuing a management decision for audit findings pertaining to the Federal award provided to the subrecipient from the pass-through entity as required by 2 CFR §200.521 Management decision.
  • 200.331(e) provides that depending upon the pass-through entity’s assessment of risk posed by the subrecipient as described in §220.331(b), the following monitoring tools may be useful for the pass-through entity to ensure proper accountability and compliance with program requirements and achievement of performance goals:
  1. Providing subrecipients with training and technical assistance on program-related matters; and
  2. Performing on-site reviews of the subrecipient’s program operations;
  3. Arranging for agree-upon-procedures engagements as described in §200.425 Audit services.

Pass-through entities must evaluate each subrecipient’s risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring. Such evaluation can include:

  1. Consider imposing specific subaward conditions upon a subrecipient if appropriate as described in §200-207 Specific conditions.
  2. Verify that every subrecipient is audited as required by Subpart F when it is expected that the subrecipient’s Federal awards expended during the respective fiscal year equaled or exceeded the threshold set forth in §200.501 Audit requirements.
  3. Consider whether the results of the subrecipient’s audits, on-site reviews, or other monitoring indicate conditions that necessitate adjustments to the pass-through entity’s own records.
  4. Consider taking enforcement action against noncompliant subrecipients as described in §200-338 Remedies for noncompliance.

In general it is best to keep the level of subrecipient monitoring in line with the Campus’s standard business processes and procedures, as well as the prime agreement reporting requirements. The primary tools for monitoring the financial aspects of the project are the invoicing procedures included in the payment provision. Annual financial reporting is also commonly required for projects that exceed a twelve month period, although campus procedures may allow accepting the existing invoices in lieu of financial reports when sufficient detail is provided for monitoring purposes. The programmatic reporting also affords a baseline level of monitoring for the Principal Investigator to monitor the technical progress, as well as any project timelines for the research program at the Subrecipient Institution. As the recipient of the technical reports, the Principal Investigator is responsible for ensuring that the work has been completed prior to any invoices being approved for payment. Should a Subrecipient be assessed a medium to high level of risk, additional requirements should be included in the final subaward agreement based on the campus’s evaluation of that subrecipient. The particular details of the project plan and the sponsor requirements should also be taken into account when developing special provisions for the purposes of risk mitigation in individual subawards. If a campus determines that a given subrecipient will require a formal audit, then the cost of that audit can be borne by the federal award. (Please see 2 CFR 200.425(c)) Such a determination would be made ideally at the time of proposal submission and included in the proposed budget.

16-440 Fixed-price Subawards

In some cases, Contract & Grant Officers may determine that the most effective mechanism for the work being performed by a subrecipient is a fixed-price award. For subawards that are made on a Federally funded prime award, 2 CFR 200.332 indicates that with prior written approvals from the Federal awarding agency, a pass-through entity may provide subawards based on fixed-amounts up to the Simplified Acquisition Threshold (currently set at $150,000), provided that the subawards meet the requirement for fixed amount awards in §200.201 Use of grant agreements (including fixed amount awards), cooperative agreements, and contracts. 

The requirements for fixed-amount awards are:

  1. The award is negotiated using the cost principles as a guide. The pass-through entity may use fixed amount awards if the project scope is specific and if adequate cost, historical, or unit pricing data is available to establish a fixed amount subaward based on a reasonable estimate of actual cost. Payments are based on meeting specific requirements of the subaward agreement. Accountability is based on performance and results. Except in the case of termination before completion of the award, there is no required review of the actual costs incurred by the subrecipient in performance of the subaward. Some of the ways in which the subaward may be paid include, but are not limited to:
    • In several partial payments, the amount of each agreed upon in advance, and the “milestone” or event triggering the payment also agreed upon in advance, and set forth in the award;
    • On a unit price basis, for a defined unit or units, at a defined price or prices, agreed to in advance of performance of the subaward and set forth in the subaward; or,
    • In one payment at subaward completion.
  2. A fixed amount subaward cannot be used in programs which require mandatory cost sharing or match.
  3. The subrecipient must certify in writing at the end of the subaward that the project or activity was completed or the level of effort was expended. If the required level of activity or effort was not carried out, the amount of the subaward must be adjusted.
  4. Periodic reports may be established for each subaward.
  5. Changes in principal investigator, project leader, project partner, or scope of effort must receive the prior written approval from the pass-through entity.

Campuses are encouraged to develop systems that will document that the above requirements are followed when awarding federal funds as a fixed-price subaward.

<< Previous | Next >>