Does the subrecipient fall under "Professional Service Costs'" in 2 CFR 200.459 - or are they held to all of the same standards of allowability as the 'prime' recipient in terms of fee?
Paragraph (b) in Section 22.205 of the DoD Grant and Agreement Regulations (DoDGARs) indicates that:
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"(b) Fee or profit. Payment of fee or profit is consistent with an activity whose principal purpose is the acquisition of goods and services for the direct benefit or use of the United States Government, rather than an activity whose principal purpose is assistance. Therefore, the grants officer shall use a procurement contract, rather than an assistance instrument, in all cases where:
(1) Fee or profit is to be paid to the recipient of the instrument; or
(2) The instrument is to be used to carry out a program where fee or profit is necessary to achieving program objectives."
The policy prohibiting the payment of fee or profit to the recipient also applies to subawards as well. A subaward is an award of financial assistance by a recipient to an eligible subrecipient or by a subrecipient to a lower tier subrecipient. A subaward is for substantive program performance by the subrecipient of a portion of the program for which the DoD grant or cooperative agreement was made. Subawards do not include the recipient's or subrecipient's procurement of goods and services needed to carry out the program. Recipients and subrecipients are not precluded from paying reasonable fees or profits when making purchases from suppliers of goods (e.g., supplies and equipment) or services needed to carry out the research.
Whether your service falls under the guidance for "Professional Service Costs" in 2 CFR 200.459 is not germane in determining if fee or profit can be paid.