They are SOOOO misunderstood!
If you have a federal grant, you will hear the terms “contract” “award” and “subaward” used interchangeably.
It’s like fingernails scraping across a chalkboard to me, every time, I hear someone refer to a “contract subaward”. 🙁
(Just say no, no, NO!) 😀
What does “Contract” Mean for Federal Grant Recipients?
When it comes to federal grant management, these terms award, subaward and contract are NOT interchangeable. And when grant recipients AND funders and federal regulations seem to use them in that way it is SLOPPY communication.
So, let’s be very precise for a few minutes and look at what the terms really mean according to 2 CFR Part 200 aka the Uniform Guidance:
According to § 200.22 Contract:
“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. The term as used in this part does not include a legal instrument, even if the non-Federal entity considers it a contract when the substance of the transaction meets the definition of a Federal award or subaward (see § 200.92 Subaward).”2 CFR Part 200 (aka the Uniform Guidance) Definitions in §200.22 Contact.
In other words: Contracts are used for procurement transactions with federal awards, and NOT for awards or subawards.
Is this being overly precise?
Absolutely not and here are three BIG reasons why:
- Procurement transactions are subject to a smaller set of rules for compliance than an award or a subaward. So, compliance should be easier.
- Procurement transactions can happen with organizations that may not be eligible for awards or subawards, such as for-profit organizations. So, more types of organization can participate in procurement transactions.
- Procurement transactions (generally) do NOT need the prior approval of the funder. Awards and subawards, typically DO require the prior approval of the federal funders. (And if you guess wrong, you could have costs disallowed by your funder!)
So be a better communicator with your federal grants and use the term “contract” to describe the legal instrument used in procurement transaction.
Use the term “agreement” to refer to an award or a subaward.
And when you are in doubt? Ask your funder. This is an example where it’s better to ask permission than to beg forgiveness. 🙂
Your contractors and subawardees (aka subrecipients) will thank you!
P.S. If you’d like some more help with terminology and helpful tips for your federal grant management, download our Tip Sheet for Determining Subrecipients vs Contractors.
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Lucy Morgan CPA, MBA
CEO, Compliance Warrior