Frequently Asked Questions (FAQ) - Contracting/Subcontracting

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...

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.