Rules for Outsourcing R&D in H2020 Projects

European projects involve a set of complementary partners that must be able to carry out all the tasks of the project. However, delegating certain actions is sometimes more practical or economical.

Nonetheless, falling back on outsourcing to complete your project is a challenge when you don’t know how to present it in your project application. Moreover if you don’t even know if you have the right to do it in the first place.

If you intend to be part of a H2020 project or if you are already part of it and want to outsource certain tasks, you might be interested in this article about the dos and don’ts of outsourcing in a H2020 project.

Is it possible to outsource in a H2020 project ?

To make it short, yes! European Commission accepts the use of subcontracting.

When the evaluation of a Horizon 2020 project is positive, the coordinator and partners receive an evaluation report and he/she is invited to prepare the grant agreement. This agreement stipulates the terms and conditions on which is based the grant obtained by the consortium.

When necessary, the labs involved may outsource through subcontractors for a technical part of their project. Indeed, the grant agreement allows to contract for the purchase of goods, works or services to carry out their project.

What is the grant agreement exactly?

The grant agreement is an official contract between the European Commission and the project coordinator as representative of the consortium. It defines the conditions for the project financing. It is composed of six different annexes that gather description of the actions taken in the project, financial informations and methodology.

The beneficiaries of the Horizon 2020projects, meaning you for example, must have the claimed resources to carry out the project.The grant agreement ensures that you can:

• Purchase goods, works and services.
• Use contributions provided by third parties, that are strongly legally linked to you or even from your team, against payment or free of charge.
• Call on subcontractors or external labs to carry out certain technical tasks described in the project.

This has to be described in a particular piece of paper of the grant agreement: the Annex 1 or Description of the Action.

What is to be mentioned in Annex 1 of the Grant Agreement?

Annex I is the “ Description of the Action” or DoA. It is composed of the originally submitted proposal. In it you will find the following information:

• Who are the third parties (description and link to you).
• What are their contributions.
• What are the related cost estimates.

What is exactly a third party?

A third party is a legal entity that is not a signatory to the grant agreement. But there are different categories :

• Linked third parties: They have a legal link with the beneficiaries and they carry out part of the work within the framework of the funded project. For example, it can be a partner from a H2020 non-eligible country.
• Third parties that provide goods, work or services with or without a financial counterpart, i.e. subcontractors.

What resources can be outsourced to subcontractors or close third parties?

• Human resources, meaning a secondment of personnel when you lack of people to do the tasks of the project.
• Equipment, when you lack machinery for certain experiments.
• Infrastructures, if you need more space for all your partners in the consortia for example..
• Assets, goods and services, if you need the input of a consulting team for example.

In which cases can you appoint subcontractors?

According to the legal facts sheet of Horizon 2020 outsourcing can only cover a limited part of the project.

It must be organized in direct connection with the tasks you planned to do in your project and described in the technical annex of the project, i.e. DoA.

What is mandatory to report when you appoint a subcontractor?

• You must be able to justify a call for competition based on a criterion for the best quality/price ratio or, when appropriate, the lowest price.
• You must also avoid any risk of a conflict of interest when choosing the contractor.
• The task you outsource should be described in the DoA
• The costs of outsourcing should not exceed the estimated budget declared in the DoA.

Basically, even though the European Commission may approve subcontracting contracts, they always must be justified and reported in the periodical technical report. And of course, using a subcontractor mustn’t challenge the decision to give you the grant in the first place in any way.

In the case of purchases valued at more than € 60,000 the European Commission can set additional conditions for eligibility of the contractor. Those conditions are based on the rules that the Commission applies for its own supply contracts (e.g. minimum number of bids received, publication in the official journal, etc.)

How to differentiate purchases or use of third party from subcontracts?

The reason why they are differentiated is a simple technical one. When you are filling the DoA and particularly the part about financials, you need to know how to fill up the spreadsheet for subcontracting costs.

What there is to know is that purchases of goods, works or services are directly linked to the project and are part of the “other direct costs” (in addition to the human resources costs) from which indirect costs are automatically determined (don’t worry, you don’t have to calculate those specifically).

And, according to the European commission recommendations, a third party is financed with the same eligibility conditions for beneficiaries (including 25% indirect).

On the contrary, subcontracting costs are apart. On the one hand because they are not part of direct costs. On the other hand because they don’t include the 25% indirect cost.

As you read through this, you probably grasp the main message about outsourcing your R&D needs in a H2020 project : it is completely possible, as long as you duly complete the DoA.

This can be achieved when you are fully prepared. That means knowing what is the grant agreement, who are the third parties, how to justify the use and choice of a subcontractor and also knowing subcontracts have their own column in the costs table. Once you know this, you are ready to outsource.