1 subawards: contracting for special cases and complexities april 7, 2009 ncura region vi & vii...

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SUBAWARDS: CONTRACTING FOR SPECIAL CASES AND COMPLEXITIES

April 7, 2009

NCURA Region VI & VII – Santa Fe, NM

Panelists: Stephanie Tramz, Contract & Grant OfficerMichiko Taniguchi Pane, Associate Director

Office of Sponsored ResearchStanford University

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• FDP members and non-FDP members may use the same updated versions as of Jan. 2008

• 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

http://www.thefdp.org/Subawards_Forms.html

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• Audit status– Significant findings that relate to research and

development

• Location, nature and maturity of the subrecipient– International Subrecipient (note FDP template for

NIH foreign subawards)– Start-up or small commercial entity

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

different risk profiles may impact the choiceof subaward instrument or language

Customizing the agreementExamples of Risk Factors

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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• Suspension and Debarment

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• 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

http://www.whitehouse.gov/omb/circulars/a133/a133.pdf

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• 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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– Incorrectly coding Federal $, resulting in inaccurate reporting

– Untimely and incomplete time & effort reporting

– Inadequate documentation justifying reasonableness and necessity of cost

– Not screening for debarred or suspended parties on EPLS

– Allowing expenditures after award end dates

– Late financial reporting

Example:

Review of an institution’s A-133 audit report shows material weaknesses, material noncompliance, significant deficiency or reportable conditions relating to its internal controls or R&D cluster in the following areas:

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Sample language:

“In addition to the above invoice requirements, at the Agreement end date, the Subrecipient shall perform a limited scope audit at its expense to review and verify all invoices submitted by Subrecipient under the Agreement, and re-certify all charges and costs. Such limited scope audit and re-certification shall be completed and submitted to University no later than 60 days of Agreement end date.”

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Sample language:

“Subrecipient represents and warrants that it will comply with federal cost principles and accurate reporting and certification of effort, and will adequately perform in accordance with its A-133 corrective action plans or management responses.”

“In the event that Subrecipient fails to adequately perform its A-133 corrective action plans or management responses, University may terminate this Agreement immediately upon written notice to Subrecipient.”

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Sample language:

“All invoices must be accompanied by documents supporting the invoice charges including, but not limited to, the following:• Labor distribution report (includes payroll, burden by individual)• All documents submitted with a travel reimbursement• Copies of invoices for all supply and equipment purchases.”

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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


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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

– Cost of limited scope audit for subrecipient monitoring may be charged to prime award

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

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• Add terms and conditions for subrecipient monitoringe (“During-the-Award 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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• Add terms and conditions for subrecipient monitoring:– Source documents: Parts 3-M and 6-M of

OMB Circular A-133 Compliance Supplement (March 2008) are located at:

http://georgewbush-whitehouse.archives.gov/omb/circulars/a133_compliance/08/pt3.pdf

- and -

http://georgewbush-whitehouse.archives.gov/omb/circulars/a133_compliance/08/pt6.pdf

Exercise

“...If the grant is funded at the requested levels, the total cost to the subcontractor PI will not be reduced. Should the award from the sponsor be reduced for any reason, the funds to the subcontract will be reduced only in the same proportion as the reduction of the total award value. Funds provided under this award to the subcontractor will not be reduced without the prior written agreement of the subcontractor PI. The duration of the subcontract will be equivalent to the duration of the grant award from the sponsor, and renewed on a non-competitive basis in conjunction with the grant award from the sponsor.”

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A senior faculty member at your institution has received an NIH grant award. The proposal was submitted in collaboration with a young investigator from another institution. The young investigator has unique expertise necessary for the research program, but has also been untimely with progress reports and deliverables on a past project. Further, at the time of award, you discover that the young investigator requested your faculty member to sign an “Agreement” outlining their understanding of the arrangements should the grant be awarded. The “Agreement” included the following text and was signed by both faculty :

How might you customize the subaward to account for the above situation?

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Customizing the agreementWhen the Prime is a Federal Contract

FAR 52.244-1 Alt 1 – Subcontracts

• Depending on CPSR status, prior approval from federal contracting officer may be required

• In general:

– CSPR-approved : prior approval not required unless spelled out in the contract*

– CPSR-not-approved : prior approval required for most subcontracts

*notification requirement for cost + fixed fee subcontracts and fixed-price subcontracts over $100K, or 5% of the prime contract value

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– Not all of those requirements need to be flowed down in every situation

– There is no easy way to determine which clauses need to be flowed-down

– The determination must be made for each subcontract

In general, you must flow-down the requirements included in your federal prime contract…but….

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General rules of thumb:

– Flow-down the FAR clauses that indicate within the clause or prescription that they must be flowed-down

– Flow-downs will almost always be required for clauses that implement a federal law

– Flow-down or add those requirements that will allow you to ensure successful completion of the prime contract, or to protect your institution

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– “Section 5 of the International Air Transportation Fair Competitive Practices Act of 1974 (49 U.S.C. 40118) (Fly America Act) requires that all Federal agencies and Government contractors and subcontractors use U.S.-flag air carriers for U.S. Government-financed international air transportation of personnel (and their personal effects) or property, to the extent that service by those carriers is available.”

– “The Contractor shall include the substance of this clause, including this paragraph (e), in each subcontract or purchase under this contract that may involve international air transportation.”

Example:52.247-63 -- Preference for U.S.-Flag Air Carriers states:

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“(h) Subcontracting. The Contractor shall obtain from its subcontractors all data and rights therein necessary to fulfill the Contractor’s obligations to the Government under this contract. If a subcontractor refuses to accept terms affording the Government such rights, the Contractor shall promptly notify the Contracting Officer of the refusal and shall not proceed with the subcontract award without authorization in writing from the Contracting Officer.”

Example:52.227-14 -- Rights in Data – General states:

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“Assurances that the offeror will include the clause of this contract entitled ‘Utilization of Small Business Concerns’ in all subcontracts that offer further subcontracting opportunities, and that the offeror will require all subcontractors (except small business concerns) that receive subcontracts in excess of $550,000 to adopt a plan similar to the plan that complies with the requirements of this clause.”

Example:52.219-9 -- Small Business Subcontracting Plan states:

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“The Government will make payments to the Contractor when requested as work progresses, but …not more often than once every 2 weeks, in amounts determined to be allowable by the Contracting Officer in accordance with Federal Acquisition Regulation (FAR) Subpart 31.2 in effect on the date of this contract and the terms of this contract.”

– As an educational institution, we would ask to substitute Subpart 31.2 (Cost Principles for Commercial Institutions) with Subpart 31.3 (Cost Principles for Educational Institutions, i.e. A-21).

– If subcontracting to a for-profit entity, it may be appropriate to flow-down Subpart 31.2.

If your subrecipient is for-profit then you can modify theflow-down clauses to reflect that fact

Example: 52.216-7 -- Allowable Cost and Payment

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Other considerations:– Check to see if your Subrecipient has a major

subcontract - may affect contract language and requirements

– Check for conflicts between your subagreement templates and the FAR clauses

• Property• Termination

– Check for requirements to obtain cost or pricing data (FAR 15.403)

– Depending on the nature of the deliverables, it may make sense to

• Tie payments to deliverables• Consider a fixed price agreement

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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

• 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

– 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 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

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

1 subawards: contracting for special cases and complexities april 7, 2009 ncura region vi & vii...

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