Unless modified as provided in § 1138.5, a DoD Component's general terms and conditions must use the following wording for SUB Article I.
SUB Article I. Distinguishing Subawards and Procurements. (DECEMBER 2014)
Section A. Required recipient determination. For each transaction into which you enter with another entity at the next tier below this award, you must determine whether the transaction is a subaward or a procurement.
Section B. Considerations in making the determination.
1. The primary purpose of the transaction between you and the other entity is the key factor you must use to determine whether the transaction is a subaward or a procurement.
a. The transaction is a subaward and the other entity therefore a subrecipient if the transaction's primary purpose is for you to transfer—for performance by the other entity—a portion of the substantive program for which we are providing financial assistance to you through this award. You will continue to be accountable to us for performance of the project or program under the award, including portions performed by any subrecipients.
b. The transaction is a procurement and the other entity therefore your contractor if the transaction's primary purpose is for you to purchase goods or services that you need to perform the substantive program supported by this award. The distinction from a subaward is the contractor is not performing a portion of the substantive program as a result of the transaction.
2. What you call the transaction is not a factor in distinguishing a subaward from a procurement. If the transaction meets the criterion in paragraph B.1.a of this article, it is a subaward for purposes of the requirements of this award even if you call and consider the transaction a “contract.”
Section C. Effect of the determination on the next-tier transaction.
1. Process for awarding the transaction. One important consequence of your determining whether a next-tier transaction is a subaward or a procurement is that there are different requirements governing the pre-award and time of award processes that you use to award the transaction.
a. SUB Article II of this award specifies pre-award and time of award responsibilities for subawards.
b. PROC Articles I and II of this award govern pre-award and time of award processes for awarding procurement transactions.
2. Transaction terms and conditions. A second important consequence of your determining whether a next-tier transaction is a subaward or a procurement is that the terms and conditions you include in a subaward differ from those you include in a procurement transaction.
a. Section C of SUB Article II of this award addresses requirements you must include in subaward terms and conditions. Those requirements generally are either identical or directly related to requirements in the general terms and conditions of this award. They include national policy requirements as well as administrative requirements in areas such as financial and programmatic management, property administration, procurement, and reporting.
b. PROC Article III of this award lists requirements you must include in a procurement transaction when applicable to the procurement.