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About the Author: Paula Morán

Financial Director - Paula owns a double degree in Law and Business Administration by the University Carlos III of Madrid (ES) and a master’s degree in international business management by ICEX-CECO and UIMP (ES). She has a great international business vision that she’s developed through her Erasmus scholarship in the University College Dublin (IE) and her job in the Commercial Office of the Spanish Embassy in Zagreb (HR).

Horizon Europe is the EU’s key funding program for research and innovation, fostering collaboration across borders and sectors. A vital component of many Horizon Europe projects is the involvement of third parties. Understanding who these third parties are, how they can participate, and how to budget and report their costs is essential for successful project management. In this blog post, we’ll clarify the different types of third parties, including in-kind contributions, and offer guidelines for budgeting and reporting, referencing the Annotated Model Grant Agreement (AMGA) for deeper insights.

Who are Third Parties?

In the context of Horizon Europe, third parties are entities that contribute to the project but are not part of the consortium of beneficiaries. They can provide additional resources, expertise, or infrastructure necessary for achieving the project objectives. The AMGA defines third parties in Article 10, which outlines the different categories and their roles.

The AMGA classifies third parties into several categories:

  1. Affiliated Entities: Legal entities affiliated with a beneficiary but not part of the beneficiary’s consortium.
  2. Associated Partners: Entities from non-EU countries that can participate in the project under specific conditions.
  3. Subcontractors: Third parties contracted to carry out specific tasks for the project.
  4. Providers of Goods and Services: Entities supplying materials, equipment, or services essential for project implementation.
  5. In-Kind Contributions: Resources provided by third parties, which can either be against payment or free of charge.

Budgeting for Third Party Costs

When budgeting for third parties in a Horizon Europe project, it’s crucial to ensure all anticipated costs are accounted for in line with the project’s financial framework. Here are some key points to consider:

  • Affiliated Entities: Their costs are integrated into the main beneficiary’s budget, under their own entity. According to the AMGA, these costs should reflect actual expenses incurred in project implementation.
  • Associated Partners: These participants can have their costs reimbursed, but it is essential to review the specific provisions regarding their eligibility and the type of costs that can be claimed.
  • Subcontractors: As outlined in Article 10 of the AMGA, the costs must be justifiable and necessary for the project. Beneficiaries must ensure that the subcontracting process is transparent and competitive. A maximum of 20% of the total eligible direct costs may be allocated for subcontracting unless justified otherwise.
  • Providers of Goods and Services: Costs for goods and services must be based on actual expenses. Ensure all costs are reasonable and necessary for project implementation, with appropriate market value assessments where required.

Subcontracting vs. Providers of Goods and Services

It’s important to differentiate between subcontractors and providers of goods and services. Subcontractors are specifically hired to carry out significant project tasks or activities as defined in the project plan. Their contributions are integral to the project’s objectives, and they typically work under a contractual agreement that outlines specific deliverables. In contrast, providers of goods and services are often engaged to supply necessary materials, equipment, or routine services that support the project but do not directly implement the project tasks. Their contributions are generally transactional in nature and do not involve the same level of integration into the project’s core activities as subcontractors.

  • In-Kind Contributions: In-kind contributions can be valuable for enhancing project resources. If provided free of charge, these contributions should be valued at market rates and documented in financial reports. If against payment, they should be treated as regular expenses, subject to the same documentation and justification requirements.

Reporting Costs

Accurate reporting of costs associated with third parties is vital for compliance with Horizon Europe regulations. The AMGA provides detailed guidance on the documentation required for reporting:

  • Affiliated Entities: Include their own financial report within the financial report of the main beneficiary. Ensure all supporting documentation is ready for audits.
  • Associated Partners: Their costs should be reported similarly to those of beneficiaries, including detailed invoices and evidence of payment.
  • Subcontractors: Beneficiaries must retain original invoices, contracts, and reports from subcontractors. All costs must align with the terms of the grant agreement.
  • Providers of Goods and Services: Maintain records of purchase orders, delivery receipts, and invoices. Documentation must show the connection between the costs incurred and the project’s needs.
  • In-Kind Contributions: Document the value of in-kind contributions clearly, including any relevant agreements or contracts. Maintain evidence of the contribution’s market value for reporting.
Table: Types of Third Parties in Horizon Europe
Type of Third Party Definition Eligibility Implements Action Tasks? Budgeting Reporting
Affiliated Entities Entities affiliated with a beneficiary but not part of the consortium Identified in the proposal. Yes Have their own budget within the main beneficiary’s. Present their own financial report within the main beneficiary’s.
Associated Partners Entities from non-EU countries participating under specific conditions. Must comply with Horizon Europe rules. Yes Budgeted as per individual agreements. Reported similarly to beneficiaries.
Subcontractors Entities contracted to perform specific tasks. Open to any legal entity, subject to rules. Yes Budgeted separately as subcontracting costs. Must provide invoices and reports.
Providers of Goods and Services Entities supplying materials, equipment, or services. Open to any legal entity. No (unless specified in the contract) Budgeted as Purchase costs: Other Goods and Services. Documented with invoices and delivery notes.
In-Kind Contributions Resources provided by third parties, either against payment or free of charge. Defined in the project proposal. No Included as direct costs in the category to which they refer. Valued at market rates and documented..

Conclusions

Incorporating third parties into Horizon Europe projects can significantly enhance capabilities and resources. However, careful attention must be paid to budgeting and reporting these costs. By understanding the distinctions between different types of third parties and adhering to the guidelines set forth in the Annotated Model Grant Agreement, project coordinators can ensure compliance and enhance their project’s success.

For further details, you can refer to the Annotated Model Grant Agreement here.

If you have any questions or need assistance with your Horizon Europe project, feel free to reach out!