The Guide to Financial Issues relating to Indirect Actions of the Seventh Framework Programme states:
A subcontractor is a type of third party, i.e. a legal entity which is not a beneficiary of the grant agreement, and does not sign it. It appears in the project because one of the beneficiaries appeals to its services to carry out part of the work, usually for specialised jobs that it can not carry out itself or because it is more efficient to use the services of a specialised company.
The subcontractor is defined by certain characteristics:
· The agreement is based on "business conditions"; this means that the subcontractor charges a price, which usually includes the profit for the subcontractor. This makes it different from other third parties' contributions where the third party charges only for the costs of the activity
· The subcontractor works without the direct supervision of the beneficiary and it is not hierarchically subordinated to the beneficiary (unlike an employee). The working place of the subcontractor, its accounting rules and internal organisation are also different.
· The subcontractor carries out elements of the work itself, whereas other third parties (apart from some exceptions) only make available their resources to a beneficiary usually on the basis of a previous agreement.
· The subcontractor's motivation is pecuniary, not the research work itself. It is a third party whose interest in the project is only the profit that the commercial transaction will bring. A subcontractor is paid in full for its contribution made to a project by the beneficiary with whom it has a subcontract.
· The responsibility vis-à-vis the EC for the work subcontracted lies fully with the beneficiary. The work that a subcontractor carries out under the project belongs to the beneficiary in the EC GA. A subcontractor has no rights or obligations vis-à-vis the Commission or the other beneficiaries, as it is a third party. However, the beneficiary must ensure that the subcontractor can be audited by the Commission or the Court of Auditors.