# Contracts & agreements

For the full [**fundraising lexicon**](https://fundraising-guide.gfmd.info/annex/lexicon) (A-Z) go to

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## Service contract

The EU, in particular, makes a clear distinction between “service contracts” which are based on prescriptive [**Terms of Reference**](https://fundraising-guide.gfmd.info/annex/call-for-proposals-terms-of-reference#terms-of-reference) and “[**grant contracts**](#grant-contract)” which give applicants greater freedom to present diverse ideas under broad thematic headings. 

In service contracts, the relationship between the [**Contracting Authority**](https://fundraising-guide.gfmd.info/annex/stakeholders#contracting-authority) and the implementing organisation is different. Delivery is more closely controlled and formal sign-off is required for most activities and related expenditure. 

[**Key performance indicators**](https://fundraising-guide.gfmd.info/annex/application-forms#key-performance-indicators) are established by the donor and monitored by the donor’s project manager. 

A significant part of the budget for EU service contracts (usually the lion’s share) is based on an agreed number of working days each of which carries a loaded [**fee rate**](https://fundraising-guide.gfmd.info/annex/budgets#fees-based-budget) (meaning that the rate covers the actual costs of the individual concerned as well as a management fee). The remainder of the budget is based on actual costs ([**incidental expenditure**](https://fundraising-guide.gfmd.info/annex/budgets#incidental-expenditure)) which are calculated separately.

## Grant contract

#### Grants generally have a different budget structure to [service contracts](#service-contract) and are based on ideas submitted by the applicants in response to published guidelines. 

As a rule, they are allocated through formal [**calls for proposals**](https://fundraising-guide.gfmd.info/annex/call-for-proposals-terms-of-reference#call-for-proposals) but some donors allocate grants on an ad hoc basis and manage programmes that accept applications throughout the year. 

Grant contracts are managed by the grantee who is required to report back to the donor according to a structured schedule but who can make decisions regarding implementation and [**expenditure**](https://fundraising-guide.gfmd.info/annex/budgets#expenditure-verification) without referring to the donor provided that agreed parameters are observed.

## Supplies contract

Members of the media development community rarely apply for supply contracts that relate to the provision of equipment or the development of infrastructure for beneficiaries in third countries. 

Supplies contracts can form part of a wider [**service contract**](#service-contract).

## Framework contract

#### Increasingly, major donors have channelled funding through **framework contracts which are essentially lists of preferred suppliers.** 

Implementing organisations can apply for framework contracts individually or as part of a [**consortium**](https://fundraising-guide.gfmd.info/annex/stakeholders#consortium) (in the EU, the latter approach is more common). 

Once the list of contractors has been determined, ad hoc opportunities are channelled through the framework contract and the preselected organisations or [consortia](https://fundraising-guide.gfmd.info/annex/stakeholders#consortium) can decide whether or not to bid for them. 

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These opportunities are not open to organisations outside the framework. Application procedures are usually simplified and lead-times are often very tight.
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