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OVERVIEW: Negotiating the grant agreement

Grant agreements and contracts might sound bureaucratic, but they're more than simply legal and administrative processes and documents. They can also be opportunities to build relationships, capacity, skills and understanding.

Ideally, your program will entail a grant agreement negotiation process, rather than simply imposing compulsory agreements on grant recipients. (You may, however, want to draw on templates to form the basis of each new agreement and speed up the process.)

The agreement negotiation process should cover what items the grant will pay for, outcomes, performance indicators, reporting arrangements, and timelines.

If you're dealing with emerging groups or organisations that have not used formal contracting processes before, or may not understand the responsibilities of receiving a grant, you may also wish to use the contract negotiation phase to build understanding and capabilities.

Grant agreements and contracts should be appropriate to the grants program, the amount of funding involved, the risks, and the organisations receiving grants.

In the case of small grants, a simple agreement written in plain English is usually the way to go. If there are millions of dollars involved, a long and more legalistic contract will usually be necessary. In this guide we're concerned mainly with agreements, not legalistic contracts.

A grant agreement template or contract template should be carefully thought out and internally consistent. In developing such a template, the aim is not only to clarify roles and responsibilities; it's also to maximise the benefit for all concerned, particularly in terms of creating opportunities to develop partnerships and build capacity. Consider these questions:

  • Who has the authority to negotiate the terms and sign the document? Who manages the contract or agreement day to day?
  • What form should the document take? For example, it might consist of a letter of offer, a large standard contract, a sub-contract, or a memorandum of understanding. The form should be appropriate to the: type of grant relationship, the size of the grant, the capacity and capability of the organisations concerned, and the risks involved.
  • Will the contract enhance administration and outcomes and effectively control fraud, or are there better or complementary ways to achieve these objectives outside the contract?
  • Does the contract cover project review and program evaluation, and set out timelines for these?
  • Does the document provide sufficient legal coverage for the grantmaker and grant recipients?
  • Will there be a negotiation phase or only a standard contract? Will grant recipients be invited to contribute to the development of the contract?
  • What degree of flexibility will the negotiators have in relation to funds, deadlines, deliverables, forms of contract, etc?
  • Who will be responsible for what during the negotiation phase?
  • Which aspects of the contract will be non-negotiable? Is this clear to the grant recipient?
  • Does the document state what will happen if either party does not fulfil their roles and responsibilities?
  • Are the language and style of the document appropriate to the grantmaker and recipients?
  • Does the document contribute to or detract from the balance and intent of the relationship between the parties?
  • Will the same type of contract or agreement be used with all parties in the grants program? If not, why not?
  • Who signs first and how do they get the contract - or will there be a joint signing?
  • Where will the contract or agreement be signed - in the privacy of respective offices, or at a mutually agreed public event or place?
  • Will the occasion of the contract signing be used for other than the legal and administrative purposes? For example, will it be used for information dissemination, program and issues awareness raising, capacity building, fraud prevention?
  • Where will the document be recorded? As a separate file, or as part of an integrated recording system?
  • How many copies will there be and who will hold them?
  • What's the deadline for signing?
  • How will disagreements be dealt with at this or some later stage of the process?
  • Has the level of risk associated with each grant recipient been assessed?

Related templates


You can gain both the efficiency of a standardised approach to contracting and the flexibility of a customised approach by developing multiple templates and modifying them to suit individual grants.

The contract-signing can provide yet another opportunity for you to promote your grants program to the wider community and to celebrate the start of a new relationship.

SmartyGrants TipSmartyGrants users: SmartyGrants allows users to build their own letter of offer and agreements as a report. Signed agreements can also be recorded as a file note against a project. Learn more