SUBAWARDS: CONTRACTING FOR SPECIAL CASES AND COMPLEXITIES

1. SUBAWARDS: CONTRACTING FOR SPECIAL CASES AND COMPLEXITIES April 28, 2008 NCURA Region VI & VII 2008 – Portland, OR Panelists: Derrick Lin, Senior Contract & Grant Officer Stephanie Tramz, Subrecipient Monitoring Coordinator and Contract & Grant Officer Moderator: Michiko Taniguchi Pane, Associate Director Office of Sponsored Research Stanford University

2. Federal Demonstration Partnership (FDP) Subaward Templates approved by Federal Agencies allow for streamlined subawarding http://www.thefdp.org/Subawards_Forms.html • 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

3. Customizing the agreementExamples of Risk Factors • 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 choice of subaward instrument or language

4. 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

5. 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

6. 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

7. 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

8. 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)

9. 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

10. 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? 10

11. 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 11

12. 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 12

13. 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

14. 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 ___.405 http://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

15. 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

16. Customizing the agreementWhen Subrecipient has Special Risk Factors 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

17. 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

18. 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

19. 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)

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

21. 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

22. 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