Subawards: Proposal Considerations when Working with External Research Collaborators

Subawards: Working with external research collaborators

Hello, I'm Dale Huls, Director in the Office of Sponsored Programs at Montana State University.

Welcome to this online training, where we will cover subaward considerations that are important when preparing and submitting a proposal that includes work with external collaborators, that is, research collaborators that are not affiliated with Montana State University.

While we have seen a steady increase in research expenditures at MSU up to $230 million in 2023 from $200 million the year before, we have also seen growth in our subawards.

Currently in fiscal year 2024, we have approximately 500 active ongoing subawards at MSU. So it's an important part of our research picture.

Our subaward research collaboration partners are essential because they allow us to access expertise for our research endeavors that we don't necessarily have at MSU.

These subawards are most often issued to other institutions of higher education, but we also issue subawards to other types of entities, including nonprofits and tribal partners.

While the majority of our subawards are domestically awarded, we do have agreements with international entities as well.

We hope this training module will get you off on the right foot with any proposal that includes external collaborators.

1:17
Now I'll turn this session over to our subawards manager in the Office of Sponsored Programs, Jennifer Nesbitt.

Thank you for taking the time to review this presentation. I hope you find some useful information that will help you develop successful proposals that include work with external collaborators.

Here are the topics we'll cover in this presentation.

We'll start out with a discussion of the differences between a subaward and a contracted services agreement and why it's important to correctly identify the nature of your proposed collaboration at the proposal stage.

Next, we will review some of the basic terminology you'll see when working in the subaward realm.

Then our discussion will move into covering some of the submission requirements that are unique to a proposal with subawards.

We will also briefly cover some additional aspects to have on your radar if you are thinking of working with a foreign collaborator. It's also important that you're aware ahead of time what your roles and responsibilities are as the prime PI, if your award includes subawards. In other words, to know what you're getting yourself into. This portion of the agenda will give you a better understanding of what you need to manage administratively, fiscally and scientifically when overseeing a subaward.

Lastly, we'll conclude with Q and A of frequently asked questions.

2:40

At the most basic level, external collaboration can be funded primarily in two ways, either through a subaward agreement or through a contracted services agreement.

If you're wondering how to distinguish between the two, here's how we break it down.

Subaward agreements have programmatic responsibility to the award. These are most commonly issued to other universities and used when a collaborator is named as Co-PI on an award.

Contracted service agreements are made to vendors or providers of specific services. These providers are specialists in their function and are hired to do a specific job, and they don't hold programmatic responsibilities. They might be identified in your proposal, but are usually not named as Co-PIs.

Examples of contracted service providers might be a trucking company providing required transportation for some key equipment or someone who's building a website relevant to the program.

Here's a little more detail on the characteristics that indicate a subaward is the correct funding mechanism for your collaboration.

It's important to note that these criteria all come from the guidelines specified in the federal uniform guidance, so therefore the decisions we make about how to work with our collaborators would need to be justifiable in an audit situation.

As mentioned earlier, subaward relationships generally indicate a Co-PI relationship with your collaborator.

The agreement is made between MSU and your collaborator’s institution with your collaborator named as the PI at their institution. The institution is held to all the same terms and conditions as MSU.

Everything from the prime award to MSU is flowed down in the subaward agreement. Subawards are essentially sub grants from MSU or grants within a grant. That's why these arrangements are executed through the Office of Sponsored Programs.

On the other hand, collaborators who provide goods and services needed to carry out your award are managed through contracted service agreements. Examples of services might include creating a website, taking photos or creating video, running lab tests, or producing educational materials for a conference.

If you're engaging someone to perform tasks that they do as part of their business and their services are available to others in the marketplace, chances are they're a contractor vendor. Because of this reason, their engagement with MSU falls under the umbrella of MSU Procurement. Procurement is responsible for the execution of these agreements and the terms are subject to the State of Montana Procurement Rules.

Besides wanting to ensure we have the proper designation of subaward or contracted services for the sake of audit and to ensure we use the applicable terms and conditions, it's important to make this determination correctly at the proposal stage because it will impact your budgeting.

If your collaborator will be getting a subaward from MSU, then in your proposal budget you will need to budget for IDC’s on your subaward expenses up to the first $25,000 of each subaward.

Your collaborator, in their budget, is entitled to IDC’s as well. That's in keeping with what I mentioned about these being grants within grants. We'll talk more in detail about what the collaborator can collect in IDC’s in just a moment.

6:04
If your collaborator will be getting a contracted services agreement from MSU, you need to budget for IDC’s on the full amount of the contract. Your collaborator will not get IDC’s.

Another reason it's important to get this determination made at the proposal stage is that subawards need to be explicitly approved by the sponsor. So if the collaboration isn't identified in the proposal that way, it could cause issues and delays when it's time to set up your grant and your subawards.

If you have any questions during the preparation of your proposal as to what the correct determination is, please reach out to the subaward team to help. I'll give you that contact information at the end of this training or you can find it on the OSP website.

6:52

Now let's quickly review some of the subaward terminology before we move on.

In subawards, what we refer to as the prime grant is the award that comes from a sponsor to MSU. The prime grant funds the subaward.

The pass through entity is MSU. That term is used because the funds and the award terms and conditions are passing through MSU to somewhere else.

The subrecipient is the entity receiving the funds from MSU. They are sometimes also called a subawardee, but all of our resources at MSU use the word Subrecipient. The subrecipient PI therefore would be the PI at the Subrecipient site.

The next two terms cost reimbursable versus fixed price have to do with how MSU will make payments to a Subrecipient.

Cost reimbursable means that the Subrecipient must invoice MSU for costs incurred in order to get reimbursement. That is the way the majority of our prime awards work at MSU and that will flow down to the subrecipient as well. Other Higher Ed institutions are equipped to operate as cost reimbursable as this is standard procedure.

However, if you are proposing a subaward to an entity that is new to subawards, you'll want to be sure this is discussed with them ahead of time to avoid the misconception that once they get their subaward they receive actual funds from MSU. They need to be prepared to incur costs at their expense and have the capacity to invoice MSU for reimbursement.

Fixed price subawards are when we pay a Subrecipient based on milestones or deliverables. Rather than invoicing MSU, they will provide a deliverable such as a report or meet a programmatic milestone and receive a predetermined payment for doing so. These arrangements are rare and absolutely have to be explicitly approved by the sponsor ahead of time.

In either case, please be aware that we do not award funds to a subrecipient up front. If you believe you have a situation where a subrecipient requires this, it must be pre-approved by MSU ahead of time. Please don't indicate to your collaborator at the proposal stage that MSU can do this. If you're awarded and MSU has not approved this, it can hamper or even prevent the collaboration altogether. That is a terrible position to be in.

9:19
OK, now let's talk about what needs to be a part of your proposal if you are including a subaward or subawards in your budget. First you'll need a budget from the Subrecipient. As I mentioned before, subrecipients are entitled to collect IDC’s if the prime award to MSU allows for IDC’s.

If they include IDC’s in their budget to you, you should get verification that they are charging the IDC that their institution is entitled to, based on their Negotiated Indirect Cost Rate Agreement or NICRA.

There are two caveats to this:

If the prime award to MSU has an IDC cap or restriction, the same applies to the Subrecipient.
Or if the Subrecipient doesn't have a NICRA, they can go with what's called the Federal De Minimis rate, that is 10 percent of modified total direct Costs.

The Subrecipient should also provide you with a budget justification, also known as a budget narrative. This is usually a text driven description of their budget that provides details for the numbers provided in the budget. For example, they might list the names, roles, and effort amounts of individuals included in the personnel costs. They might provide a description of supplies included in their supply budget and/or they might identify the location and purpose for expenses in their travel budget.

10:44
The budget justification would also be a place to document if you are seeking a fixed price subaward. The budget justification in this case would state that and include a proposed payment schedule per deliverable or milestone as opposed to an itemized budget.

If the sponsor requires a letter of commitment from the subrecipient institution, you will need that as well. This letter serves as an indication that the entity agrees to accept the agreement if it's awarded.

In other words, it ensures that your collaborator has gotten approval from his or her institution to pursue the subaward.

You will also want to have a scope of work for the subaward that details the activities, tasks, and or programmatic objectives being performed by the subrecipient. It should be specific enough to identify exactly what they will be doing.

This will ultimately be incorporated into the subaward Agreement and it will be used to measure whether or not they've done the work they are supposed to do.

One last note, if you have any human subject research or animal research for your award that will be performed by the subrecipient, that should be acknowledged in the letter of commitment you get.

The approvals for that work need to be granted at the subrecipient institution unless you have already worked with MSU's Office of Research Compliance to cover that work under your own protocol.

At MSU, when we establish the subaward, we ask for copies of the approvals before we open the subaward. They don't have to be granted at the proposal stage, but documenting the commitment of the subrecipient institution to provide them if needed is helpful.

We don't have a lot of subawards to foreign entities, but we do have some. Working with a foreign collaborator can present a lot of unique opportunities, but it can also present some challenges. If you plan on working with a foreign subrecipient, there are a few things to be mindful of and to prepare yourself and your collaborator for.

First currency. Budgets, invoices and payments will all be in U.S. dollars. The Subrecipient takes the risk of changes in exchange rates, not MSU. Second, language. Agreements and any Subrecipient reporting will be in English, so translation may need to be figured in. Third, contract terms. Additional contract terms will be included. For example, there will be terms around governing language, governing law, international arbitration, laws, and anti-terrorist compliance. Fourth, animal and human subject work. If a foreign subrecipient is doing this work, they will have to comply with their country's laws and protocols. This could mean additional steps are required that could potentially create delays. This came up on a subaward to a foreign country recently. The process for attaining approvals in that scenario was very complex, involving many layers of approval and nothing happened quickly. The unanticipated delays threatened the project timeline. Not only the subrecipient’s work, but the work at MSU that was dependent on the subrecipient’s work. So get out ahead of this one early if you can. Contact the subawards team or the Office of Research Compliance directly if this is a foreseeable need.

Lastly, be aware of any travel restrictions that might come into play or any restrictions on collaborations in certain countries that the US restricts.

14:16
Finally, let's spend a little time going over what your commitment means as the MSU PI.

When you have a subaward on your grant administratively, you'll be responsible for compiling information from your collaborator and for submitting the request for the initial subaward, as well as any needed amendments. The good news is for the initial request, you should already have the required budget, budget justification and the scope of work from the proposal.

There are just a few other forms that you will need in order to complete the initial request and we have a lot of information on our website that will help. We will also have additional training modules online that cover this in more depth.

If the subaward needs any amendments, for example re-budgeting, adding additional funding and/or an additional budget period or other changes to the project, you are responsible for submitting those requests as well. This includes providing us with the budgetary details needed to amend an existing subaward budget.

We have a lot of information on our website about processing an amendment request too.

The takeaway here is that the subaward actions don't happen automatically, they need to be initiated by the MSU PI. If you have administrative support for this in your department, that person or persons can also assist you with these administrative tasks.

I'm going to go back to my grant within a grant analogy now as these next two duties are an extension of duties you already have as the PI on the Prime award.

Programmatically you are responsible for monitoring the subrecipient’s scientific progress and incorporating their reporting into your reports to the sponsor.

In order to successfully complete the objectives of the award you will need to monitor the subrecipient’s performance for completion of their portion of the sponsor’s objectives.

That scope of work we talked about previously, it really comes into play here. If you have provided a clear and detailed scope of work, it really improves your ability to evaluate this and address any shortcomings if needed.

Financially, you are responsible for reviewing the Subrecipient’s invoicing to make sure it's in line with their approved budget, that it corresponds to the level of progress on the research and that they are within budget. You also need to be mindful that they are invoicing you in a timely manner to ensure the appropriate spend-down on your grant.

You need to manage any over- or under-spending by the subrecipient in a timely manner, as you would any budget category on your prime award. You wouldn't want to get to the end of your award or past it and realize the Subrecipient had underspent and it's too late for you to reallocate those funds to the Prime award. This could result in forfeiture of your funds back to the sponsor.

Conversely, we had a situation where the MSU PI was not monitoring for invoices and the subrecipient did not invoice within the allowable time frame. The PI was then presented with an invoice too late and although it was for valid expenses, MSU was unable to bill a sponsor for those costs. Then you get into the uncomfortable situation of trying to determine who absorbs that loss and how.

You might receive financial management assistance from accounting staff at MSU. But as MSU PI, you must be involved in the financial oversight of any subaward.

These responsibilities are all things you should be prepared to take on when you pursue passing through some of your award funding to another entity.

You are the PI on the prime award to MSU and the responsibilities you have for the funding passing through MSU to your collaborator are an extension of the responsibilities you have for the funding that stays here at MSU.

18:09
Now we're going to go through some of the questions we frequently hear.

Hello, I have a question. Let's say I'm an MSU PI. What happens if my collaborator moves to a different entity after my proposal is awarded, but I haven't set up the subaward yet.

You'll want to work with your OSP fiscal manager first to make sure the sponsor is OK with the switch. Although your Co PI isn't changing, the subaward is actually made to the entity, not the individual, and you had a different entity named in the proposal. So check in with your FM and see what's required for sponsor approval. You very likely will also have some budget considerations with this type of change. Re-budgeting may be necessary because the new subrecipient may have a different cost associated with doing the research and a different indirect cost rate than the proposed subrecipient.
If you end up adjusting the subaward amount because of this, you'll have to accommodate it in your prime award budget. Work with your OSPFM on this as well. One other note, please wait to submit any of the required subaward paperwork until the change has been approved and update your request documents to reflect the new entity.

I have a follow up question to that. What if the subrecipient entity doesn't change, but I need to select a different individual as my collaborator after my proposal is awarded? Let's say in this case it's also before the subaward is set up. This is another time you'll want to check in with your OSP Fiscal Manager. The collaborator you originally selected was probably named as key personnel in your proposal. Many sponsors want to be notified and/or approve of any changes in key personnel. Your FM can help you navigate that as well.

And again, please don't submit your request until the change has been approved and be sure to update your request documents to reflect the new subrecipient PI.

19:59
Hi, I have a question about another type of change. What happens if a PI has designated a collaboration as a subaward in their proposal, but it's the wrong determination and the collaborator should be funded by a contracted service agreement instead?

Well, this could impact the prime award budget for IDC’s if the award is using modified total direct cost and the amount that was budgeted for that particular subaward is more than 25K.

As a subaward on an award using modified total direct cost, that expense would have been budgeted to collect IDC’s only on the first $25,000 of the subaward, but when that gets moved to contracted surfaces, the PI will have to recalculate IDC’s on the full amount. This could require a re-budget of the grant, reducing the budget for their direct costs and increasing their indirect costs. That can definitely be a problem, and that’s why it's important to try to make the right determination at the proposal stage.

Again, the PIS FM or the subawards team can help the PI with that determination as they're preparing the proposal.

 

21:05

Thanks so much for your time.

If we didn't answer all your questions or if new questions come to mind after viewing this training, please reach out to the OSP Subawards team. You can find our contact information on our website or you can call the OSP office and get connected with the subawards staff. We also have a general e-mail inbox that is [email protected]. That mailbox is monitored by all members of our team and is your best first point of contact for any subaward questions you might have.

We also have a lot of great information on the Office of Sponsored Programs website. Look for the link to subawards and please take advantage of our additional subawards training modules available online. Thanks again for joining us.