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Frequently Asked Questions (FAQ) - Third Parties
The answer can be found in the Annotated Model Grant Agreement (MGA) under Article 10 (Subcontracting, page 128) and Article 13 (Contracts to purchase goods, works or services, page 119). There is also a table comparing those two options (Article 8 pp 113).
Since the price is charged by a different department of the same legal entity, this is considered internal invoicing.
The beneficiaries must base their subcontracts on the ‘best value for money’ or on the lowest price. The best value for money principle does not require competitive selection procedures in all cases. However, if a beneficiary did not request several offers, it must demonstrate how best value for money was ensured.
No, contracting between beneficiaries is not allowed. Each beneficiary must declare its own costs.
The Grant Agreement does not exclude the possibility that a contract or subcontract is awarded to a third party with a legal link to a beneficiary (which is not an affiliate). However, the selection of the (sub-)contractor must not be influenced by a conflict of interest. See the examples in article 35 of the Annotated Grant Agreement for further information.
The rule is that the tasks to be implemented and the estimated cost for each subcontract must be set out in Annex 1, and the total estimated costs of subcontracting per beneficiary must be set out in Annex 2. The actual price may be higher or lower than the estimation in the budget. There is no ‘% tolerance’ foreseen.
We are afraid it is impossible to answer your question regarding contracts/subcontracts in general without knowing further details.
Regarding durable equipment such as machines, only the share of the depreciation costs used for the action (taking into account the equipment’s ‘full capacity’) is eligible.
By definition, a Linked Third Party does not charge a price, but declares its own costs in line with the eligibility conditions of the Grant Agreement. Therefore, a Linked Third Party cannot be a subcontractor of a beneficiary in the same project.
We are not sure if we understand your question correctly.
As a general rule, service contracts do not cover the implementation of an action task (as defined in Annex 1), but are necessary for the implementation of a task by beneficiaries themselves. As long as the analytical work performed does not cover the implementation of action tasks, it is considered a service and not a subcontract.
According to the Annotated Model Grant Agreement, ‘framework contract must (have) be(en) awarded on the basis of best-value-for-money and absence of conflict of interest.’ Moreover, general eligibility conditions such as compliance with the principles of sound financial management, apply. There is no rule that explicitly requires a re-evaluation of the framework contract after several years.
To a large extend, the distinction between contracts and subcontracts is project-specific. If the work to be outsourced is defined as an action task in Annex 1 of the Grant Agreement, the related contract is considered a subcontract. In contrast, a contract does not cover the implementation of an action task, but is necessary for the implementation of a task by beneficiaries themselves.
Implementing tasks as a Linked Third Party is an option, not an obligation. It is up to the potential Linked Third Party and to the consortium do decide if it makes use of this option or includes the organisation as an additional beneficiary. In general, entities performing a substantial part of the work (i.e. tasks) should be beneficiaries, and not linked third parties. Linked third parties should only exceptionally perform a major part of the R&I work.
Unless otherwise agreed with the Linked Third Party, the beneficiary should transfer the money to the Linked Third Party after it has received it from the coordinator.
We are not sure if we understand your question correctly.
As a general rule, entities performing a substantial part of the work (i.e. tasks) should be beneficiaries, and not linked third parties.
Subcontracting to affiliates is only allowed if there is a framework contract or the affiliate is the usual provider, and the subcontract is priced at market conditions. Moreover, an affiliated entity is not automatically considered a Linked Third Party of a beneficiary, but only if it has been identified as such in the Grant Agreement.
No, a CFS is not required in this case.
It can be a Linked Third Party if it is under the ‘direct or indirect control’ of the beneficiary. This means that the large company must (directly or indirectly) hold of more than 50% of the nominal value of the issued share capital, or a majority of the voting rights, or the decision-making powers in the R&D unit.
A unit cost is a ‘fixed amount’ per unit which is charged instead of a price which has ‘actually incurred’ by the beneficiary. Regarding SME owners: SME owners not receiving a salary must declare their personnel costs on the basis of unit costs (an hourly rate fixed by the Commission).
We understand you are referring to third parties of Linked Third Parties. Since Linked Third Parties are subject to the same conditions of eligibility as beneficiaries, they may also declare costs of in-kind contributions provided by third parties.
An “action task” is a task of the project described in Annex 1.
The beneficiary will reimburse the actual direct costs. Concerning the reimbursement of the indirect cost two different cases my apply: either not taken into account if the in-kind contribution is used in the premises of the beneficiary or taken into account by using the 25% flat-rate if the in-kind contributions are used in the third party’s premises. In this case, the direct costs actually incurred by the third party may be increased by a flat-rate of 25% on those costs. For more details and examples see annotated Grant Agreement Article 11.
Advantage: no legal link is necessary so also third parties with no legal link are able to provide in-kind contributions
Disadvantage: the third parties are not able to do project work on themselves whereas linked third parties are able to do some project work
By definition, a third party providing in-kind contributions does not perform any work in the project, so it does not play an active role in the project. Even if it seconds personnel to a beneficiary, this personnel works under the instructions of the beneficiary and not of the third party. In contrast, a Linked Third Party actively carries out work in the project.
The beneficiaries may declare their costs for paying the in-kind contribution (e.g. the invoice from the third party), but only up to the costs actually incurred by the third party. If an audit shows that the costs declared by the beneficiary are higher than those actually incurred by the third party, the difference will be rejected as ineligible (even if they correspond to the amount actually paid by the beneficiary).
A selection procedure regarding in-kind contributions by third parties is not required by the Grant Agreement. However, every beneficiary must respect its usual practise (i.e. its internal rules) and comply with the national public procurement law, if applicable.
Regarding your question about existing laws, we are not quite sure what you mean.
If the in-kind contribution is declared as a cost, it needs to be supported by evidence. Therefor, personnel provided as an in-kind contribution free of charge need to be supported by time records or a declaration on exclusive work on the action.
For information on tax regulations in a specific country, please contact your internal support facilities or tax consultant.
The estimated budget (Annex 2) may be adjusted by transfers of amounts between beneficiaries or between budget categories (or both) as long as the project is implemented as described in Annex 1.
A receipt does not necessarily lead to a reduction of the grant, but only if the receipt would produce a profit at the level of the consortium. Please see article 5.3 of the Grant Agreement for further information.
‘Financial support for third parties’ is an option which is not applicable in most grants; it has nothing to do with ‘in-kind contributions provided by third parties’.
If the in-kind contribution is free of charge (or, as you write, ’without payment’), the university does NOT receive a payment for seconding the PhD candidate. If the university charges the beneficiary for providing the PhD candidate, this is considered an ‘in-kind-contribution against payment’. The beneficiary charges the costs it incurs under the category A.3 (costs of personnel seconded by a third party against payment) and reimburses the university.
No, they are not considered as in-kind contributions. If the experts are paid a fee, the relationship would usually be considered a contract or subcontract.
In-kind contributions by third parties are only considered receipts if they have been provided by the third party free of charge and specifically to be used for the action, and declared as an eligible cost by the beneficiary. Since the beneficiary receives both a free-of-charge service (by the third party) and a financial reimbursement for the costs borne by the third party, these in-kind-contributions are likely to produce a profit.