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Subcontracts and Hybrid Purchase Orders

When funds awarded to the University for the conduct of a sponsored project are to be paid to an organization outside of the University, the arrangement should be treated as a Subcontract or Hybrid Purchase Order if all of the following criteria apply:

Criteria for determining if a Subcontract or Hybrid PO should be used

  1. Sponsored funds are being paid to a university, non-profit entity, or for-profit business, rather than to an individual.

  2. Subcontractor/Vendor is acting as a collaborator or contributing to the scientific/scholarly conduct of the project.

  3. Subcontractor's/Vendor's portion of the project requires use of discretion and unique expertise available from only one qualified source.

  4. Subcontractor/Vendor was identified by name, statement of work, and dollar amount in the project proposal and/or does not provide the same services to others as their primary business.

  5. Verification by the Project Director of the Subcontractor's/Vendor's performance is required before payment is made.

If the circumstances meet all 5 of the criteria above, a Subcontract or Hybrid PO should be completed through the Office of Contract Administration. Additionally, if funds received from the Sponsor are earmarked for "pass-through" (i.e. the University is performing a funds transfer on behalf of the Sponsor) to a Subcontractor or Vendor, then a Hybrid PO should be completed.

If any of the above criteria do not apply, the funds should be paid through other appropriate means (i.e. Purchase Order processed through Procurement, PeoplePay, etc.) Please contact the Office of Contract Administration at 763-3193 with any questions.

Procedure to Obtain a Subcontract or Hybrid PO

When the circumstances meet all of the criteria listed above, the Office of Contract Administration will assist you in the preparation and negotiation of your Subcontracts and Hybrid PO's issued under Sponsored Projects. It is not necessary for you to determine if it should be a Subcontract or Hybrid PO, only that it meets all 5 of the criteria above. To initiate the process, please forward your request to:

Office of Contract Administration
2044 Wolverine Tower #1273
763-3193

Be sure to include the following information in your request:

  1. Name, campus address and phone number for the University of Michigan Principal Investigator and administrative contact person in the department.
  2. Official name of the Subcontractor/Vendor, type of organization (for-profit, non-profit, foreign, etc.), size (small or large business, etc.), and the address of their Contracts and Grants office.
  3. Specific statement of work describing the services and deliverables to be provided by the Subcontractor/Vendor.
  4. Detailed budget that has been approved by the Subcontractor's/Vendor's business office (if cost-sharing was proposed by the Subcontractor/Vendor, include the details and amounts).
  5. Period of performance for the Subcontract/Hybrid PO. This will be the period for which funding will be legally committed, rather than the potential total period of the Subcontract/Hybrid PO.
  6. Subcontractor's/Vendor's key personnel (at a minimum this would include the Principal Investigator for the Subcontractor/Vendor).
  7. Copy of the Prime contract/grant received from the Sponsor which approves the Subcontract/Hybrid PO arrangement and a copy of the PAN from DRDA.
  8. Explanation of how and why the proposed Subcontractor/Vendor was selected as a sole-source.
  9. A statement regarding potential conflict of interest (e.g. P.I. employed or has a financial interest in the Subcontractor/Vendor, Subcontractor/Vendor key personnel employed/appointed at UM, with or without compensation).
  10. The following certification is to be signed by the Principal Investigator indicating that he/she has reviewed the budget from the Subcontractor/Vendor and considers the costs to be reasonable.

    COST/PRICE REASONABLENESS CERTIFICATION

    "I have reviewed the cost and price data provided by the Subcontractor/Vendor and have determined that the costs proposed are necessary and reasonable for the work to be performed by the Subcontractor/Vendor."

     

    UM PI Name & Signature                                                                     Date

The next question may or may not apply. Please read carefully.

  1. If the project is funded under a Federal Contract, then the additional Cost/Price Analysis information outlined below also needs to be provided. This does not need to be completed for projects funded under Federal Grants, Cooperative Agreements, or non-Federal projects.

COST/PRICE ANALYSIS

The following information is required to ensure that appropriate documentation is obtained to support the proposed budget of the Subcontractor/Vendor. This supporting documentation is required in accordance with Federal regulations for each and every budget category proposed by the Subcontractor/Vendor under a Federally-Sponsored Contract. Below is a listing of the most common budget categories and the justification required to support a cost/price analysis. FAILURE TO PROVIDE COMPLETE INFORMATION WILL DELAY ISSUANCE OF THE SUBCONTRACT OR HYBRID PO. Simply re-stating a budget in detail is not sufficient.

Salaries/Wages: Attach supporting documentation of the individual's actual base rate. If the proposed rate includes an escalation factor, identify that factor and attach the subcontractor's justification for its inclusion. Attach the subcontractor's justification for direct charging of administrative or clerical personnel. Supporting documentation for salaries and wages may include copies of payroll forms or reports. If such documentation is not available, the following certification signed by an authorized representative of the subcontractor/vendor will be required: "The salary and wage information provided is true and correct and represents the current and actual base rate of each individual proposed."

Fringe Benefits: Attach supporting documentation for fringe benefits. Supporting documentation for fringe benefits may include a copy of the federally-negotiated fringe benefit rate agreement or a copy of the published rates. If such documentation is not available, the following certification signed by an authorized representative of the subcontractor/vendor will be required: "The fringe benefit information provided is true and correct and represents the current and actual fringe benefits of each individual proposed."

Consultants: Identify the name, rate and number of hours/days for each Consultant. Determine that the purpose and costs are appropriate. Attach supporting documentation for the rates used. Attach written justification for rates exceeding the federally-authorized rate. Supporting documentation for Consultant rates may include a copy of the Consultant's published rates, or a statement signed by the Consultant indicating that the rate charged is the same as normally charged to others for the services provided.

Travel: For each trip, provide the cost elements proposed for airfare, rental car, hotel, per diem, etc., as well as the purpose of the trip. Attach supporting documentation for each cost element such as published quotes for airfare, rental car, and hotel as well as a copy of the Subcontractor's/Vendor's current travel policy and procedures if available.

Materials and Supplies: Attach supporting documentation for items with unit costs of $500 or more. Attach justification for direct charge items such as office supplies, postage, local telephone costs, and memberships that are normally treated as indirect costs. Supporting documentation for materials and supplies with unit costs exceeding $500 may include copies of published catalog prices or copies of previous expense vouchers.

Other Direct Costs: Examples are computing services or time, communications, student fees, etc. Attach supporting documentation for rates and costs used.

Equipment: Equipment means an article of nonexpendable, tangible, personal property having a useful life of more than two years and an acquisition cost that equals or exceeds $1000. Attach supporting documentation for each item. Supporting documentation for equipment may include copies of published catalog prices, vendor quotes, or copies of previous expense vouchers.

Profit or Fee: Please explain/justify and attach supporting documentation as to why profit or fee is reasonable.

Indirect Costs or Overhead: Attach a copy of the Subcontractor's/Vendor's Federally-negotiated Indirect Cost Rate Agreement. If the Subcontractor/Vendor does not have a rate agreement, sufficient information should be attached indicating how the rate used was determined and, if the rate was accepted and paid previously by a Federal agency, documentation to that affect should be provided.

Last reviewed: 05/2009

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