Donors and international institutions involved in dispersing foreign aid routinely employ contracts with intermediaries such as I/NGOs and private firms to carry out functions relating to health service development and delivery. Based on an ESRC-DFID funded study on the role and functions of aid funded maternal and child health projects and programmes in Nepal since 1990, this paper discusses how projects are conceptualized and designed, awarded and out-sourced, sub-contracted to local NGOs, implemented, managed and evaluated. In particular, this paper looks at two projects that are implemented in the community with a specific focus on capacity building of health workers and improvement of health services through community participation. Data for this paper is drawn from a detailed case studies of a) Strengthening Approaches for Maximizing Maternal, Neonatal, and Reproductive Health (SAMMAN) Project, which is a three-year project managed by Care Nepal and funded by a corporate donor- Glasgow Smith Kline; and, b) Strengthening Reproductive Health Service Project through Improving Health Facilities and Capacity Building for Medical Service workers (SRH), which is a three year project managed by ADRA Nepal and funded by the Government of Japan.