6 Comments

1. • If a Grantee utilizes subcontracts (versus procurement contracts) to carry out portions of the proposed activities, will the subcontractor be subject to the indirect rate cap? (Note it is understood that for any type of procurement, the Grantee is responsible for ensuring price reasonableness and fairness.)

   • Does the limitation on indirect cost rate recovery on only the first $25K of a subcontract apply to the first $25K of a subcontract per year or for the entire subcontract period of performance?

   • The questioner seems to be making a distinction between “subcontracts” and “procurement contracts” that are not recognized in the Uniform Guidance, nor the federal regulations under EDGAR. Thus, we infer that these terms are being used within the potential applicant’s internal policies. Under the Uniform Guidance an arrangement to obtain services will either be a “contract” under 2 CFR 200.22 or a “subaward” under 2 CFR 200.92. EDGAR treats “subawards” and “subgrants” as interchangeable terms. Section 200.330 of the Uniform Guidance provides some guidance on distinguishing between a subrecipient (the recipient of a subaward) and a contractor. This program does not allow subgrants, so all of the grantee’s agreements to obtain services for the implementation of the grant should be “contracts” as described in the Uniform Guidance, even if the grantee uses a different name for the actual legal document. While the question does not make clear how the potential applicant distinguishes between a “subcontract” and a “procurement contract,” if both terms have the same meaning as the definition of a “contract” under the Uniform Guidance, then the indirect cost provisions do not apply to the vendor.

     The Department typically issues funds on an annual basis and anticipates that grantees are accounting for indirect costs on a similar annual basis. However, whether a specific grantee could charge indirect costs to the first $25k of a multiyear contract only once, or from year to year would be dependent on the terms of the contract and the applicant’s accounting practices, including how the costs of the contract are obligated. It should be noted that because Department funding is dependent on annual appropriations, the grantee bares the risk in any decision to enter into a multiyear contract.

2. The notice states that applicants must:
   • Demonstrate how “proposed key project personnel, consultants and subcontractors have the qualifications and experience to carry out the proposed activities and achieve the project’s intended outcomes;”
   • Demonstrate how “the applicant and key partners have adequate resources to carry out the proposed activities”
   • Describe “clearly defined responsibilities for key project personnel, consultants, and subcontractors, as applicable;”
   • Describe how “(k)ey project personnel and any consultants and subcontractors will be allocated to the project and how these allocations are appropriate and adequate to achieve the project’s intended outcomes”
   The notice also states that as part of the application review, the Secretary will consider:
   • “the qualifications, including relevant training and experience, of project consultants or subcontractors”
   • “the relevance and demonstrated commitment of each partner in the proposed project to the implementation and success of the project”

   Each of these requirements suggest that subgrants may be utilized to provide the solution to this priority. However, the notice also states that, “A grantee under this competition may not award subgrants to entities to directly carry out project activities described in its application.”

   Can you please confirm that the language prohibiting subgrantees should be removed and that subgrantees are allowed under this competition?

   • The language in the notice is in reference to subgrants and not subcontracts. Under 34 CFR 75.708(e), a grantee may contract for supplies, equipment, and other services in accordance with 2 CFR part 200.

     • Thank you for the clarification regarding the prohibition on subgrants. The priority includes a cap on indirect rate recovery for the applicant of the lesser of its federally negotiated indirect rates or 40% of its MTDC. Can you please confirm that this cap applies only to the applicant and not any proposed subcontractors?

       • Indirect costs rates do not apply to contractors and they are not entitled to claim them, rather any overhead charges included the contract must be reasonable and necessary and subject to the grantee’s procurement policies.

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