Follow us on  LinkedFit for Health LinkedIN

Frequently Asked Questions (FAQ) - Third Parties

Question details: 
Distinction between a subcontractor and the purchase of goods and Services: is the crucial point whether or not there is a named/numbered task recorded as part of one of the work packages in the DoW. So is it correct, that depending on the way the text is written, the end result might be a subcontract, or might be a contract for goods/services.
Answer: 

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).
http://ec.europa.eu/research/participants/data/ref/h2020/grants_manual/a...

Question details: 
What do you consider a department of an institution that issues invoices for the services provided to the other departments of the institute due to the accounting system of the organisation? Is it a third party?
Answer: 

Since the price is charged by a different department of the same legal entity, this is considered internal invoicing.

Question details: 
For the clinical trial in a project the participating centres have been identified as subcontractors to include patients and it is foreseen that an agreement is signed between the sponsor and the participating centre. Is it an obligation to set up a binding procedure to choose the participating centres?
Answer: 

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.

Answer: 

No, contracting between beneficiaries is not allowed. Each beneficiary must declare its own costs.

Question details: 
In the AMGA it states that in exceptional cases subcontracts are possible between beneficiaries and affiliates. Does this also apply to linked third parties (no affiliate, but legal link)? Does this rule also apply to contracts?
Answer: 

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.

Answer: 

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.

Question details: 
Difference Subcontracts / Contracts to purchase goods: When you need to buy a special machine, specially designed for the project, to carry out the work programme, what kind of third party is the supplier? Contractor? Subcontractor? Is the cost of the machine an eligible cost (the full cost or only the depreciation costs of the machine during the project)?
Answer: 

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.

Question details: 
Is subcontracting possible with the affiliates if they are a 3rd party in the contract through Art 14? The question is if a linked third party is also the usual provider for the use of equipment (but not the same general direction) is it possible to consider them as contractor. Hence, they will make an invoice to the R&D department of the Beneficiary.
Answer: 

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.

Answer: 

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.

Answer: 

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.

Question details: 
How can you distinct between subcontracts and cost for services as service contracts in research projects: are pure measures of scientific samples belonging to services (if not including scientific work) and in contrast is a R&D contract including research belonging to subcontract? How can you then proceed in a marginal case like blood measurements with a resulting standard analysis which later on will be scientifically evaluated and incorporated into the work action?
Answer: 

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.

Question details: 
When should a partner participate as a third party (with a legal link or affiliate) instead of participating as a (regular) beneficiary? Is the difference related to the amount of work of the partner or must the partner participate as a third party if related to another beneficiary?
Answer: 

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.

Answer: 

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.

Answer: 

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.

Question details: 
You mentioned that affiliated companies could be regarded as subcontractors under special circumstances. Could you please clarify under which circumstances these would therefore not be regarded as linked third parties?
Answer: 

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.

Answer: 

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.

Other (3)

Answer: 

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).

Question details: 
What happens in the case of third parties of third parties: sometimes Hospitals who are dependent on Health Services have third parties that control the budget of the proposal on a free of charge basis (clause 12). If an institution has the national service as third party that means that the entity is obliged to mention the Hospital foundation as a third party. In this case, how could the entity proceed?
Answer: 

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.

Answer: 

An “action task” is a task of the project described in Annex 1.

Question details: 
actual direct costs of third Party for ist infrastructure: 20.000 Euro, actual indirect costs 10.000 EURO (total 30.000 EURO costs); beneficiary will receive from EU only 25.000 EURO (100%+25% indirect costs), does the beneficiary has to pay to the linked third Party providing in-kind contribution at the premises of the Third Party only 25.000 EURO or the complete 30.000 EURO
Answer: 

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.

Answer: 

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

Question details: 
Is a third party ‘providing in kind contribution’ in contrast to a ‘linked third party’ according to the existing definition in the AMGA never intended to be a research co-operation partner as the other contractual beneficiaries?
Answer: 

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.

Answer: 

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).

Question details: 
Can a scientist choose any third party in kind contribution partner without having a selection by three offers or a call if the contract will be above 30.000 €? Regarding existing laws: why is it not obligatory to obtain offers/do a public procurement for any third party in kind contribution?
Answer: 

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.

Answer: 

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.

Answer: 

For information on tax regulations in a specific country, please contact your internal support facilities or tax consultant.

Answer: 

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.

Answer: 

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.

Question details: 
On the in-kind contribution without payment: if a PhD candidate works 10% of his time for a beneficiary, in an in-kind contribution free of charge, does the beneficiary declare costs of in-kind contributions for this 10% work in "Other direct costs"? If yes, how does the beneficiary give the corresponding funding to the university paying for the PhD candidate? Under the "financial support for third parties" section?
Answer: 

‘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.

Answer: 

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.

Answer: 

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.