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Guidelines for Industry Partners
Increasingly, federal funding agency programs and solicitations are requiring more complex partnerships with industry partners. In response to such sponsor requirements, researchers are directed to identify an industry partner or partners to serve on the research team. These industry partners should not be chosen at random; rather, they are chosen for strategic reasons that are integral to the objectives of the research proposal. Conflicts of interest are to be avoided. The partnership between the university and an industry partner will typically be characterized as either a contractoror as a subrecipient. It is important to identify which type of a relationship exists prior to submitting a proposal.
The full definition of the terms subrecipient and contractor are provided below. In short, a subrecipient is an entity that expends federal funds received from a prime grantee to carry out a sponsored program
Subrecipients should be budgeted as a subawardee or a subcontractor in the sponsor program. The cost is then recognized as a budgeted item and approved by the sponsor in the terms and conditions of any subsequent award. The resulting subaward or subcontract agreement will flow down sponsor requirements, including federal regulations and compliance requirements. In some cases, the industry partner will not receive funds under the prime award; in those cases, the partner's subrecipient status can be documented through a Memorandum of Understanding (see below under Steps).
A contractor is defined as an entity providing goods or services that are necessary for conducting the sponsored program. Contractors are responsible for providing equipment, supplies, or services used to complete the sponsored program. Contractors can be listed in proposal budgets by name, but doing so will not eliminate or circumvent the university's competitive requirements, nor will the listed vendor necessarily be selected to supply those goods or services. Industry partners that propose to provide equipment or services at a reduced cost as part of their contribution to the sponsored program are considered contractors and are subject to the university's competitive requirements.
Steps
The Office of Sponsored Programs Administration (OSPA) will work with the researcher to make a determination as to the type of partnership required by the sponsor guidelines. The determination will be based on the definition section below. OSPA will notify the researcher and Purchasing of the determination at the time of proposal submission. Researchers are encouraged to contact OSPA early in the proposal process to facilitate timely resolution.
Subrecipient - Work with OSPA
If the industry partner is a subrecipient, the researcher should work with the OSPA to develop a memorandum of understanding (MOU) or similar agreement prior to submission of the proposal. Such agreements provide a framework for the relationship and highlight the aspects of the relationship that show the industry partner is a proposed subrecipient. After the award is made, OSPA will work with the researcher to develop a subrecipient agreement (either a subaward or a subcontract) if funds will be transmitted to the industry partner under the prime award. If funds will not be transmitted, the previous MOU can stand as the framework of the relationship between the parties. In addition, after the award is made, subrecipients are required to comply with flow down terms associated with the prime award, including any federal regulations and compliance requirements for federal funding sources.
Contractor - Work with Purchasing
If the industry partner is a contractor, the researcher may wish to work with Purchasing prior to submission of the proposal through OSPA to develop requests for proposals, obtain bids, and prepare other documentation that meets university and sponsor requirements for competition. Otherwise, requests for proposals and bid reviews will have to be generated after award and may delay the start of the research until the competitive process has been completed. After the award is made, contractors are required to meet the university's purchase order terms as well as any federal flow down requirements if the source of funding is federal.
Why Is It Important to Make an Appropriate Determination of the Relationship?
The nature of the relationship determines whether the partner is a contractor or a subrecipient. The dollar amount of the proposed purchase order or subrecipient agreement is not a determining factor. A careful review will eliminate post-award problems such as:
- Apparent conflicts of interest
- Determining the appropriate relationship - employee, subrecipient or contractor
- Obtaining sponsor prior approval for unbudgeted subrecipients
- Delays in processing requisitions for equipment, goods or services budgeted as subrecipient agreements
By making a proper determination prior to the proposal stage, the appropriate relationship can be established from the start. Such early determinations will lead to better coordination among offices and more timely preparation of required agreements and/or purchase orders.
Key Points to Remember
- Prior to a researcher submitting a proposal to an external agency through OSPA that includes an industry sponsor, the researcher will need to work with OSPA and Purchasing to determine the appropriate relationship between the partner and the university.
- If an industry partner offers discounts on equipment or other special deals as part of a proposed relationship, please be sure to inform OSPA prior to the proposal submission. OSPA can incorporate such offers as part of any required agreements; if the sponsor is a contractor, Purchasing can incorporate such offers into a request for proposal and bid process.
- Researchers cannot bind the university to any agreements or deals that may be discussed with the proposed industry partner or contractor. Only OSPA and Purchasing can authorize such arrangements.
- Researchers should not click through on any industry partner's web-based order or agreement form when it indicates the researcher is agreeing to terms and conditions (including on-line orders for biological materials and software). Please contact OSPA or Purchasing when this occurs and the offices can discuss the terms with the industry partner.
Definitions
Subrecipient
A subrecipient is a state or local government, college, university, corporation or other organization that expends federal funds received from a prime grantee to carry out a federal program. See 2 CFR 200.93.
According to 2 CFR 200.330, a subrecipient:
* Has its performance measured against federal program objectives;
* Has responsibility for programmatic decision-making;
* Has responsibility for adherence to applicable federal program compliance requirements; and
* Uses Federal funds to carry out a program of that organization, rather than providing goods or services for a program of the prime grantee.
Other indications that an organization should be deemed a subrecipient include when:
* The organization is contributing to the scholarly/scientific conduct of the project as described in a statement of work for the organization;
* The conduct of the organization's portion of the project requires use of the discretion and unique expertise of the organization; or
* Payments are made before the work is performed and that ultimate settlement of the agreement will be on the basis of incurred allowable cost.
Contractor
In contrast, a contractor is a dealer, distributor, consultant, merchant or other seller providing goods or services that are necessary for conducting a federal program. These goods or services may be for an organization's own use or for the use of beneficiaries of the federal program.. According to 2 CFR 200.330, a contractor:
* Provides goods and services within normal business operations;
* Provides similar goods or services to many different purchasers;
* Operates in a competitive environment;
* Provides goods or services ancillary to the operation of the federal program; and
* Generally is not subject to federal program compliance requirements.
Other indications that an organization should be deemed a contractor include when:
* Payments are made after performance or at intervals of progress made toward identified deliverables; or
* The organization typically benefits financially or seeks to make a profit..
Conflict of Interest
Conflicts of interest should be avoided when preparing a proposal statement of work and budget.
The university's Conflict of Interest policy may be viewed at:
http://policy.iastate.edu/policy/conflict/
Federal regulations also prohibit conflicts of interest in the selection of contractors or subrecipients. See excerpts from 2 CFR 200
.__200.318 (c)(1) "No employee, officer, or agent shall participate in the selection, award, or administration of a contract supported by Federal funds if a real or apparent conflict of interest would be involved. Such a conflict would arise when the employee, officer, or agent, any member of his or her immediate family, his or her partner, or an organization which employs or is about to employ any of the parties indicated herein, has a financial or other interest in the firm selected for an award."
.__200.319 (a) All procurement transactions must be conducted in a manner providing full and open competition consistent with the standards of this section. In order to ensure objective contractor performance and eliminate unfair competitive advantage, contractors that develop or draft specifications, requirements, statements of work, or invitations for bids or requests for proposals must be excluded from competing for such procurements. Some of the situations considered to be restrictive of competition include but are not limited to:
(1) Placing unreasonable requirements on firms in order for them to qualify to do business;
(2) Requiring unnecessary experience and excessive bonding;
(3) Noncompetitive pricing practices between firms or between affiliated companies;
(4) Noncompetitive contracts to consultants that are on retainer contracts;
(5) Organizational conflicts of interest;
(6) Specifying only a “brand name” product instead of allowing “an equal” product to be offered and describing the performance or other relevant requirements of the procurement; and
(7) Any arbitrary action in the procurement process.