Why Nonprofits Should Pursue Sub-Grants to Obtain Strategic Funding

You are a thoughtful, driven leader of a global development non-profit organization or social business implementing impact-driven programs in communities of need. Based on your research, you learn that the U.S. Agency for International Development (USAID), the Foreign, Commonwealth, and Development Office (FCDO), or the Bill and Melinda Gates Foundation are making grants related to your work. You question the best method for obtaining funding from these large international development organizations. Before you dive into proposal writing, however, consider another pathway to funding from those donors: the sub-grant.

What Is a Sub-Grant?

When USAID or another donor awards a contract or grant, the initial funding recipient is called the “prime”. Primes have direct managerial and oversight responsibilities for the funds they receive. They need to ensure that the funds are used to achieve the target results, and that the funds are managed and reported on in accordance with the donor’s regulations and guidelines. A sub-grantee is an organization that receives a piece of those funds from the prime in order to implement specific portions of the program.

Why Do Donors Promote Sub-Grants?

Donor agencies around the world have realized that there is a benefit to having prime award recipients sub-grant funds to other organizations. Those benefits include:

• Working with new or local organizations and building long-term relationships with them;
• Leveraging small organization’s niche expertise in a specific geography, technical area, or approach to problem solving;
• Gaining new insights and innovative approaches to development;
• Scaling their work to new markets, beneficiaries, or geographies.

Many sub-grants are made to locally-run organizations that donor agency staff may not have had the opportunity to encounter otherwise. By allowing sub-grants, donor organizations can expand their networks for future work.

Why Do Prime Awardees Use Sub-Grants?

USAID, FCDO and Gates Foundation awards tend to be large. So large, in fact, that no one organization (even established, multinational implementing organizations) has all the expertise and personnel necessary to implement a program. Smaller organizations tend to be nimble and more focused on specific fields. As such, they bring highly specialized expertise and insights that larger firms simply do not have. Because of this, prime award winners regularly seek to develop partnerships with sub-grantees to ensure the award is implemented well.

Why Should I Pursue Sub-Grants?

Navigating bureaucracy can be difficult, especially for new or small organizations. A sub-grant is an excellent opportunity for you to forge connections in the international development community while allowing your organization or business to focus on your mission and core competencies. In addition, working with a prime partner can help you develop the grants management and administration skills and processes necessary to pursue larger grants or contracts (even prime awards) in the future.

How Can I Learn More?

Connective Impact hosted a workshop Thursday, May 5 to discuss how organizations can pursue sub-grants. Speakers from prime organizations, Blumont, RTI International, Tetra Tech/ARD, and DevWorks International shared their experiences and approaches to working with sub-grantees, and provided advice for how your organization can position itself for success. You can still view the recording and receive links to all other materials here.