When do we know that a service falls under subcontracting cost and not other goods and services costs (or other goods, works and services costs in Horizon Europe)?
Based on our experience, many beneficiaries under Horizon Europe (and earlier H2020) confuse the subcontracting cost category with Other goods, works and services costs. This is a common mistake in Horizon Europe financial reporting and can lead to compliance issues.
What do we need to know to avoid this mistake?
Under the Horizon Europe Grant Agreement:
- Subcontracting costs fall under B. Subcontracting costs (Article 9.3). These relate directly to the implementation of action tasks that are explicitly described in Annex 1 of the Grant Agreement, including their estimated amounts.
- Other goods, works and services costs fall under C. Purchase costs – C.3 Other goods, works and services (Article 6.2.C.3). These are necessary to carry out the action tasks, but they do not themselves implement the tasks.
It’s important to emphasize that subcontracting costs will not be taken into account for the indirect flat rate and subcontracts between beneficiaries in the same consortium or with affiliates are not permitted.
What if, during the project, a Beneficiary decides they need to subcontract a service?
If the subcontract was not foreseen in Annex 1 of the Grant Agreement, the Commission may still approve it. There are two options:
- Amendment of the Grant Agreement to include the subcontract (with cost and nature clearly defined).
- Simplified procedure:through the technical report, on an exceptional basis, supported by strong justifications provided by the Beneficiary. This is why knowing how to prepare for a Horizon Europe audit and avoid financial risks becomes crucial.
FAQ Section
1. What is the difference between subcontracting costs and other goods, works and services in Horizon Europe?
Subcontracting covers tasks of the action carried out by a third party, while other goods, works and services are support costs necessary for implementation but not action tasks themselves.
2. Can subcontracting costs be claimed for indirect costs in Horizon Europe?
No. Subcontracting costs are excluded from the flat-rate indirect cost calculation.
3. Can I subcontract tasks to another beneficiary within my consortium?
No. Subcontracting among beneficiaries or with affiliates is not allowed.
4. What happens if subcontracting was not foreseen in Annex 1?
It must either be introduced through a Grant Agreement amendment or exceptionally approved by the Commission through technical report, with proper justification.
Understanding the difference between subcontracting costs and other goods, works, and services under Horizon Europe is essential to ensure accurate financial reporting and avoid compliance risks. Clear categorization from the start of the project helps beneficiaries save time and prevent errors during audits.
