Subrecipient or Contractor Classification Determination

Generally, the determination of the relationship with an entity is verified through the institutional review of the proposal
narrative, budget justification, and other related proposal documents, as well as through discussions with key personnel prior to proposal submission. When the relationship remains unclear, refer to the below criteria to provide assistance in making an accurate determination.

Subrecipient:
§200.93 Subrecipient means a non‐Federal entity that receives a subaward from a pass‐through entity to carry out part of a Federal program; but does not include an individual that is a beneficiary of such program. A subrecipient may also be a recipient of other Federal awards directly from a Federal award.

Contractor:
§200.23 Contractor means an entity that receives a contract as defined in §200.22 Contract.
§200.22 Contract means a legal instrument by which a non‐Federal entity purchases property or services needed to carry out the project or program under a Federal award.

A subaward is for the purpose of carrying out a portion of a Federal award and creates a Federal assistance relationship with the subrecipient. Characteristics which support the classification of the non‐Federal entity as a subrecipient include when the contrator:

  1. Determines who is eligible to receive what Federal assistance;
  2. Has its performance measured in relation to whether objectives of a Federal program were met;
  3. Has responsibility for programmatic decision making;
  4. In accordance with its agreement, uses the Federal funds to carry out a program for a public purpose specified in authorizing statute, as oppsed to providing goods or services for the benefit of the pass-through entity.

Entities that include these characteristics are responsible for adherence to applicable Federal program requirements specified in the Federal award.

A contract is for the purpose of obtaining goods and services for the non‐Federal entity's own use and creates a procurement relationship with the contractor. Characteristics indicative of a procurement relationship between the non‐Federal entity and a contractor are when the non‐Federal entity receiving the Federal funds:

  1. Provides the goods and services within normal business operations;
  2. Provides similar goods or services to many different purchasers;
  3. Normally operates in a competitive environment;
  4. Provides goods or services that are ancillary to the operation of the Federal program.

Entitites that include these characteristics are not subject to compliance requirements of the Federal program as a result of the agreement, though similar requirements may apply for other reasons.

Use of Judgement (use only when the determination cannot clearly be made using the above criteria):
In determining whether an agreement between a pass‐through entity and another non‐Federal entity casts the latter as a subrecipient or a contractor, the substance of the relationship is more important than the form of the agreement. All of the characteristics listed above may not be present in all cases, and the pass‐through entity must use judgment in classifying each agreement as a subaward or a procurement contract.