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Are subcontractor costs eligible under Horizon Europe?

Source last checked: 1 August 2026 · based on the European Commission's Annotated Grant Agreement (AGA), version 2.0 of 1 April 2025

The cost is eligible only if the work is an action task

Subcontracting is not a general label for outside help. The Grant Agreement defines it narrowly: it is a contract for goods, works or services that are part of the action tasks described in Annex 1. If the work is not an action task, it is not subcontracting, whatever the invoice says (AGA, p. 30).

Purchases — Contracts for goods, works or services needed to carry out the action (e.g. equipment, consumables and supplies) but which are not part of the action tasks (see Annex 1). Subcontracting — Contracts for goods, works or services that are part of the action tasks (see Annex 1).

Article 2 — Definitions, quoted from AGA, p. 30

That single distinction decides which column the cost lands in on your financial statement, and it is the classification auditors test first. The AGA's own worked case: an action has two tasks, a water-quality study and an aerial survey. Sending water samples to a laboratory is a sub-activity of the study, so the lab invoice is a purchase. Contracting a provider to fly and analyse the aerial survey — the whole task — is subcontracting (AGA, p. 163).

Everyday examples the AGA puts on the purchase side: an audit certificate on the financial statements, translation of documents, printing brochures, room hire and catering for a meeting, IPR consultants (AGA, p. 13).

Four conditions decide eligibility

The model text is short, and every clause in it does work. Note that the square brackets are options in the model agreement: the granting authority switches them on or off per programme and per call, so the text in your signed agreement is one resolved version of this.

Subcontracting costs for the action (including related duties, taxes and charges[OPTION for programmes with VAT eligible:, such as non-deductible or non-refundable value added tax (VAT))]) are eligible, if they are calculated on the basis of the costs actually incurred, fulfil the general eligibility conditions and are awarded using the beneficiary's usual purchasing practices — provided these ensure subcontracts with best value for money (or if appropriate the lowest price) and that there is no conflict of interests (see Article 12).

Article 6.2.B, Option 2, quoted from AGA, p. 78

Unpacked, that is four tests (AGA, p. 79): the general eligibility conditions of Article 6.1(a) — incurred during the action, necessary, linked to the action; declaration as actual costs, never as a unit or flat rate; award on best value for money or lowest price, your choice between the two; and no conflict of interest. Beneficiaries that are contracting authorities or contracting entities under Directives 2014/24, 2014/25 or 2009/81 must additionally follow their national public procurement law.

The amount you may charge is the amount the subcontractor invoiced (AGA, p. 80). Unlike an affiliated entity, a subcontractor's price normally contains a profit margin, and that margin is eligible (AGA, p. 13).

You do not need three quotes, but you do need proof

Competitive selection is the default and the safest route, not a hard requirement. The AGA says plainly that subcontracting does not necessarily require competitive selection procedures, provided that in a check, review, audit or investigation the beneficiary can prove both best value for money or lowest price and the absence of conflict of interest (AGA, p. 79).

Acceptable evidence it lists: data from a previous competitive tender on a similar subject that confirms market value, or a market consultation such as price quotations, supplier brochures, or a consultation with independent experts. It also names situations where a single offer is defensible — no suitable offers to a prior tender, a monopoly for technical or IP reasons, a unique work of art, an international organisation whose statutes bar it from competitive procedures, the winner of a prior design contest under the action, or a documented need for special security measures (AGA, p. 80).

Who you cannot subcontract to

Three prohibitions, and they catch consortia often (AGA, p. 81):

• Another beneficiary in the same grant. Not allowed. If one beneficiary needs another's services for its part of the work, the second beneficiary declares its own costs.
• Affiliated entities participating in the action. Normally not allowed, for the same reason. Subcontracting to an affiliate not participating in the action is possible only exceptionally — monopoly, or an existing framework contract where the affiliate is the usual provider.
• The coordinator's own coordination tasks. Cannot be subcontracted or outsourced to anyone. They can only be delegated, in limited circumstances, to an entity with authorisation to administer, or in the case of sole beneficiaries (AGA, p. 152).

Associated partners and third parties giving in-kind contributions sit in a middle band: subcontracting to them is exceptionally possible on the same monopoly or framework-contract logic, provided Annex 1 states clearly which tasks they perform in each role (AGA, p. 81).

One more boundary worth naming: a self-employed person working under your direction, on conditions similar to an employee, is not a subcontractor. That is a natural person under direct contract, a personnel cost under Article 6.2.A.2. What separates a subcontractor is that the work is carried out without the direct supervision of the beneficiary and the subcontractor is not hierarchically subordinate to it (AGA, p. 163, AGA, p. 61).

Subcontracting earns you no overhead — a worked comparison

This is the part that changes budgets, and it is specific to Horizon Europe. Most EU programmes reimburse indirect costs at a 7% flat rate on all direct cost categories. Horizon Europe, together with SME COSME EEN and EDF, uses the 25% flat rate instead — but on a smaller base, which excludes subcontracting costs, volunteers costs, financial support to third parties and exempted specific cost categories (AGA, p. 136).

So the same EUR 20,000 of external work costs the consortium a different amount depending on which category it correctly falls into. Take a beneficiary with EUR 100,000 of personnel costs under a 25% flat rate:

A EUR 5,000 gap on one line item, and it is not a lever you may pull. The classification follows the Annex 1 test above, not the budget you would prefer. Relabelling a subcontracted action task as a purchase to widen the overhead base is exactly what an audit looks for. The point of the table is the opposite one: if the work genuinely is not an action task, booking it as subcontracting out of caution quietly costs you overhead you were entitled to.

The AGA carries the same arithmetic in its own example, with a 25% rate applied to personnel plus consumables while EUR 20,000 of subcontracting sits outside the base (AGA, p. 137).

A subcontract you did not foresee: amendment or simplified approval

Tasks to be subcontracted and the estimated cost of each must be set out in Annex 1, and the total estimated subcontracting per beneficiary in Annex 2. The subcontractor itself does not always have to be named, especially if not yet known (AGA, p. 78, AGA, p. 80).

If the need appears after signature, the coordinator either requests an amendment to add it to Annex 1, or flags it in the periodic report under the simplified approval procedure. The AGA states the trade-off directly: with the second route the beneficiaries bear the risk that the granting authority does not approve the new subcontract and rejects the costs at interim or final payment stage (AGA, p. 80). Note also that the simplified route is available only where the change would not call into question the award decision or breach equal treatment of applicants (AGA, p. 78).

Two carve-outs to know. In actions concerning the essential interests of the EU and its Member States, the call conditions may switch the simplified approval procedure off entirely and impose extra participation and eligibility conditions. And action tasks involving EU classified information may only be subcontracted to entities established in an EU Member State or a non-EU country with a security of information agreement with the EU, and only with the granting authority's explicit written approval (AGA, p. 80).

What this answer does not cover

The rules above come from the General Model Grant Agreement as annotated in the AGA. That scope has hard edges, and reading past them gives you the wrong rule:

• Lump sum grants are outside it. The General MGA is the agreement for action grants funded on the basis of actual costs incurred. For lump sum grants the Commission points to separate guidance (AGA, p. 10, AGA, p. 11).
• PCP and PPI calls are outside Article 6.2.B. For calls that run as a PCP or PPI type of action, the rules for subcontracts in Article 6.2.B and Article 9.3 do not apply to the PCP or PPI procurement; those costs go under Article 6.2.D.5 and Annex 5. RIA, IA and CSA calls are not subject to that regime even when the project includes PCP or PPI activities — there, the activities are handled as ordinary subcontracting. Both groups must read General Annex H of the Horizon Europe work programme first (AGA, p. 119).
• Subcontracting can be switched off, or limited, per programme. Article 6.2.B carries an Option 1 reading simply "Not applicable" (AGA, p. 78). Where it is on, only limited parts of the action may be subcontracted unless the call conditions or Grant Agreement say otherwise; the acceptable limit is judged by the granting authority against the nature of the action, and for some large-infrastructure programmes such as CEF the limit is systematically disactivated (AGA, p. 79).
• ERC actions have their own category. ERC additional funding for subcontracting, FSTP and internally invoiced goods and services sits in its own budget category (D.8) set by the ERC work programme (AGA, p. 123).
• This is EU law only. It says nothing about US federal subcontracting under the FAR, or about UK public contract rules. Those are separate regimes with separate thresholds.

And the general caution the AGA repeats throughout: programme-specific provisions live in Article 6 and Annex 5, everything else is common across programmes (AGA, p. 11). Your signed Grant Agreement and your call conditions are the binding text; this page describes the model they were built from.

Common questions

Can I subcontract to another beneficiary in the same Horizon Europe project?

No. Subcontracting to another beneficiary is not allowed in the same grant. The AGA's reasoning is that every beneficiary already contributes to the action, so if one needs work done by another, it is the second beneficiary that should declare its own costs for that work.

Do I need three quotes for a subcontract?

Not as a rule. Competitive selection is described as the default and safest approach, but subcontracting does not necessarily require a competitive procedure. What you must be able to prove in an audit is best value for money or lowest price and the absence of conflict of interest — for example with data from a previous tender on a similar subject, or a documented market consultation.

Is subcontracting included in the 25% indirect cost flat rate?

No. Where the 25% flat-rate option applies, the base is eligible direct costs in categories A to D excluding volunteers costs, subcontracting costs, financial support to third parties and exempted specific cost categories. Subcontracting is reimbursed at the funding rate but generates no overhead.

What if the subcontract was not in Annex 1?

Two routes. The coordinator asks for an amendment to add it to Annex 1, or the subcontract is flagged in the periodic report under the simplified approval procedure where that is available. The second route carries the risk that the granting authority does not approve it and rejects the cost at payment stage.

Can the coordinator subcontract its coordination tasks?

No. Coordination tasks such as distributing funds and reviewing reports cannot be subcontracted or outsourced to anyone, including other beneficiaries, affiliated entities or associated partners. They can only be delegated in limited circumstances to an entity with authorisation to administer, or in the case of sole beneficiaries.

Is it subcontracting or a purchase?

Ask whether the contract covers an action task described in Annex 1. If it does, it is subcontracting. If it covers goods, works or services that are needed to carry out the action but are not themselves an action task — a translation, a brochure, an audit certificate — it is a purchase.

Source: European Commission, EU Grants: AGA — Annotated Grant Agreement, version 2.0 of 1 April 2025, pages cited individually above. Retrieved into the Scalebiz database and last checked on 1 August 2026. The AGA annotates the General Model Grant Agreement; the binding text for any given project is its own signed Grant Agreement and call conditions. Commission guidance is revised periodically — confirm against the official source before you rely on this.