Sponsored Consulting Agreements
The responsibility for issuing consulting agreements under sponsored programs transitioned from the Office of Sponsored Programs (OSP) to Supply Management Services (SMS) effective July 1, 2009. Active consulting agreements already executed before July 1, 2009 will continue to be administered by OSP. All new consulting agreement requests will be processed by SMS. To learn about the new process, please visit: http://www.research.cornell.edu/FSS/news/news/contractor.htm.
Consulting vs. Employment
Agreements to secure the services of a consultant are established when the required services are for highly specialized advice or professional expertise which cannot be performed satisfactorily by existing University personnel during the course of their assigned responsibilities. The Purchases with Special Procedures: Paying for Services section of Supply Management Service's Buying Guide provides guidance regarding determination and procurement procedures as they relate to the purchase of outside personal services.
Consultants are independent contractors and not employees or agents of the University. Current Cornell employees usually may not simultaneously serve as independent contractors under consulting agreements with the University. Consulting agreements are contracts which bind both the consultant and the University. Like any contract, consulting agreements and any changes thereto, require the signature of both parties.
It is important to properly distinguish between consulting and employment relationships established on behalf of the University. By utilizing consulting agreements, the University can complete needed tasks that cannot be performed by current personnel without either the University's or the consultant's acquiring any additional responsibility or liability beyond that established in the contract. However, improper consulting arrangements that establish employment relationships under the guise of a contract impose on the University full employer responsibilities under the law, and may result in penalties for failure to fulfill such responsibilities.
The fundamental distinction between employment and consulting relationships, on which the Internal Revenue Service bases its enforcement of employers' withholding and reporting obligations, is the degree to which a proposed service arrangement will allow control of the work effort in terms of exactly what will be accomplished, when and how. It is important to note that such control is deemed to exist whether or not it is actually exercised. Simply having the right to exercise such control over the services is sufficient to render the University subject to all responsibilities and liabilities applicable to employment relationships. The Internal Revenue Service requires withholding and payment of taxes, including Social Security Tax, where any element of an employer/employee relationship exists. Enforcement is strict and the University may be subject to significant penalties, including criminal action, for failing to properly distinguish consultants from employees.
If proposed consultants will perform services in the context of being in business for themselves, where they stand to realize a profit or suffer a loss as a result of their business activity, and where the consultants' and the University's obligations will be only as established in the contract, a consulting agreement is an appropriate, cost-effective way for obtaining the services on the University's behalf.
Your OSP Grant and Contract Officer can provide further guidance regarding proper designation of services under sponsored agreements.