What is the difference between a Subaward, a Consulting/Professional Services Agreement, and a Contractor/Fee for Service Purchase Order?

A research project may include relationships with contractors, consultants, and subrecipients.  The pass-through entity holds the responsibility for deciding whether any given arrangement constitutes a subaward (carrying out an intellectually significant portion of the Federal award, creating a financial assistance agreement) or a contractor agreement (obtaining goods and services, creating a procurement relationship).

Determining the appropriate relationship at proposal stage is critical to ensure appropriate accounting for costs and compliance requirements.  Misclassification may result in delays in subaward processing, inaccurate calculation of costs (e.g., failure to include or exclude F&A costs), and time to request approval for project changes.

As a reference tool, the FDP Checklist to Determine Subrecipient or Contractor Classification provides guidance about making this determination.


Under 2 CFR 200.92, the Uniform Guidance, Subaward means an award provided by a pass-through entity to a subrecipient for the subrecipient to carry out part of a Federal award received by the pass-through entity.  It does not include payments to a contractor or payments to an individual that is a beneficiary of a Federal program.  A subaward may be provided through any form of legal agreement, including an agreement that the pass-through entity considers a contract.

Following are characteristics of a subaward.  The subrecipient:

  • has responsibility for programmatic decision making

  • contributes to the scholarly/scientific conduct of the project as described in the statement of work for the prime award

  • uses the funding to carry out a program for a public purpose specified in the authorizing statute, as compared to providing goods or services for the benefit of the pass-through entity

  • requires considerable discretionary judgment and the unique expertise of the subrecipient in the performance of the work

  • investigator would be considered as a co-author of publications resulting from the work performed under the prime award

  • performs work that involves human subjects or animal studies

Subawards are processed through the Division of Sponsored Programs.  See the process flowchart.


Consulting/Professional Services Agreement

Generally the University recommends use of a Professional Services Agreement when collaborating with individuals.   Professional Services Agreements are handled through the UI Purchasing Department.  A consultant may provide advisory services related to a sponsored research project.  When paying consultants, if you plan to use an hourly rate, consider the NIH salary cap

 Contractor/Fee for Service Purchase Order

A contractor provides goods or services within normal business operations and operates in a competitive environment providing similar goods and services to a variety of customers.

Following are characteristics of a contractor/fee for service purchase order.  The contractor organization:

  • provides a routine service (e.g., equipment fabrication or repair, data processing, performing routine analytical testing services, etc.)

  • provides the goods or services as part of its normal business operations

  • operates in a competitive environment (i.e., competes with others who can provide a similar service)

  • provides similar goods or services to many different purchasers

Fee for service arrangements are handled through the UI Purchasing Department.

Who is responsible for determining whether an arrangement is a Subaward, a Professional Services Agreement or a Contractor/Fee for Service purchase order?

It is the PI’s initial responsibility to ensure the appropriate classification of costs at the time a proposal is submitted to the sponsor.  The PI must ensure the sufficient information about the proposed arrangement is shared with the departmental administrator and the Division of Sponsored Programs (DSP).   PIs and departmental administrators are strongly encouraged to consult with DSP in advance of a proposal due date if they have questions about the appropriate classification of costs.

Collaborating with Individuals or Sole Proprietors

Generally, the University of Iowa does not issue subawards to individuals or sole proprietors.   The University recommends that when collaborating with an individual or sole proprietor the agreement should be handled as a Professional Services Agreement through the UI Purchasing Department.

Issuing a subaward to, or entering into a fee for service or consulting arrangement with, another UI department:

Regardless of the type of service performed, the nature of the arrangement is not considered as a subaward because both departments are part of the same legal entity, The University of Iowa. The UI PI and the PI''s departmental administrator should make arrangements with the programmatic contact in the other UI department and with the other departmental administrator regarding all aspects of the arrangement. A UI requisition can be issued directly from the PI's department to the other UI department as reimbursement for the costs incurred. Contact > dsp-contracts@uiowa.edu if you have questions.