POLICIES & PROCEDURES
Outside Contracts at Florida Atlantic University - 98-02
August 28, 1997
Subcontracts; Service Agreements; and Consultants - 98-03
Renamed 7/01
See SR 01-02, Contracts With Private Companies and Non-Profits
Sponsored research, training and education programs frequently require the services of experts and others outside Florida Atlantic University. There are several mechanisms by which such services are provided: Subcontracts; Service Agreements; and Consultants . Principal Investigators (P.I.) are encouraged to seek guidance from Sponsored Programs (SP) where the proper classification is unclear. The following highlights the critical differences among these categories.
It is important to note that the Florida Statutes, Chapters 287.058, (entitled Contract document), require there be a formal two-party agreement for all amounts of $25,000 and over. Unless the work being performed is put out to bid, the requisitioner must complete a sole source certification form and attach it to the purchase requisition.
SUBCONTRACTS
A subcontract is defined as a formal arrangement by which responsibility for a sizable portion of the work is transferred from the University to a third party.
The specific prior approval of the sponsor is required before an activity on a sponsored project may be subcontracted. Where the intention to subcontract is known at the time of application and an offer is addressed in the proposal, approval may be assumed in the instance of most awards if the effort is funded as proposed.
Subcontract arrangements are formalized in a written agreement between the University and the subcontractor. SP will assist the P.I. in obtaining subcontract approval from the sponsor and will develop the agreement to be used. In many instances the form and content of the contractual agreement itself must also be approved by the sponsor. Therefore, adequate time must be allowed for negotiation prior to the subcontract s effective date.
Subcontracts are rarely entered into with individuals. A service agreement is used for individuals (see below Service Agreements ).
Procedures for Subcontracting
Proposal Stage
When subcontracts are planned, the total required dollar amount must include the direct as well as the indirect costs of the subcontracting party. These will appear as a direct cost in the FAU budget. All individual line items of the subcontract must be detailed on a separate budget page. The need for contracting part of the proposed research must be justified in the narrative. In addition, the subcontractor should indicate in writing the intent, capability, and willingness to provide services. Along with the Letter of Intent, the subcontractor should provide a proposed budget. This Letter of Intent must be endorsed by an official authorized to obligate the subcontracting party. Faculty are reminded that they must have University endorsement, and may not, as individuals, enter into written agreements with any other party.
Post Award Stage
When an award is made, SP will develop and execute the subcontract on behalf of the University. The subcontract agreement will state the activities to be performed, the time schedule, reports to be delivered, general provisions applicable to the subcontractor, any other policies and procedures to be followed, the dollar limitation of the agreement, and the cost principals to be used in determining allowable cost. After the subcontract is fully executed, then the P.I. will process a Requisition Form through SP to the Purchasing Department to encumber the funds. The body of the Requisition Form must only state the title of work, period of subcontract, and the total dollar amount.
SERVICE AGREEMENTS
A service agreement is used when an individual or firm is asked to produce a distinct product, typically a report translation, analysis, or the like. The service provider functions as an independent contractor, with the work usually performed off University premises.
No active employee of the State of Florida may be paid via a service agreement. Also, in most circumstances, full-time federal employees may not be paid for services. However, in cases where it is essential to engage a federal employee for a project, special approval may be obtained from the federal employer and from the sponsor.
When the services are provided by an individual, certain guidelines are to be followed to determine whether that individual should appropriately be paid via OPS or as an independent contractor. When the service is to be performed by an independent contractor outside the project office and without day-to-day supervision, the service provider has the right to control the progress of the work and may be obligated to provide the equipment required for the work. An individual paid as an independent contractor must provide the University with his/her federal tax ID number.
Procedures for Contracting for Services $25,000 and Over
Proposal Stage
When contracting for services is planned, costs will appear as a direct cost in the FAU budget. The need for contracting services must be justified in the narrative. Faculty are reminded that they must have University endorsement, and may not, as individuals, enter into written agreements with any other party.
Post Award Stage
Contracting for services of $25,000 and over requires a two-party agreement. A requisition is prepared by the Principal Investigator. The requisition is submitted through SP to the Purchasing Office. SP will verify that the services should be a service agreement and not a subcontract. After verification, Purchasing will prepare a two-party agreement and will issue a purchase order upon receipt of the fully executed agreement.
Procedures for Contracting for Services Less Than $25,000
Proposal Stage
When contracting for services are planned for less than $25,000, costs will appear as a direct cost in the FAU budget. The need for contracting services must be justified in the narrative.
Post Award Stage
When contracting for services for less than $25,000, only a requisition is required. The requisition should describe the services, the period of time, and amount. The requisition is submitted through SP to the Purchasing Department. SP will verify that the services should be a service agreement and not a subcontract.
CONSULTANTS
A consultant is defined as a non-FAU employee who, acting as an independent contractor, gives professional advice to a project in exchange for compensation. In general, a consultant is engaged when a particular individual s unique expertise is required. A consultant rarely produces a written product. More commonly, the consultant provides on-site expert professional advice and guidance. As an independent contractor, a consultant must provide the University with his/her federal tax ID number. Consultant fees are allowable costs under most sponsored programs. Prior to entering into an agreement, however, the award terms should be reviewed to determine whether consultant use is permissible and whether there is a limitation on either the reimbursement rate or the number of days of consulting. In addition to complying with sponsor requirements, the selection of consultants should meet the following minimum standards:
- There is evidence that the assistance to be provided is essential and cannot be provided by persons receiving salary support under the award.
- There is evidence that a selection process has been employed to secure the most qualified person available.
- There is evidence that the charge to a sponsored program is appropriate considering the qualifications of the consultant, past experience, and the nature of the consultation.
If the prospective consultant is a member of the Florida Atlantic University faculty, special conditions apply. Consult SP in advance in such cases. It is normally not permissible to engage either a federal employee or a non-faculty employee of the University as a paid consultant.
Procedures for Consulting Services $25,000 and Over
Proposal Stage
When a consultant is planned, costs will appear as a direct cost in the FAU budget. The need for a consultant must be justified in the narrative. Faculty are reminded that they must have University endorsement, and may not, as individuals, enter into written agreements with any other party.
Post Award Stage
A consulting fee for $25,000 and over requires a two-party agreement. A requisition is prepared by the Principal Investigator. The requisition is submitted through SP to the Purchasing Department. SP will verify that the services should be a consultant agreement. The Purchasing Office will prepare a two-party agreement and will issue a purchase order upon receipt of the fully executed agreement.
Procedures for Consulting Services Less Than $25,000
Proposal Stage
When a consulting fee is planned for less than $25,000, costs will appear as a direct cost in the FAU budget. The need for contracting services must be justified in the narrative.
Post Award Stage
When consulting is for less than $25,000, then only a requisition is required. The requisition should describe the services, the period of time, and amount. The requisition is submitted through SP to the Purchasing Department. SP will verify that the consulting services should not be a service agreement.
Send comments to Camille Coley or Penny Ashwanden
Updated July 2006 by Dianne Parkerson
