The Federal Government provides funding for research and development (R&D) primarily by two mechanisms:
Both types are considered to be legal contracts between the sponsor and the University, as they both involve a formal and legally binding agreement. Unlike a Grant or Cooperative agreement, the Federal Government uses contracts as a procurement mechanism.
Difference between Grants and Contracts
Governed by terms and conditions, including clauses from the Federal Acquisition Regulation (FAR)
Federal grants are governed by the administrative terms and conditions found in the grants administration manuals or handbooks of the sponsoring agency, e.g. the NSF Grant Policy Manual or the NIH Grants Policy Statement. These types of documents set forth the sponsor’s general terms and conditions of award and are derived from OMB Uniform Guidance.
 Cooperative Agreements are used when federal sponsors want to retain more active involvement in the conduct of the project. This active oversight may be evidenced by a high level of agency program officials advising on the direction of the project, more frequent reporting, or anticipated deliverables.