Georgia Tech is responsible for determining whether a relationship with a third party should be characterized as that of a subrecipient or as an independent contractor (also known as a vendor). Use this excerpt from OMB's Uniform Requirements to help make the determination.
A subrecipient is a non-federal entity that receives federal funds from Georgia Tech to carry out a federal program. For the purpose of a subaward, a subrecipient generally has a specific scope of work to conduct in conjunction with the proposed research. The Principal Investigator (PI) in charge of the subaward is accountable for the course of study as well as for following all federal guidelines.
An independent contractor is a dealer, distributor, merchant, or other seller providing goods or services that are necessary for conducting a federal program. In this relationship, Georgia Tech purchases goods or services needed to carry out a federal award or program (for example, laboratory services and supplies). Under a procurement contract, an independent contractor provides goods or services that are auxilliary to the proposed research.
Sponsor-Funded Subaward Activities
To use sponsored funds to support subaward activities, PIs must determine the appropriate relationships between Georgia Tech and third parties. For example, is the relationship a transfer of scope that is typically seen in a collaborative research agreement? Or is a purchase of off-the-shelf services the only involvement? In making the relationship determination, consider the level of subrecipient input in the decision-making process as well as any documentation requirements. Also consider any risk mitigation plans and budgeting implications that could result from improper cost identification.
Other useful references include:
- This checklist for help with decision-making and documentation
- OSP's Policy on the Pre-Award Stage for specific considerations involving subagreements
- Georgia Tech policy on sponsored funds (i.e., Distinguishing Gift vs. Sponsored Agreements in External Funding)
Employee or Independent Contractor Determination
All activities funded with non-sponsored dollars, (including state, Georgia Tech foundation, and internal research and development funds) are processed through Procurement & Business Services. Regardless of the funding source, PIs must follow Georgia Tech's Employee or Independent Contractor policy to ensure that Georgia Tech remains compliant with IRS rules and avoids costly legal and financial consequences. Use this procurement guidance to help make the determination.
Other useful forms and policies include:
- Georgia Tech Business and Finance Policy 5.3.3 Consultants (Individuals and Firms)
- Georgia Tech Checklist for Determining Independent Contractor or Employee
- Georgia Tech Business and Finance Policy 5.3.5 Payments to International Vendors and Nonresident Alien Consultants
Budget subrecipient and independent contractor relationships appropriately by applying Facilities & Administration (F&A) subrecipient costs to the first $25K of the award. Contractors are fully burdened. Consultants are burdened like materials and supplies, unlike subcontractors/subrecipients. The budget justification statement may serve as official documentation to clarify for sponsors any budget calculations for items such as staff salaries, special equipment, and subawards. See OSP's direct costs guidelines for additional budgeting details.
- Subrecipient: A subrecipient's performance will be measured based on whether the federal objectives are met and have programmatic decision making. Determination example: A Georgia Tech researcher collaborates with his/her counterpart in pursuit of advancing knowledge and understanding of a research question and moving the basic research question from theory. A subaward does not include contract labor.
- Independent Contractor: An independent contractor is providing services that are ancillary to the research effort and are within its normal business operations. Determination example: A Georgia Tech researcher purchases products off-the-shelf or out of a catalogue and uses the products as advertised with little or no changes. Other examples include contracting services to develop web pages or construct products based on a Georgia Tech researcher's specific technical specifications.
Use this Cost Determination Tool for help with cost identification and classification.
Regarding the post-award stage, in addition to the budgeting guidelines above, researchers should obtain sponsor approval to proceed. Guidelines for sponsor consent are found in the research award.
Georgia Tech must assess the risk of each subrecipient to determine appropriate monitoring. The OSP subaward team uses this risk assessment process to consider the risk of all subrecipient relationships. The process is based on five controls and uses a conditional and logical reasoning process. The team works with PIs and other campus stakeholders to mitigate any identified risks. Actions include selecting the appropriate contract type; modifying contract terms; and obtaining appropriate management plans, security documents, and protocols. Results are documented in the Memorandum of Negotiation that is placed in the subaward file. The subaward team also completes a checklist in the database to document the contracting officer’s workflow decision.
Use the following criteria when considering a subrecipient’s risk:
- Subcontractor Entity: Is the recipient foreign-owned, a university, a non-profit organization, or a small business?
- Past Performance: Is the entity eligible to receive federal dollars? Is there information available regarding experiences on previous awards? Have you worked with this researcher before? Does the subrecipient’s location create a burden on collaborations?
- Financial Conflicts of Interest: See Georgia Tech’s Conflict of Interest Regulations and Policies and Type of Subaward: [link to cost type document still in development]
- Risk Mitigation possibilities: See OSP policies on Subrecipient Monitoring.