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Is this a subaward or a contract under 2 CFR 200?

Source last checked: 1 September 2026 · 2 CFR Part 200, 2025 edition (govinfo PDF)

Who makes the call, and on what basis

The pass-through entity makes it, one agreement at a time. Section 200.331 puts the determination on the entity passing the money down, not on the federal agency and not on the organization receiving it. The federal agency has no direct legal relationship with subrecipients or contractors at any tier; what it oversees is whether the pass-through entity is doing its job with its own first-tier subrecipients. A federal agency may require the pass-through entity to follow additional guidance when making these determinations, as long as that guidance does not conflict with 200.331. Source: 2 CFR Part 200, page 55 (govinfo PDF).

The regulation then does something unusual for a classification rule: it refuses to make itself mechanical.

All of the characteristics listed below may not be present in all cases, and some characteristics from both categories may be present at the same time. No single factor or any combination of factors is necessarily determinative. The pass-through entity must use judgment in classifying each agreement as a subaward or a procurement contract. In making this determination, the substance of the relationship is more important than the form of the agreement.

2 CFR § 200.331, page 55

Two consequences follow from that paragraph, and both matter more than the characteristic lists that come after it. First, the title on the document is irrelevant: the definition of subaward says it may be provided through any form of legal agreement, including an agreement the pass-through entity itself considers a contract. Second, an entity can hold more than one role at once. The same organization may be a recipient on one award, a subrecipient on another and a contractor on a third, concurrently. Source: 2 CFR Part 200, pages 17 and 55 (govinfo PDF).

What points toward a subaward

An agreement is a subaward when it hands over a piece of the federal program itself. Section 200.331(a) defines a subaward as an agreement for the purpose of carrying out a portion of the federal award, creating a federal financial assistance relationship with a subrecipient. The characteristics it lists as supporting that classification, which it is careful to say are not exhaustive, are that the entity:

• determines who is eligible to receive what federal assistance;
• has its performance measured against whether the objectives of a federal program were met;
• has responsibility for programmatic decision-making;
• is responsible for adherence to applicable federal program requirements specified in the federal award; and
• implements a program for a public purpose specified in authorizing statute, as opposed to providing goods or services for the benefit of the pass-through entity.

The last one carries most of the weight in practice, because it asks who the work is for. A subrecipient is doing the program; a contractor is doing something for you. Source: 2 CFR Part 200, pages 55 and 56 (govinfo PDF).

What points toward a procurement contract

An agreement is a contract when it buys something you need in order to run the program. Section 200.331(b) says a contract is for the purpose of obtaining goods and services for the recipient's or subrecipient's use, creating a procurement relationship. The supporting characteristics, again expressly not exhaustive, are that the other party:

• provides the goods and services within its normal business operations;
• provides similar goods or services to many different purchasers;
• normally operates in a competitive environment;
• provides goods or services that are ancillary to the implementation of a federal program; and
• is not subject to the compliance requirements of a federal program as a result of the agreement, although similar requirements may apply to it for other reasons.

Section 200.1 backs this up from the definitions side: a contract is the legal instrument by which a recipient or subrecipient conducts procurement transactions under a federal award, and a contractor is simply an entity that receives one. Source: 2 CFR Part 200, pages 8 and 56 (govinfo PDF).

A worked example: one project, both answers

The lists are easier to apply against a concrete case than in the abstract, so here is one. A city health department holds a federal award to run diabetes screening in underserved neighborhoods. It signs two agreements, and they do not land on the same side.

The community clinic. The clinic will decide which residents meet the program's eligibility rules, run the screening days, and report against the program's own targets for people screened and referred. If the targets are missed, that is the clinic's performance problem. It is determining who is eligible, it is making programmatic decisions, its performance is measured against program objectives, and what it is doing is the public purpose in the authorizing statute rather than a service rendered to the health department. That is a subaward, and the clinic is a subrecipient, whatever the agreement is titled.

The laboratory. The lab will process blood samples at a published per-sample price, the same price it charges hospitals and insurers, using the assay it runs every day for everyone. It makes no eligibility decisions and has no view on whether the program hits its targets. It operates in a competitive market, serves many purchasers, and the testing is ancillary to the program rather than the program itself. That is a procurement contract, and the lab is a contractor.

Note what did not decide either case: size, sector, whether the other party is a nonprofit, and the word printed at the top of the agreement. Note also the harder variant. If the health department wrote the eligibility screen into the lab's contract and made the lab responsible for applying it, the agreement would start picking up characteristics from both categories, and the determination would turn on judgment rather than on the list, exactly as 200.331 says.

What changes once you call it a subaward

A subaward pulls the subrecipient inside the award's compliance perimeter and leaves you responsible for it. The terms and conditions of the federal award, including Part 200 itself, flow down to subawards unless a particular section or the award terms say otherwise, and pass-through entities must comply with 200.331 through 200.333 regardless. Source: 2 CFR Part 200, page 18 (govinfo PDF).

Section 200.332 then sets out what the pass-through entity must do. It must verify the subrecipient is not suspended, debarred or otherwise excluded, by the methods in 180.300, including confirming this in SAM.gov. It must identify every subaward to the subrecipient clearly as a subaward, carrying the federal award identification data the section lists, from the subrecipient's unique entity identifier and the FAIN through to the indirect cost rate for the federal award. It must pass on all requirements of the subaward, and any further requirements it imposes in order to meet its own responsibilities. Source: 2 CFR Part 200, pages 56 and 57 (govinfo PDF).

Beyond the paperwork, the duty is ongoing. The pass-through entity must evaluate each subrecipient's fraud risk and risk of noncompliance to decide how much monitoring is appropriate, weighing matters such as prior experience with similar subawards, the results of previous audits, new personnel or substantially changed systems, and the extent and results of any federal agency monitoring. It must then monitor the subrecipient as necessary: reviewing financial and performance reports, ensuring corrective action on significant developments that negatively affect the subaward, issuing management decisions on audit findings relating to its own subaward, and resolving findings specific to that subaward, though not cross-cutting findings that reach other awards. It must verify the subrecipient is audited where Subpart F requires it. Source: 2 CFR Part 200, pages 57 and 58 (govinfo PDF).

One hard number sits in this part of the regulation. With prior written approval from the federal agency, a recipient may provide subawards based on fixed amounts up to $500,000, and those fixed amount subawards must meet the requirements of 200.201. Source: 2 CFR Part 200, page 58 (govinfo PDF).

What changes once you call it a contract

A contract moves the agreement out of the award's compliance perimeter and into the procurement standards, where your obligation is to have bought properly rather than to supervise program delivery. Federal award compliance requirements normally do not flow down to contractors. In most cases the compliance responsibility is to ensure that the procurement, receipt and payment for goods and services comply with federal statutes, regulations and the award terms. The exception is pointed: where a procurement transaction does make the contractor responsible for meeting program requirements, you must ensure those requirements are met, including by stating the contractor's responsibilities clearly in the contract and reviewing the contractor's records; and where such transactions relate to a major program, the audit's scope must determine whether they comply. Source: 2 CFR Part 200, page 104 (govinfo PDF).

In exchange, the procurement standards attach. All procurement transactions under the federal award must be conducted in a manner that provides full and open competition. Contractors that develop or draft specifications, requirements, statements of work or invitations for bids must be excluded from competing on those procurements. The regulation gives a non-exhaustive catalog of situations that may restrict competition, among them unreasonable qualification requirements, unnecessary experience and excessive bonding, noncompetitive pricing between affiliated companies, organizational conflicts of interest, and specifying a brand name without allowing an equal product. The recipient or subrecipient must have written procedures for procurement transactions. Source: 2 CFR Part 200, page 48 (govinfo PDF).

Section 200.318 adds the housekeeping that follows from being the buyer. Contracts may be awarded only to responsible contractors able to perform, with integrity, public policy compliance, proper classification of employees, past performance and financial and technical resources all considered. Records must detail the history of each procurement transaction, including the rationale for the procurement method, the contract type, contractor selection or rejection, and the basis for the contract price. And you own the fallout: the recipient or subrecipient is responsible for the settlement of all contractual and administrative issues arising out of its procurement transactions, including source evaluation, protests, disputes and claims. Source: 2 CFR Part 200, page 47 (govinfo PDF).

Side by side

The same money, routed under either label, lands in a different regime. The comparison below is ours, not the regulation's; each row is cited to the page it rests on.

What this guide does not cover

Section 200.331 draws one line, and it is narrower than it first looks. The following sit outside it, and reading them into the page would give you the wrong rule:

• Beneficiaries and participants. The definition of subrecipient expressly excludes them, and the definition of subaward excludes payments to a contractor, a beneficiary or a participant. Someone receiving the program's services is not a third classification option under 200.331; they are outside it. Source: 2 CFR Part 200, page 17 (govinfo PDF).
• Audit of for-profit subrecipients. Subpart F does not apply to for-profit organizations. Where a subrecipient is for-profit, the pass-through entity is responsible for establishing requirements to ensure compliance itself, describing them and the subrecipient's responsibility in the subaward; methods may include pre-award audits, monitoring during performance and post-award audits. Source: 2 CFR Part 200, page 104 (govinfo PDF).
• The single audit threshold itself. Classification tells you which dollars count as federal awards expended; it does not tell you whether an audit is triggered. An entity expending less than $1,000,000 in federal awards in its fiscal year is exempt from federal audit requirements for that year, except as noted in 200.503. Source: 2 CFR Part 200, page 104 (govinfo PDF).
• Which clauses go into the contract. Once an agreement is a procurement contract, a separate part of the regulation governs what must appear in it. That is Appendix II, not 200.331.
• Federal agencies buying for themselves. Part 200 is OMB guidance that federal agencies apply to non-federal entities receiving federal awards, and the pass-through rules bind pass-through entities. A federal agency's own purchasing for its own use is a different regime and is not what 200.331 classifies. Source: 2 CFR Part 200, page 18 (govinfo PDF).
• Agency-specific overlays. Your federal agency may impose additional guidance on how you make these determinations, provided it does not conflict with 200.331, and agencies codify Part 200 in their own regulations. The award terms are part of the answer. Source: 2 CFR Part 200, page 55 (govinfo PDF).

Frequently asked questions

Can the same organization be both a subrecipient and a contractor?

Yes, and the regulation says so twice. Section 200.331 opens by stating that an entity may concurrently receive federal awards as a recipient, a subrecipient and a contractor, and the audit provisions repeat that an auditee may simultaneously be all three. The determination is made per agreement, not per organization. Source: 2 CFR Part 200, pages 55 and 104 (govinfo PDF).

Does calling the agreement a contract make it a contract?

No. The definition of subaward in 200.1 says a subaward may be provided through any form of legal agreement consistent with the criteria in 200.331, including an agreement the pass-through entity considers a contract. Section 200.331 adds that the substance of the relationship is more important than the form of the agreement. Source: 2 CFR Part 200, pages 17 and 55 (govinfo PDF).

Who decides, the federal agency or the pass-through entity?

The pass-through entity. It is responsible for making case-by-case determinations about whether the entity receiving federal funds is a subrecipient or a contractor. The federal agency may require compliance with additional guidance for making them, and it monitors the pass-through entity's oversight of first-tier subrecipients, but it has no direct legal relationship with subrecipients or contractors of any tier. Source: 2 CFR Part 200, page 55 (govinfo PDF).

Do the federal award terms flow down to a contractor?

Normally no. Terms and conditions of the federal award flow down to subawards to subrecipients unless a section of Part 200 or the award says otherwise, and federal award compliance requirements normally do not flow down to contractors. The exception is where the procurement transaction makes the contractor responsible for meeting program requirements, in which case the auditee must ensure they are met. Source: 2 CFR Part 200, pages 18 and 104 (govinfo PDF).

Does money paid to a contractor count toward the single audit threshold?

No. Federal awards expended as a recipient or a subrecipient are subject to audit under Part 200 unless a program is exempt by federal statute, while payments received for goods or services provided as a contractor under a federal award are not subject to audit under this part. The exemption from federal audit requirements sits at less than $1,000,000 in federal awards expended in the fiscal year. Source: 2 CFR Part 200, page 104 (govinfo PDF).

Is there a dollar ceiling on a subaward?

Not on subawards generally, but there is one on fixed amount subawards. With prior written approval from the federal agency, a recipient may provide subawards based on fixed amounts up to $500,000, and those must meet the requirements of 200.201. Source: 2 CFR Part 200, page 58 (govinfo PDF).

How long do the records have to be kept?

Three years from the date of submission of the final financial report, for recipient and subrecipient alike, with records including financial records, supporting documentation and statistical records. The period runs from the quarterly or annual financial report for awards renewed on those cycles, and it extends where litigation, a claim or an audit finding involving the records is unresolved. Source: 2 CFR Part 200, page 58 (govinfo PDF).

Related guides

• 2 CFR Part 200 (Uniform Guidance): what it covers and who it binds
• When does a federal award recipient need a single audit?
• Which clauses must go into a contract paid with federal grant money?
• What counts as modified total direct costs under 2 CFR 200?

Source: 2 CFR Part 200 — Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, 2025 edition, US Government Publishing Office, a public domain document. Source last checked 1 September 2026. Every claim on this page is drawn from that text and cited to its page. This guide describes 2 CFR Part 200 as revised in 2024 (89 FR 30046, effective 1 October 2024), which is the text in force today. OMB published a proposed rewrite on 29 May 2026 (91 FR 32198, docket OMB-2026-0034); the comment period closed on 13 July 2026. OMB signalled a target effective date of 1 October 2026, but as of 28 September 2026 no final rule had been published in the Federal Register, and the proposal has no legal effect until it is finalised. Checked against the source on 28 September 2026. Agencies implement Part 200 in their own codified regulations and may add guidance of their own; confirm against the current official text and your award terms before you rely on this.

Written by Robert Grabarević, founder of Scalebiz. He built the radar as a tool for himself, so that he would not have to re-read the same funding rules for every application. Every guide on this site cites the regulation by section or page, so each claim can be checked against the source. About Scalebiz · Robert on LinkedIn.