The University of Wisconsin-Madison
Research and Sponsored Programs
Notice 89-1
July 1, 1988

TO: Deans, Directors, and Department Chairpersons and Secretaries
(for distribution to all Faculty)
FROM: William J. Vance, Associate Director
SUBJECT: Subcontracting Procedures on Extramural Funds

A subcontract (or subgrant) is broadly defined as:

A grant from one institution to another institution or individual in support of a project in which the programmatic activity is carried out through a cooperative arrangement between or among the grantee institution (UW-Madison) and one or more other institutions or individuals which are separate legal entities, administratively independent from the grantee. The involvement of the non-grantee institution or individual is that of actually performing a portion of the scope of work as opposed to simply providing a routine service or consulting activity.

In an effort to simplify current procedures for subcontracting extramural funds to non-UW institutions and individuals, the University requested that the State Bureau of Procurement exempt subcontracts from the procurement process. The Director of the State Bureau of Procurement recently approved that request with the understanding that the exemption applies only to subcontracts which distribute or pass-through funds originally awarded to the University for specific projects.

To implement this new policy, principal investigators are encouraged to:

  1. Begin to identify subcontractors, by name, in their extramural grant applications. The subcontractor�s total cost should be included in the University�s budget as a line item under the appropriate budget category, customarily identified as either "Subcontracts", "Contractual Services", or "Other Direct Costs". The subcontractor�s scope of work and detailed budget should then be appended to the University�s budget.

  2. Contact the appropriate staff member through the Research and Sponsored Programs Directory as soon as it is known that a project, which includes a subcontract, is going to be funded. Research and Sponsored Programs will also review award documents for subcontracts, and initiate contact with appropriate campus individuals.

Once a subcontractual arrangement has been identified, Research and Sponsored Programs will determine if it qualifies for exemption under State Procurement policies. If it does, we will work with the principal investigator or departmental representative to develop the subcontract. If it does not, the principal investigator will be given guidance on how to obtain the necessary purchasing approvals. Even if the subcontract is not exempt, we will begin development of the subcontract in anticipation of receiving authorization from the State Bureau of Procurement.

We caution you not to assume that a particular transaction qualifies as a subcontract, or that all subcontracts will be exempt from procurement policies. While most Federal subcontracts will qualify for exemption, the status of Nonfederal subcontracts is more uncertain. Please review all potential subcontractual arrangements with Research and Sponsored Programs before making verbal commitments to any outside entities or individuals.

We have developed internal step-by-step procedures for the preparation and administration of both exempt and nonexempt subcontracts. Because the subcontracting of extramural funds is not wide-spread and our procedures are very lengthy, I have not attached a copy to this Notice. Copies of the procedures will, however, be distributed with this Notice to all divisional business representatives, to all principal investigators at the time a subcontract is identified, and upon request, directed to any of the accounting staff in Research and Sponsored Programs.

If you have questions or need assistance, contact Chuck Hoffman (Miscellaneous Federal Accounting) at 608-262-0253, Barb Keenan (DHHS and NSF Accounting) at 608-262-2588, or Mark Inman (Non-Federal Accounting) at 608-262-5414.


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