Certified Research Administrator Practice Exam

Who establishes the actual facilities and administrative cost rate for a subcontract?

1. Prime recipient's rate

2. Prime award agreement

3. Subcontractor's normal rate

4. Agreement between subcontractor and funding agency

The correct answer is: Subcontractor's normal rate

The actual facilities and administrative cost rate for a subcontract is determined by the subcontractor's normal rate. This rate reflects the specific indirect cost structures and expenses that a subcontractor incurs while performing research or other contractual work. Each subcontractor has its own unique cost structure based on overhead expenses, facilities usage, administrative costs, and any other factors that contribute to their operational costs. Subcontractors typically negotiate their own indirect cost rates with their cognizant federal agency or relevant oversight body, and these rates can differ from those of the prime recipient or the terms outlined in the prime award agreement. Consequently, the subcontractor's normal rate becomes the basis for calculating the facilities and administrative costs associated with the work to be performed under the subcontract. The other options, while relevant in the context of funding agreements and grant management, do not directly establish the specific rate for the subcontract. The prime recipient's rate and the prime award agreement pertain more to the overarching funding framework rather than the individualized cost structure of each subcontractor. Likewise, while agreements between the subcontractor and the funding agency are crucial for compliance and funding allocation, they do not determine the subcontractor's normal rate itself.