A sub-contract occurs when two organizations sign a contract for which the sub-contracting organization pays for services provided by the sub-contracted organization. The services provided help the sub-contracting organization to meet its own objectives. As such it is best described as a fee for service relationship. In this relationship, it is then assumed that the sub-contracted organization already possesses some of the necessary qualities and skills to carry out the task for which it has been sub-contracted.
Outsourcing is a special type of subcontract that occurs when a company, hospital or government agency turns over an entire activity to an independent firm specializing in that kind of work.