If you are working with EU-funded projects, especially Horizon Europe, you may have wondered how to distinguish between subcontracting and purchase of services. While these concepts may sound similar, the distinction is important and getting it wrong can lead to budget reductions or audit findings.
Subcontracting
Subcontracting covers costs incurred by a beneficiary for the implementation of action tasks carried out by a subcontractor. These activities form part of the project description and contribute directly to the project’s main results. Although the work is performed by a third party, the beneficiary remains fully responsible for its implementation and outcomes.
Typical examples of subcontracting include developing a key software component, carrying out essential laboratory experiments, or performing core fieldwork or technical testing.
It is important to note that only limited parts of the action may be subcontracted. Subcontracting must remain proportionate in terms of the share and nature of the tasks subcontracted, and the overall share of subcontracting costs in the project budget. What is considered acceptable is assessed by the granting authority and may vary depending on the programme and the specific call.
Purchase of Services
The purchase of services refers to the acquisition of support services that assist with the management or implementation of the project but do not constitute core scientific or technical tasks. These services facilitate project execution but do not directly generate its main outputs.
Common examples include translation, event organisation, website hosting, or video production. While useful and often necessary, these services support the project rather than define its results.
In a nutshell
Subcontracting involves outsourcing core project work, whereas the purchase of services concerns buying supporting services. If the project would fail to deliver its main results without the activity, it is likely subcontracting. If the project would still deliver its results, albeit less efficiently, it is likely a purchase of services.
How to declare subcontracting costs
Subcontracting costs must be declared as actual costs and must comply with the general eligibility conditions. In addition, they must respect the best value for money principle and avoid any conflict of interest.
In the financial report, the eligible cost must correspond to the amount invoiced by the subcontractor.
Why it matters
Confusing subcontracting with the purchase of services can lead to ineligible costs, budget reductions, and audit findings. Correctly identifying these categories during the proposal writing phase helps protect both your funding and your project. Subcontracting should always be clearly described and justified in the project description, whereas the purchase of services generally requires less detailed justification.
