The Federal Government provides funding for research and development (R&D) primarily by two mechanisms:

  1. Grants or Cooperative Agreements[1]
  2. Contracts

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

Contracts Grants
  • Used as a procurement funding mechanism (i.e. buyer/seller) for the direct benefit or use of the U.S. Government
  • Relatively inflexible as to scope of work, budget and changes
  • Failure to perform can result in potential legal action or financial consequences
  • May be unilaterally awarded at proposal stage without ability to negotiate terms and conditions

Governed by terms and conditions, including clauses from the Federal Acquisition Regulation (FAR)

  • Flexible funding mechanism to support public purpose (i.e. assistance mechanism)
  • Some flexibility to change Scope of Work, Budget, etc.
  • More freedom to adapt project
  • Usually only annual report

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.

[1] 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.