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SUBAWARDS: CONTRACTING FOR SPECIAL CASES AND COMPLEXITIES

April 28, 2008

NCURA Region VI & VII 2008 – Portland, OR

Panelists: Derrick Lin, Senior Contract & Grant OfficerStephanie Tramz, Subrecipient Monitoring Coordinator

and Contract & Grant Officer

Moderator: Michiko Taniguchi Pane, Associate Director

Office of Sponsored ResearchStanford University

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• Versions for FDP members and non-FDP members

• Ideal for use between U.S. institutions covered under A-110 when:– the prime award is a standard Federal

grant or cooperative agreement– there are no other risk factors

Federal Demonstration Partnership (FDP)Subaward Templates approved by Federal

Agencies allow for streamlined subawardinghttp://www.thefdp.org/Subawards_Forms.html

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• Prime award type & nature of the deliverables– Federal contracts– Foundation awards– Clinical trials

• Audit status– Significant findings that relate to research and

development

• Location, nature and maturity of the subrecipient– International subrecipient– Start-up or small commercial entity

different risk profiles may impact the choiceof subaward instrument or language

Customizing the agreementExamples of Risk Factors

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Customizing the agreementWhen the Prime is a Federal Contract

• Government is buying a product, tangible or intangible (e.g., scientific instrument or data). Depending on the nature of the deliverables, it may make sense to:– Tie subrecipient payments to deliverables

to assure delivery to the Prime– Consider a different type of agreement than

your Prime• Cost reimbursement –vs- fixed price

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Customizing the agreementWhen the Prime is a Federal Contract, cont.

• Spell out particular FAR Clauses that need to be highlighted, e.g.:– FAR 52.232-22 Limitation of Funds requires

advance notice to Government when 75% of funding will be exceeded within next 60 days

• Flow down FAR Clauses that are applicable to subrecipient or to protect your institution, e.g.:– Reporting and Deliverables, including data

deliverables (CDRLs – Contract Data Requirements List) where the Government owns unlimited rights, FAR 52.227-14

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Customizing the agreementWhen the Prime is a Federal Contract, cont.

• Flow down FAR Clauses, e.g., cont.:

– Intellectual property governed by the Bayh-Dole Act, or other?

– Property purchased by Subrecipient is owned by Government

– Change order, Stop work or Termination for convenience clauses

– Subaward totals over $550,000 Subcontracting Plan is required

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Customizing the agreementWhen the Prime is a Federal Contract, cont.

• Special Terms and Conditions, e.g.:– Agency prior review and comment period on

publications– Agency credit/acknowledgement for

research

• Other issues to consider:– sole source justification– cost-price analysis– certificate of current cost or pricing

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Customizing the agreementWhen the Prime is a Private Foundation

• Special reporting requirements:– Special formats for reports– Special timing, due dates for reports

• Require Subrecipient’s report before your Institution’s report is due

• May be necessary to shorten Subrecipient’s period of performance to meet deadlines

• Ownership of intellectual property– Some foundations may want to own the IP

• Publicity (giving public credit to foundation, or not)

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Customizing the agreementWhen the Prime is a Private Foundation, cont.

• Special accounting requirements and record retention requirements

• Other Issues that may intrude into fundamental research exclusion and institutions’ varied sensitivities:–Anti-terrorism–Limitations on foreign nationals–Limitations on publication

These issues are sensitive, and each institution may have its own distinctive policies and principles on these issues

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Customizing the agreementWhen the Prime Agreement is a Clinical Trial

• Is this government or industry sponsored?

• Is this a PI Initiated Study?• Can the Sponsor contract directly with

the other Institution?• Is there a Clinical Research

Organization (CRO) involved?

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Customizing the agreementWhen the Prime Agreement is a Clinical Trial

Industry sponsor approval of subaward• Negotiation points with subrecipients:

– Confidentiality– Audit– Ownership of Intellectual Property Rights

and Data– Ownership of Tissue and Specimens

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Customizing the agreementWhen the Prime Agreement is a Clinical Trial

Negotiation points with subrecipients:– Publication of CTA Results– Disclaimer of warranties– Indemnification– Insurance– Adverse Event Reporting – Subject injury payment– Subrecipient’s Record Retention

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Customizing the agreementWhen Subrecipient has Special Risk Factors

• Subrecipient is U.S. university, but has audit findings– Review A-133 audit report for detail of findings

and corrective action plan:• A-21 Allowable Costs• Time and Effort Reporting• Certification of Effort• Cost-Sharing• Cost Transfers• Late Technical, Financial Reports• Property and Equipment Inventories

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Customizing the agreementWhen Subrecipient has Special Risk Factors

• Subrecipient is U.S. university, but has audit findings, cont.

Interpreting OMB Circular A-133, sections ___.400(d)(5) and ___.405http://www.whitehouse.gov/omb/circulars/a133/a133.pdf

– Do findings “relate to” your Institution’s subaward to the Subrecipient, or to the same CFDA number?

– Do findings “relate to” the Research and Development Cluster of funding? Variation in Institutional sensitivities, policies.

– Write management decision letter

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Customizing the agreementWhen Subrecipient has Special Risk Factors

• Subrecipient is U.S. university, but has audit findings, cont.– Depending upon finding and nature of

subaward research, develop special terms and conditions in Subaward Agreement

• Progress reports from subrecipient on performing corrective action plan

• Special post-performance review and verification of invoices by subrecipient

• Subrecipient provides back-up documentation for invoices

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Subrecipient is:• international (outside of U.S.)• start-up (new entity)• small entity (commercial or non-

profit)

– Will not have A-133 audit report– Inquire with Subrecipient as to what

kinds of current accounting and audit information are available, and obtain copies

Customizing the agreementWhen Subrecipient has Special Risk Factors

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Customizing the agreementWhen Subrecipient is International or Start-Up

• First, perform a “desk review” of all current audit and accounting information the Subrecipient has available– Areas of inquiry:

• Independent audit report?• Financial statements?• Accounting, procurement procedures• Time-keeping procedures• Property management• Basis for IDC, FB charged

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Customizing the agreementWhen Subrecipient is International or Start-Up

Your institution as pass-through entity may conduct an up-front “limited scope” audit of the Subrecipient, using an outside accounting firm– it covers activities allowed or unallowed;

allowable costs/costs principles; level of effort; reporting

– See OMB Circular A-133, Section 230(b) for details

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Customizing the agreementWhen Subrecipient has Special Risk Factors

• Add terms and conditions for subrecipient monitoring:– OMB Circular A-133 Compliance Supplement

(March 2006) lists some:• Reporting• Site Visits• Regular Contacts and Inquiries with

Subrecipients regarding program activities• For non-A-133 subrecipients, “Agreed-

upon procedures engagements” including audit under OMB Circular A-133, section ___.230(b)(2) (costs chargeable to prime award)

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Customizing the agreementWhen Subrecipient has Special Risk Factors

• Add terms and conditions for subrecipient monitoring:– Source documents: Parts 3-M and 6-M of

OMB Circular A-133 Compliance Supplement (March 2006) are located at:

http://www.whitehouse.gov/omb/circulars/a133_compliance/06/pt3.pdf

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http://www.whitehouse.gov/omb/circulars/a133_compliance/06/pt6.pdf

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Customizing the agreementBalancing Risk Factors with Future Collaboration

• Your institution (as pass-through entity issuing a subaward) may be held responsible for subrecipient’s errors and may be required to reimburse the funding agency for them– See case studies by Office of Inspector

General, Department of Health and Human Services, at

http://oig.hhs.gov/oei/oeisearch.html

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Customizing the agreementBalancing Risk Factors with Future Collaboration

At the same time……• Maintain a collaborative

relationship with the subrecipient– Facilitate successful completion of

research project– Lay groundwork for future

collaborations– Undue burdens imposed upon

Subrecipient may call forth undue burdens in return