Subaward, Professional Services Agreement or Fee for Service (Vendor Purchase Order)?

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

A research project may include relationships with vendors, consultants, and subrecipients.   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.


A subaward is an agreement between the recipient of a prime award (grant or contract) and another organization (educational institution or other entity) in support of a sponsored project in which any substantive programmatic activity is carried out by the other organization, which is a separate legal entity, administratively independent of the prime award recipient. The involvement of the subawardee organization is that of actually performing a portion of the programmatic activity as opposed to simply providing a routine service to the prime award recipient.

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 its own program, as compared to providing goods or services for a UI program

  • provides matching funds or cost sharing

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

  • has performance measured against the objectives of the prime award

  • 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.  

 Vendor/Fee for Service Purchase Order

A vendor 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 vendor/ fee for service purchase order.  The vendor 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 services of a repetitive nature or goods of a commonly available kind

  • provides the service in support of the prime award recipient's project (rather than the organization's own project)

  • assumes the risk if performance is more costly or time consuming than expected

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 Vendor/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 > if you have questions.