16.1 Definitions and Classifications
Defines subawards as administered through the Stanford Office of Sponsored Research and distinguishes them from other procurement actions.
Describes the roles of the parties involved in proposal, issuance, oversight, and closeout of subawards, including the responsibilities of assessing and overseeing risk associated with a given subrecipient, audit oversight, monitoring subawards, review and processing of invoices, proper management of equipment purchased, fabricated or otherwise acquired under subawards, application of F&A costs, subaward reporting, and closeout. Links to associated forms and detailed procedures are also provided
A subaward is a formal written agreement made between Stanford University and a Subrecipient to perform a portion of the Statement of Work under a Stanford sponsored project. A subaward must include a clearly defined, intellectually significant Statement of Work (SOW) to be performed by the subrecipient. The subrecipient's SOW is performed by its personnel, using its own facilities and resources. The subrecipient takes full responsibility for adhering to the terms and conditions of the subaward including those flowed down from Stanford's sponsor, and assumes creative and intellectual responsibility and leadership as well as financial management for performing and fulfilling the subrecipient's SOW within the subrecipient's approved budget. The subrecipient's responsibility under a subaward is also called "programmatic decision-making" under federal funding terminology. A subaward SOW may include fabrication of specialized equipment to be used for the Stanford sponsored research project as a project-related asset or as a deliverable to the sponsor.
Subawards differ from procurement contracts used to acquire goods or services from vendors. Additional guidance is found in this policy.
B. Pass-Through Entity
The pass-through entity is defined as a non-federal entity that provides an award to a subrecipient to carry out a program (Statement of Work on a sponsored project). The pass-through entity assumes responsibility for negotiation, issuance, oversight, and management of a subaward. The pass-through entity assumes many of the responsibilities typically assigned to a prime sponsor in issuance and oversight of an award to a grantee or contractor, including verification of the financial viability, adequacy of compliance controls and audit status of its subrecipients as well as oversight and verification of the subrecipient's fulfillment of its portion of the programmatic effort. Stanford serves as the pass-through entity for subawards issued under its sponsored projects.
A subrecipient is a non-Stanford entity that expends awards received from Stanford to carry out a portion of Stanford's programmatic effort under a sponsored project. There must be an arms-length relationship between Stanford and its subrecipients. In keeping with this requirement, the subrecipient may not involve an individual who is also a direct beneficiary of such a program at Stanford, the sponsor, or a higher-tier subrecipient. The subrecipient may be another educational institution, an independent laboratory, a foundation, a for-profit corporation, a non-profit corporation or other organization, and may be a domestic or foreign entity. Generally, Stanford does not issue subawards to individuals. For both federal and non-federal sponsored projects, Stanford adheres to the federal governments definition of a Subrecipient as defined in Office of Management and Budget (OMB) Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Section 200.93.
D. Sponsored Projects
Subawards are issued under sponsored projects, including grants, contracts and cooperative agreements funded by extramural sources (see Research Policy Handbook, section 13.1). On rare occasions, subawards may be funded under University Research awards. In this case, approval from the university research funding source must be obtained before the subaward is processed through the Office of Sponsored Research (OSR). When subawards are funded under gifts, they are issued in accordance with the specific gift terms. Please consult with OSR in each such instance.
2. Distinguishing between a Subaward and a Procurement Action
A. Importance and Responsibility for Proper Classification
The proper classification of an entity relationship as either a subrecipient or vendor at the time it is proposed is critical to ensure proper accounting for costs and compliance requirements. Misclassification may result in delays in subaward processing or inaccurate calculation of costs and may result in the PI having insufficient funding to carry out the proposed program. In rare cases, incorrect classification of costs may threaten the ability of the program of work to proceed.
PIs have the initial responsibility for ensuring the correct classification of the relationship and its associated costs at the time funding is first requested from the sponsor. The PI or his/her designee must ensure that sufficiently detailed information about the proposed subrecipient and their SOW are provided both to their departmental administrators and to the applicable research administration offices. If the information provided is insufficient, research administration offices may request additional information from the PI.
If the departmental administrator or institutional official determines that a cost has been misclassified, s/he will require the proposal to be corrected before it receives institutional endorsement. PIs and departmental administrators are strongly encouraged to consult with their institutional representative well in advance of a proposal due date if they are uncertain about the correct classification of costs.
Please note: F&A waivers or reductions are not granted to remedy incorrect classifications of costs. PIs may request supplemental funding from sponsors, but such requests are rarely granted.
The Office of the Dean of Research has developed training (Cardinal Curriculum Class DOR-1122) and tools to assist faculty and departmental staff in the proper classification of subawards. OSR staff and school-based research administration office staff are available for assistance in determining the proper classification of costs. Such consultation should take place at the time the PI has decided to propose a subaward on a sponsored project, well before the proposal is submitted for institutional endorsement and transmission to the sponsor.
B. Distinguishing Characteristics Between Subawards and Other Procurement Actions
Stanford follows the requirements found in OMB Uniform Guidance, section 200.330 to distinguish subawards from other procurement actions, as follows:
Stanford will issue a subaward when:
Stanford (with assistance from its sponsor, as required) determines who is eligible to receive the subaward
the Subrecipient has its performance measured against whether the objectives of the sponsored program are met
the Subrecipient has responsibility for programmatic decision-making* (see definitions section, above)
the Subrecipient assumes responsibility for adherence to applicable sponsor program compliance requirements*
the Subrecipient uses sponsor funds to carry out a program (Statement of Work) for Stanford as compared to providing goods or services
Stanford will use other procurement actions when the entity:
provides the goods and services within its normal business operations
provides similar goods or services to many different purchasers
operates in a competitive environment
provides goods or services that are ancillary to the operation of Stanford's sponsored project
is not subject to compliance requirements of Stanford's sponsor
*Subawards are typically needed when the nature of the subrecipient's statement of work could result in intellectual property or publishable results being developed by the subrecipient. In most cases, the need for an entity to obtain compliance approvals (e.g., approval to use human subjects or animal subjects) will also indicate the need to use a subaward rather than a procurement action.
Consistent with the requirements found in the OMB Uniform Guidance, Section 200.330, there may be unusual circumstances or exceptions to the listed circumstances that will have a bearing on the ultimate classification of the costs. In making the determination of whether a subrecipient or vendor relationship exists, the substance of the relationship will be considered more important than the form of the agreement. It is not expected that all of the characteristics will be present in every case.
3. Resolution of Disagreements Regarding the Proper Classification of Costs
The PI, department, Procurement, and OSR may disagree about the correct classification of a given transaction. In the event of disagreement, the party who believes the transaction is misclassified may petition for reconsideration based on an assessment of the factors outlined in section B above. Petitions should be in writing, addressed to the OSR Contract and Grant Officer handling the subaward, and should include the Subrecipient's proposed Statement of Work (SOW) and the reasons why the requestor believes the transaction is not appropriately classified. [Please note that a sponsor's approval of a budget submitted by Stanford is not, in and of itself, sufficient rationale since Stanford bears the ultimate responsibility for the accurate classification of costs.]
The OSR Contract and Grant Officer will consult with their Director and notify the PI and department of their determination, and the reasons for that decision.
In the event of further disagreement, the party who believes the transaction is misclassified may request further consideration by the Associate Vice President of OSR. The Associate Vice President of OSR will consult with the head of Procurement, and will apprise the PI and department of the outcome and the reasons for that decision.
In the event that there is further disagreement, or when the Associate Vice President of OSR and the Director of Procurement do not concur, the matter will be referred to the Vice Provost and Dean of Research or his/her designee for final determination.
4. Post Issuance Changes in Status From Procurement Action to Subaward
During the course of a sponsored project, the nature of a consultant's or contractor's services, originally acquired through a procurement action, may expand and deepen as the consultant or contractor takes on intellectual and creative responsibilities for a portion of Stanford's research project. Indicators of such expansion may be a change in the original deliverables under the procurement action, an increase in the funding, or changes that may lead to the development of intellectual property. In this case, the consultant's or contractor's relationship may transform into a subaward relationship. In this case, the procurement action will be terminated and a subaward issued through OSR.
PIs, departmental administrators, school-based research administrators and/or the Procurement Department staff handling requisitions for vendor, contractor or consultant services are responsible for identifying situations in which procurement agreements may be transforming into subawards. These should be brought to the attention of the appropriate OSR Contract and Grant Officer in a timely manner.
In some cases, OSR staff may also discover a shift during their subaward review process. Following an analysis of the individual circumstances, OSR will determine whether the mechanism for acquiring the services of the vendor/subrecipient must be changed. When a mechanism must be changed, every effort is made to ensure a smooth transition so that programmatic effort on the project will not be unduly disrupted. PIs and departmental administrators are responsible for cooperating in obtaining the necessary paperwork from the subrecipient and/or the sponsor, and for preparing the necessary Stanford paperwork to permit a subaward to be issued. Disagreements about the classification of work should be resolved through the resolution process described in section 3 above.