Subcontracting means that certain project tasks (“(action) tasks”) defined in Annex 1 of the Grant Agreement (GA) are outsourced by project partners to external third parties (i.e. subcontractors) if these tasks are not or cannot be carried out by the beneficiaries themselves.
A subcontractor is contracted by a beneficiary to implement a specific (action) task, delivers the agreed service (e.g. works, services or goods), invoices the beneficiary, and is paid a market price.
Costs for subcontracting are not included in the calculation of the 25% flat rate for indirect costs.
Eligibility criteria
For subcontracting costs to be eligible, the following conditions must be fulfilled:
- The outsourced tasks are clearly described as “(action) tasks” in Annex 1 of the GA.
- The corresponding costs are foreseen in the budget (Annex 2 of the GA, category B (PDF).).
- The award of the subcontract complies with the principles of:
- transparency,
- equal treatment, and
- best value for money (or lowest price, where appropriate).
- No conflict of interest exists.
The inclusion of a subcontractor after the start of the project is possible:
- either through an amendment to the GA, or
- through a simplified approval procedure (in this case, the beneficiary bears the risk of ex-post approval by the European Commission).
Liabilities and obligations
Beneficiaries remain fully liable towards the European Commission, both:
- technically (e.g. proper implementation of the action task), and
- financially.
They must ensure that subcontractors comply with relevant obligations under the GA (e.g. audit rights of the European Commission).
Limitations
Subcontracting is not allowed in the following cases:
- Subcontracting to other beneficiaries within the same project
- Outsourcing of core project tasks (in particular tasks of the coordinator)
- Subcontracting is only allowed in duly justified exceptional cases for:
- Subcontracting to affiliated entities
How subcontracting (category B) and purchases (category C) differ
- Purpose: subcontracting covers action tasks set out in Annex 1 of the grant agreement. Purchases support beneficiaries in carrying out those tasks.
- Description in the grant agreement: subcontracting must be described in Annex 1. Purchases do not need to be described there.
- Indirect costs: subcontracting costs are excluded from the calculation of the 25% flat rate for indirect costs. Purchase costs are included.
Further Information: AGA, Articles 6.2.B and 9.3 (PDF)