What is the difference between a grant and a contract?
Grants vs Contracts vs Cooperative Agreements
A procurement contract is used when a federal agency’s principal purpose is to acquire goods or services for its own use. A grant transfers a thing of value to carry out a public purpose, with no substantial agency involvement. A cooperative agreement is a grant where substantial involvement is expected.
Current figures — verified 2026-08-11
Item Value Source Deadline to file most bid protests with GAO not later than 10 days after the basis of protest is known 4 CFR 21.2 Deadline to appeal a contracting officer’s decision to an agency board 90 days from receipt 41 U.S.C. § 7104 Deadline to bring a contract claim in the Court of Federal Claims 12 months from receipt of the decision 41 U.S.C. § 7104 Single Audit trigger $1,000,000 in federal awards expended per fiscal year 2 CFR 200.501 These figures change. Verify against the linked source before relying on them. Report an outdated figure
Key takeaways
- Principal purpose decides the instrument; the agency chooses, not the applicant.
- Substantial involvement means an agency participates in the work, not monitors it.
- Contracts run under the FAR; grants run under the Uniform Guidance.
- Contract results are usually bought; grant inventions usually stay with the recipient.
- Bid protest rights attach to contracts, not to assistance awards.
What is the difference between a grant and a contract?
The difference is set by statute rather than by preference, and it governs every track in the funding tracks hub. The Federal Grant and Cooperative Agreement Act directs an executive agency to use a procurement contract when the principal purpose “is to acquire (by purchase, lease, or barter) property or services for the direct benefit or use of the United States Government” (31 U.S.C. § 6303). The government is buying something for itself.
An agency must use a grant agreement when the principal purpose “is to transfer a thing of value to the State, local government, or other recipient to carry out a public purpose of support or stimulation authorized by a law of the United States” and “substantial involvement is not expected” (31 U.S.C. § 6304). Nobody acquires anything; the agency is advancing a purpose it wants advanced.
A cooperative agreement is identical to a grant on the purpose test and differs only on the second question. The statute applies where the purpose is a transfer and “substantial involvement is expected between the executive agency and the State, local government, or other recipient when carrying out the activity contemplated in the agreement” (31 U.S.C. § 6305). Where all three sit in the wider system is mapped in federal grants explained.
The table below compares the three instruments on the two statutory questions and on what the recipient owes.
| Instrument | Principal purpose | Substantial involvement | Core obligation |
|---|---|---|---|
| Procurement contract | Acquire property or services for government use | Not the test | Deliver to specification |
| Grant agreement | Transfer value for a public purpose | Not expected | Spend on the approved purpose |
| Cooperative agreement | Transfer value for a public purpose | Expected | Spend on the purpose, jointly executed |
What is substantial involvement in a cooperative agreement?
Substantial involvement is programmatic participation by the agency in the work itself, not administrative oversight of it. The distinction is deliberate: routine monitoring, financial reporting, and site visits are ordinary stewardship on any assistance award and do not make an award a cooperative agreement.
The Department of Defense’s assistance regulation states the concept precisely, noting that substantial involvement is “a relative, rather than an absolute, concept” that is “primarily based on programmatic factors” and “may include collaboration, participation, or intervention in the program or activity to be performed under the award” (32 CFR 22.215). The same regulation adds a guardrail worth quoting:
“Under no circumstances are cooperative agreements to be used solely to obtain the stricter controls typical of a contract.” — 32 CFR 22.215(a)(2)
A concrete example makes the abstraction usable. In a model cooperative agreement, the Department of Energy’s Office of Energy Efficiency and Renewable Energy states that it “shares responsibility with the Recipient for the management, control, direction, and performance of the Project,” that it “may intervene in the conduct or performance of work under this Award for programmatic reasons,” and that it “may redirect or discontinue funding the Project based on the outcome” of a go/no-go decision point (DOE EERE model cooperative agreement). Other common forms: agency approval of annual work plans, concurrence in the selection of key personnel, and a federal scientist working alongside recipient staff.
A notice of funding opportunity offering a cooperative agreement must describe the substantial involvement, and that paragraph tells you how much unilateral control you will hold. Reading it before writing the work plan is part of how to read a NOFO.
Which rule sets govern grants and contracts?
Grants and contracts run under two different bodies of regulation that share almost no text. Federal procurement runs on the Federal Acquisition Regulation, which “applies to all acquisitions as defined in part 2 of the FAR, except where expressly excluded” (FAR 1.104). Federal financial assistance runs on the Uniform Guidance in 2 CFR Part 200, which each agency adopts into its own title of the Code of Federal Regulations.
The Uniform Guidance mirrors the statutory test in its own definitions. A cooperative agreement is distinguished from a grant “in that it provides for substantial involvement of the Federal agency or pass-through entity in carrying out the activity,” while a grant agreement “does not provide for substantial involvement.” A contract, in the assistance context, is “a legal instrument by which a recipient or subrecipient conducts procurement transactions under a Federal award” (2 CFR 200.1).
The detail table below compares the two regimes on the dimensions that change day-to-day operations.
| Dimension | Procurement contract | Grant or cooperative agreement |
|---|---|---|
| Governing rules | Federal Acquisition Regulation, agency supplements | 2 CFR Part 200 and agency adoptions |
| Award official | Contracting officer | Grants officer or agreements officer |
| Evaluation basis | Best value, including price and past performance | Merit review against published criteria |
| Cost principles | FAR Part 31 | 2 CFR Part 200 Subpart E |
| Performance obligation | Deliver to specification; nonperformance is breach | Make good-faith effort toward the approved scope |
| Payment | Invoice against deliverables or allowable costs | Advance or reimbursement drawdown |
| Audit regime | Contract audit, incurred cost, and possible cost accounting standards | Single Audit above the expenditure threshold |
| Reporting | Contract data requirements set by the contract | Financial and performance reports set by the award terms |
| Termination | Agency may terminate for convenience or default | Agency may terminate for noncompliance or under award terms |
| Dispute route | Contract Disputes Act claim and appeal | Agency objection, hearing, and appeal procedures |
Evaluation deserves a note. Procurement source selection sits on a continuum where “the relative importance of cost or price may vary,” and price dominates when a requirement is clearly definable (FAR 15.101). Assistance review scores published merit criteria, with price appearing only as budget reasonableness. A first-time bidder with no past performance record carries a structural disadvantage in procurement that writing quality does not fix; the same organization can win an assistance award on the proposal alone.
Who owns the results and the intellectual property?
Ownership diverges sharply, and the divergence is one of the strongest practical reasons to care which instrument you are signing. On procurement contracts, the government’s default position on data is broad. The FAR defines unlimited rights as “the rights of the Government to use, disclose, reproduce, prepare derivative works, distribute copies to the public, and perform publicly and display publicly, in any manner and for any purpose, and to have or permit others to do so” (FAR 27.401). Agencies acquire data to obtain competition among suppliers, disseminate results, and meet logistics needs (FAR 27.402).
Patent rights follow a different and more favorable rule that applies across both instruments. Under the Bayh-Dole framework, each nonprofit organization or small business firm “may, within a reasonable time after disclosure,” elect to retain title to any subject invention made with federal funding, subject to disclosure, election, and filing obligations and to a government license for government purposes (35 U.S.C. § 202). Missing a disclosure or election deadline is how title is actually lost, not the instrument type.
Data and software are where the instruments part company. Contracts specify data rights through negotiated clauses, and deliverables typically carry unlimited government rights unless the data was developed at private expense and properly marked. Assistance awards have no deliverable-acquisition mechanism at all, because the agency is not buying a deliverable; obligations run instead to public access, data sharing, and award reporting terms. The practical rule for a company: on a contract, marking discipline determines what the government may hand to a competitor, while on a grant the disclosure and election calendar determines whether you keep your patents.
How do competition, protest, and appeal rights differ?
Protest and appeal rights are among the sharpest differences, and applicants routinely assume rights they do not have. Procurement carries a formal protest forum: a protest “concerning an alleged violation of a procurement statute or regulation shall be decided by the Comptroller General if filed in accordance with this subchapter” (31 U.S.C. § 3552). Timing is unforgiving — most protests must be filed within a short fixed window after the basis is known (4 CFR 21.2).
Contract performance disputes have their own statutory track. A contractor may appeal a contracting officer’s final decision to an agency board of contract appeals, or instead “bring an action directly on the claim in the United States Court of Federal Claims, notwithstanding any contract provision, regulation, or rule of law to the contrary,” each within its own deadline (41 U.S.C. § 7104).
Assistance awards have neither. There is no bid protest of a grant selection at the Government Accountability Office, and there is no Contract Disputes Act claim. What exists instead is an administrative process: a federal agency “must maintain written procedures for processing objections, hearings, and appeals,” and upon initiating a remedy for noncompliance must give the recipient “an opportunity to object and provide information challenging the action” (2 CFR 200.342).
Termination differs in kind as well. An assistance award may be terminated for noncompliance, by mutual consent, by the recipient, or “pursuant to the terms and conditions of the Federal award, including, to the extent authorized by law, if an award no longer effectuates the program goals or agency priorities” (2 CFR 200.340). A termination for a recipient’s material failure to comply is reported in SAM.gov under the same section. No single government-wide statute sets a grant appeal deadline, though: what a recipient may challenge, and by when, comes from the award’s own terms and the agency’s written objection, hearing, and appeal procedures. Consequences and process are covered in grant termination, suspension, and appeals.
How can you tell which instrument an announcement is offering?
Announcements label themselves, and the label is usually in a structured field rather than in the prose. Assistance opportunities posted on Grants.gov carry a coded funding instrument type — “G = Grant,” “CA = Cooperative Agreement,” “PC = Procurement Contract,” and “O = Other” (Grants.gov XML extract). Procurement opportunities are posted separately on SAM.gov’s contract opportunities system.
Four secondary tells resolve any remaining ambiguity. Vocabulary is the fastest: a procurement solicitation addresses an “offeror” submitting a “proposal” or “quotation” against a “statement of work” or “performance work statement,” while an assistance announcement addresses an “applicant” submitting an “application” against a “program narrative.” The regulatory citations differ — FAR clause numbers in one, 2 CFR Part 200 references in the other. The award official differs, contracting officer versus grants officer. And an assistance announcement carries an Assistance Listing number in the format XX.XXX.
The same agency may fund similar work under either instrument, and this is normal rather than a mistake. Small business research programs are the clearest case: several agencies award research phases as grants while others award the identical phase as contracts, which imports acquisition regulation, cost accounting, and negotiated data rights clauses into what looks like the same program. Program mechanics are covered in SBIR and STTR explained.
What goes wrong when organizations treat grants and contracts alike?
Organizations that pursue both instruments with one process fail in five predictable ways.
- Running procurement capture as grant writing. Contract source selection weighs past performance and price realism. A narrative about mission fit, submitted without a performance record or a defensible cost volume, loses to a competitor with both.
- Assuming protest rights exist on an assistance decline. A declined applicant looking for a protest forum finds none, and burns the reconsideration window that actually exists while looking.
- Applying grant cost principles to a contract. Allowability under FAR Part 31 and allowability under 2 CFR Part 200 Subpart E are separate rule sets with different treatment of the same expense categories. Cost logic is developed in allowable, allocable, and reasonable costs.
- Missing the audit step-up. Crossing the federal expenditure threshold converts a bookkeeping function into an audited one, an obligation no single award budgeted for (2 CFR 200.501).
- Ignoring the substantial involvement paragraph. A team that writes a cooperative agreement work plan as though it were a grant discovers mid-project that the agency holds redirection authority over the scope.
The workable posture is one capability and two processes. The same technical staff, the same past-performance library, and the same cost data support both channels; the capture motion, the compliance matrix, and the review calendar should not be shared. Building that internal function is covered in building a grants function.
Frequently asked questions
Can an applicant choose whether to receive a grant or a contract?
No. Federal law directs the agency to select the instrument based on principal purpose and expected involvement, and an agency acquiring services for its own use must contract (31 U.S.C. § 6303). An applicant can choose which announcements to pursue, not which instrument an agency issues.
Does the Federal Acquisition Regulation apply to grants?
No. The FAR governs acquisitions (FAR 1.104). Grants and cooperative agreements are governed by the Uniform Guidance in 2 CFR Part 200 as adopted by each agency. Procurements a recipient makes with grant funds are a separate matter and follow the procurement standards inside the Uniform Guidance.
Is a cooperative agreement harder to manage than a grant?
Not harder, but less autonomous. The administrative rules are the same body of regulation; what changes is that agency staff participate in decisions about the work — approving plans, redirecting scope, gating tranches at decision points. Budget for the meeting load and the approval latency.
Can you protest the award of a federal grant?
Not through the bid protest system. Protests at the Government Accountability Office concern federal contracts (31 U.S.C. § 3552). Assistance recipients have administrative objection, hearing, and appeal procedures that each agency must maintain in writing (2 CFR 200.342), and some agencies publish a reconsideration process for declined applications.
Who owns a patent from federally funded work?
Under the Bayh-Dole framework, a nonprofit or small business firm may elect to retain title to a subject invention, subject to disclosure, election, and filing deadlines and to a government license (35 U.S.C. § 202). The rule applies to both assistance awards and contracts; missed deadlines, not instrument type, are what cost recipients title.
Are contract revenue and grant revenue treated the same financially?
No. Contract revenue is earned revenue against delivered goods or services and strengthens a balance sheet accordingly. Assistance funding is restricted, conditional, and subject to disallowance and return. The two produce different pictures of the same organization to a lender or investor.
Related topics
- Funding Tracks by Funder Type — the hub for how each funding track behaves
- Federal Grants Explained
- SBIR and STTR Explained
- Non-Dilutive Capital for Startups
- Grants vs Loans, Equity, and Contracts
Sources
- U.S. Code. 31 U.S.C. § 6303 — Using procurement contracts. Legal Information Institute, Cornell Law School. https://www.law.cornell.edu/uscode/text/31/6303 (accessed 2026-08-11)
- U.S. Code. 31 U.S.C. § 6304 — Using grant agreements. Legal Information Institute, Cornell Law School. https://www.law.cornell.edu/uscode/text/31/6304 (accessed 2026-08-11)
- U.S. Code. 31 U.S.C. § 6305 — Using cooperative agreements. Legal Information Institute, Cornell Law School. https://www.law.cornell.edu/uscode/text/31/6305 (accessed 2026-08-11)
- U.S. Code. 31 U.S.C. § 3552 — Protests by interested parties concerning procurement actions. Legal Information Institute, Cornell Law School. https://www.law.cornell.edu/uscode/text/31/3552 (accessed 2026-08-11)
- U.S. Code. 41 U.S.C. § 7104 — Contractor’s right of appeal from decision by contracting officer. Legal Information Institute, Cornell Law School. https://www.law.cornell.edu/uscode/text/41/7104 (accessed 2026-08-11)
- U.S. Code. 35 U.S.C. § 202 — Disposition of rights. Legal Information Institute, Cornell Law School. https://www.law.cornell.edu/uscode/text/35/202 (accessed 2026-08-11)
- Code of Federal Regulations. 4 CFR § 21.2 — Time for filing. Legal Information Institute, Cornell Law School. https://www.law.cornell.edu/cfr/text/4/21.2 (accessed 2026-08-11)
- Department of Defense. 32 CFR § 22.215 — Distinguishing grants and cooperative agreements. Legal Information Institute, Cornell Law School. https://www.law.cornell.edu/cfr/text/32/22.215 (accessed 2026-08-11)
- Office of Management and Budget. 2 CFR 200.1 — Definitions. eCFR. https://www.ecfr.gov/current/title-2/subtitle-A/chapter-II/part-200/subpart-A/section-200.1 (accessed 2026-08-11)
- Office of Management and Budget. 2 CFR 200.340 — Termination. Legal Information Institute, Cornell Law School. https://www.law.cornell.edu/cfr/text/2/200.340 (accessed 2026-08-11)
- Office of Management and Budget. 2 CFR 200.342 — Opportunities to object, hearings, and appeals. Legal Information Institute, Cornell Law School. https://www.law.cornell.edu/cfr/text/2/200.342 (accessed 2026-08-11)
- Office of Management and Budget. 2 CFR 200.501 — Audit requirements. eCFR. https://www.ecfr.gov/current/title-2/section-200.501 (accessed 2026-08-11)
- General Services Administration. FAR 1.104 — Applicability. Acquisition.gov. https://www.acquisition.gov/far/1.104 (accessed 2026-08-11)
- General Services Administration. FAR 15.101 — Best value continuum. Acquisition.gov. https://www.acquisition.gov/far/15.101 (accessed 2026-08-11)
- General Services Administration. FAR Subpart 27.4 — Rights in Data and Copyrights. Acquisition.gov. https://www.acquisition.gov/far/subpart-27.4 (accessed 2026-08-11)
- U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy. Model Cooperative Agreement. https://www.energy.gov/sites/prod/files/2016/07/f33/eere_110_model_cooperative_agreement.pdf (accessed 2026-08-11)
- Grants.gov. Online Help: XML Extract — Funding Instrument Type. https://www.grants.gov/help/xml-extract/ (accessed 2026-08-11)