Sub-recipient versus contractor

When you pass federal money to another organisation, that organisation is either a SUB-RECIPIENT or a CONTRACTOR, and the classification decides how much of the award's rulebook travels with the money. It is determined by the substance of the relationship, not by what the agreement is called.

A sub-recipient carries out part of the funded programme. Its performance is measured against the programme's objectives, it makes programmatic decisions, it is responsible for meeting the programme's requirements, and it uses the money to accomplish a public purpose rather than to sell you something.

A contractor provides goods or services within its normal business operations, to many purchasers, in a competitive market, at a market price. A laboratory selling assay services is a contractor. A university running a work package with its own investigators is a sub-recipient.

The consequence is substantial. Sub-recipients are bound by the Uniform Guidance, must be given specific data elements in their subaward, count towards their own single audit threshold, and must be monitored by you, including a risk assessment before the award and documented oversight during it. Contractors are bound by the contract and by your procurement obligations, and nothing more.

As the PASS-THROUGH ENTITY you carry responsibility for your sub-recipients' compliance. Their unallowable costs become your finding, and "they told us it was fine" is not a defence. Classify deliberately at proposal stage; reclassifying afterwards means renegotiating the agreement and, often, redoing the monitoring.