Subcontracting Costs (Article 6.2.B)

B. Subcontracting costs

If the RAO decides to set specific rules, they must be set out in the call and take into account the value of the contracts and the relative size of the EU contribution in relation to the total cost of the action and the risk (proportionality). Specific rules may only be set for the award of contracts of a value higher than EUR 60 000. This is a standard obligation for all EU grants. It may be unselected only for actions where subcontracting is a key/large part of the action (e.g infrastructure projects; PCP/PPI; technical assistance, statistical programmes, etc).

Calculation 1.1 What? If eligible under the Grant Agreement (all programmes), beneficiaries/affiliated entities may charge ‘Subcontracting costs’.

This budget category covers subcontracted action tasks, i.e. contracts for parts of the project described in the description of the action (DoA; Annex 1) that are not implemented by the beneficiary itself, but by a subcontractor.

Subcontracts are normally wide in scope (implementation of a part of the project, i.e. action tasks). If a contract covers only individual equipment or consumables that do not constitute an action task by itself, this will be considered as a purchase (see Article 6.2.C.2 and C.3). Only limited parts of the action may be subcontracted — unless explicitly allowed in the call conditions/Grant Agreement. Limited parts means that subcontracting remains proportionate both in terms of share and type of subcontracted action tasks, as well as in terms of share in the eligible cost. The acceptable limit is assessed by the granting authority based on the nature of the action, which may vary between programmes and calls. For some programmes with large infrastructure projects (e.g. CEF), it is systematically disactivated.

1.2 Subcontracting costs must be declared as actual costs.

1.3. The costs must comply with the eligibility conditions set out in Article 6.2.B, in particular:

− fulfil the general conditions for costs to be eligible (i.e. incurred during the action duration, necessary, linked to the action, etc; see Article 6.1(a))

− be based either on the best value for money (considering the quality of the service, good or work proposed, i.e. the best price-quality ratio) or on the lowest price

− not be subject to conflict of interest and

− for beneficiaries that are ‘contracting authorities’ or ‘contracting entities’ within the meaning of the EU Public Procurement Directives (Directives 2014/24, 2014/25 and 2009/81)13: comply with the applicable national law on public procurement; these rules normally provide for special procurement procedures for the types of contracts they cover.

The beneficiaries can in principle freely choose between best value for money and lowest price.

Best value for money applies the general cost eligibility condition set out in Article 6.1(a)(vii) (i.e. that costs must be reasonable and comply with the principle of sound financial management) to the subcontracting context.

A competitive selection of subcontractors should be the default approach since it is the safest way to ensure no conflict of interest, best value for money or lowest price through direct comparisons between offers. However, subcontracting does not necessarily require competitive selection procedures to be eligible, provided that, in case of a check, review, audit or investigation, the beneficiary can prove compliance with best value for money or lowest price AND no conflict of interest, for instance by showing:

− data from a previous competitive tender on a similar subject that confirms the market value

− a conducted market consultation, e.g. price quotations, supplier brochures, or consultation with help of independent experts

Directive 2014/24/EU of the European Parliament and of the Council of 26 February 2014 on public procurement (OJ L 94, 28.3.2014, p. 65) and repealing Directive 2004/18/EC (OJ L 94, 28.03.2014, p.65). Directive 2014/25/EU of the European Parliament and of the Council of 26 February 2014 on public procurement by entities operating in the water, energy, transport and postal services sectors and repealing Directive 2004/17/EC (OJ L 94, 28.3.2014, p. 243).

− that no suitable offers have been submitted in response to a prior competitive selection procedure

− that a subcontractor is in a monopoly situation due to technical reasons; or exclusive (intellectual property) rights; or acquisition of a unique work of art or artistic performance; or that the task can only be performed by an international organisation which cannot participate in competitive procedures according to its statutes

− that the subcontractor is the winner of a prior competitive design contest under the action or a linked action

− a need for special security measures in order to protect the essential interests of the EU or Member States in accordance with the call conditions.

The beneficiary must be able to demonstrate that the criteria defining quality were clear and coherent with the purpose.

Best practice: It is recommended to entrust the decision of awarding a contract to an evaluation committee rather than to a sole person. Members of the evaluation committee should be aware that they need to disclose the existence of a conflict of interest. The beneficiary should have clear rules and guidance on situations of conflict of interest. These rules should provide information on who to contact for advice or disclose the conflict to and, where necessary, the appropriate action. It is good practice that staff involved in the procurement process formally signs a declaration of no conflict of interests before performing their duties. Subcontracts (tasks to be subcontracted and estimated costs; not necessarily the subcontractor, especially if not yet known) must be justified in Annex 1 (simplified approval procedure allowed; see below).

1.4 Regarding the calculation, the amount charged as eligible cost must correspond to the amount invoiced by the subcontractor.

Specific cases (subcontracting costs (B.)):

Simplified approval procedure (new subcontracts)

If the need for a subcontract was

Subcontracting in actions affecting security or public order (e.g. HE, DEP, EDF, CEF) — If provided for in the call conditions, the simplified approval procedure is NOT allowed and specific participation conditions and cost eligibility criteria may apply to subcontracting in actions that concern essential interest of the EU and its Member States.

Subcontracting of action tasks involving classified information — Action tasks involving EU classified information may ONLY be subcontracted (cumulative conditions):

− to entities established in an EU Member State or in a non-EU country with a security of information agreement with the EU (or an administrative arrangement with the Commission) and

− if the granting authority has explicitly approved such requests in writing (see Article 13.2 and Annex 5 > Confidentiality and security).

Coordination tasks of the coordinator (e.g. distribution of funds, review of reports and other tasks listed in Article 7) — Can NOT be subcontracted (they can only be delegated, under certain circumstances, to an entity with ‘authorisation to administer’ or in the case of ‘sole beneficiaries’ within the meaning of Article 190(2) of the Financial Regulation 2024/250914; see Article 7).

Subcontracting to beneficiaries

Is NOT allowed in the same grant. All beneficiaries

Subcontracting to affiliates

Is normally NOT allowed in the same grant. As for

Subcontracting to associated partners or third parties giving in-kind contributions — Exceptionally possible, e.g. in case of monopoly or where they have a framework contract (the associated partner or third party giving in-kind contributions is their usual provider) and provided that the Annex 1 DoA explains clearly what tasks the participant will perform as associated partner, or contribute to as third party giving in-kind contributions and what tasks will be performed as subcontractor (the latter remaining the responsibility of the subcontracting beneficiary). The subcontracting needs to comply with the general and specific eligibility conditions, in particular ensure best value for money or lowest price and avoid any conflict of interest.

Framework contracts

Framework contracts can be used for selecting a provider if this is

[old Financial Regulation: Article 187(2) Financial Regulation 2018/1046].