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Negotiating a grant contract

THE TAKEAWAY: When you enter into a grant contract, you need to be very clear what your organisation is being asked to agree to. Read the fine print.

The purpose of contracts

Obtaining a grant is the start of a whole process of accountability. The accountability process is usually based on a contract that spells out everything that needs to be done to ensure the success of the project or program for which your organisation has obtained a grant.

The contract should cover everything that needs to happen during the projectís life Ė the outcomes and outputs expected by both the grantmaker and the recipient, how progress will be measured, how and when payments will be made, how project success will be measured, and what remedies will be enforced should things not go to plan.

While the contract has to meet the grant program managerís requirements, itís also very important you ensure that it protects the interests of your organisation. You also need to ensure that the contract is understood by, and the projected actions are achievable by, the members of your organisation. Organisations and individuals shouldnít accept grants or sign contracts if they know there are conditions or clauses they donít have the capacity to deliver. If contract negotiation is done well, it will:

Types of contracts

Contracts come in all shapes and sizes. Yours should be appropriate to the size of the grant and the risks involved in completing the funded project. It might be as simple as an exchange of letters, in the case of small grants for attendance at events or for small travelling scholarships. Or it might be as complex as a large formal legal document signed at a public ceremony, in the case of an organisation receiving $100,000 for establishing a community-based initiative.

And of course it could be anything in between.

Whatever the size of the contract, it must cover all that needs to be covered, and wherever possible, it should be a positive partnership document rather than an inhibiting one. Contracts that are achievement-oriented are more effective at building relationships than contracts that focus on Ďpunishmentí.

The right people to negotiate

Itís always worth thinking about whether your organisation has the right people within it to handle a contract negotiation successfully. It may be worthwhile taking a professional negotiator to contract negotiation meetings, or, failing that, someone with negotiating experience. Such a person wonít necessarily do the negotiating on your behalf, but they can work beside you to support you and build your capacity. This person could be a board member, a solicitor, or someone you know and trust whoís managed negotiations successfully before.

Standardised contracts: things to look out for

Grantmakers sometimes use standardised contracts with predetermined clauses, which means they wonít always provide grant recipients with the opportunity to negotiate. The awarding of the grant may be dependent on the acceptance of those terms and conditions.

Even in standardised contracts, however, there can be room for negotiation around the attachments to the contract.

When there is no opportunity to negotiate, you need to very clear what your organisation is being asked to agree to. Be mindful of any obligations you have to any other grant provider or sponsor and make sure the position of these other parties isnít compromised in any new arrangements.

For example, if the grantmaker is contributing only part of the funds your project requires and other organisations are also contributing, it is important to see that the requirements of all grantmakers can be accommodated. Often, as the grant recipient, your organisation will be the only party to hold all the information about the project, so it is up to you to check.

If your organisation is receiving separate amounts of money for separate projects, you need to check that you have the capacity to deliver both projects; that the distinction between the projects and the sources of funds is transparent; and that your organisation isnít taking on activities that are incompatible with each other.

If there appears to be a problem, the third party may need to be involved in the negotiations too, or at least be part of separate new negotiations with you alone. Resolving differences early

Itís important to sort out any differences in points of view between your organisation and the grantmaker early on. If the grant program manager expects particular outcomes that you feel your organisation wonít be able to deliver, you need to put these issues on the table now Ė thereís no point in hoping theyíll be sorted out later. Itís best to discuss the problem at the outset to try to come to a position that both the grant owner and the recipient can live with.

For example, the issue might be excluded from the contract altogether, or it might be watered down to the point where the recipient believes itís achievable with some extra effort, or some other compromise might be found.


If the recipient agrees to deliver something and then fails to do so, the recipient will at some stage be in breach of the contract. There are usually consequences for this.

Spelling out these consequences is an essential part of the contract negotiations. The contract might cover

You should be aware that you can ask for such conditions to be included. A contract isnít intended to be a one-sided document; itís a mutually agreed one.


Contract negotiations are generally considered to be confidential, but you do have a responsibility to keep your stakeholders informed. Itís a tricky situation.

One way to deal with this is to provide your stakeholders with general updates about particular issues within the contract without divulging where negotiations are up to. This can also provide your contract negotiator with the opportunity to test possible positions before taking them back to the grant program manager.

However, you should ask your stakeholders to keep such information confidential, and inform them that the contents of the contract will (where appropriate) be made available when the contract has been signed. Itís not useful to have half-baked ideas cluttering up the public arena.

Checklist for contract negotiations


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