Grants vs. Contracts: The Definitive Guide for 2019


Should you go after federal grants, contracts, or both?

Well, in this blog post, we’re going to answer that question and a lot more.

So if you want to know…

  • The difference between a federal grant and a federal contract
  • Who is eligible for federal grants
  • Where you can find grants
  • If you should pursue grants or contracts

Then you have come to the right place.

So keep reading OR just check out this episode of Federal Insider Live:

Federal Grant vs. Federal Contract

The main difference between a federal grant and a federal contract comes down to purpose.

The U.S. Federal Government issues contracts when it needs a product or service in order to do its job. On the other hand, Uncle Sam will write out grants for purposes and causes that he deems to be in the name of “the greater good.”

Here’s a quick example:

If the government needed to buy medication for a VA hospital, they’d issue out a contract to buy the medication.

If they wanted a new type of medication or cure developed, they’d issue a grant for research and development.

Don’t however, let this example limit your view on grants vs. contracts. Federal grants aren’t just for research. Some go to nonprofits, some to local and state governments, and they’re also available to help students get through college.

Also, if you’re an inventor, you should know that there are contracting opportunities for you. You may have to do a bit more reaching out and some marketing for your innovation, but there is room in federal contracting for inventors. DARPA is a federal agency which writes out contracts for research and development.

Federal Contracts and Federal Grants both:

  • Supplement your entity
  • Require a great amount of accountability (grants are not “free money”)
  • Have a formalized process for obtainment
  • Are for a limited time or for the purpose of achieving a specific goal

Also, the federal government spends roughly $500 billion per year on grants and $500 billion on contracts making a total of $1 trillion every year.

Who is eligible for federal grants? 

You do not want to spend all of this time pursuing federal grants…only to find out you’re not eligible.

Here’s just a rundown of who can get federal grants:

  • Government Organizations (state, county, city, Native American tribes)
  • Educational Institutions
  • Public Housing Organizations
  • Nonprofit Organizations
  • For-Profit Organizations
  • Small Businesses
  • Individuals
  • Foreign Applicants

“Well, that pretty much seems like…everyone.”

It does.

Your true eligibility relies on three main factors:

  1. Registration in the System for Award Management (SAM).
  2. Registration in
  3. The specific legal requirements of the particular federal grant.

Where to Find Grants 

To find opportunities for federal grants, you will simply go to the Search Page of

On the left-hand side of the screen, you will find a bunch of search criteria for grants. When you fill in the appropriate fields, the results will get narrowed down to appropriate opportunities.

Surprisingly, for a government website, it’s pretty easy to use.

The majority of grants will come in these main varieties:

Standard – May fall into the category of Fixed Amount of Work or Simplified. The government awards you with a fixed amount of funding and you get to retain the supplies when the work is complete.

Cooperative Agreement – The government will have substantial involvement with the grant. If you exceed over $5,000 in supplies, you are required to request disposal of materials from the government.

Discretionary – These are competitive grants which the government will award based on merit.

Mandatory (formula, block) – Noncompetitive grants which are generally for local and state governments.

Should You Go After Federal Grants or Federal Contracts?

Now it’s time to answer the key question of this blog post.

Basically, it comes down to…your needs and aspirations.

A federal grant is supposed to be a supplement toward what you’re trying to achieve. One single grant from the federal government isn’t going to pay you through your goals. It’s just a major step toward getting there.

A federal contract is a solid stream of revenue. People pursue federal contracts because they know that Uncle Sam is a reliable customer who is always looking to spend money.

Nonprofits, universities, and local governments tend to go after federal grants. Businesses tend to go after contracts.

However, this doesn’t mean that grants and contracts are limited to the type of entity. If you were a nonprofit for example, there would be nothing stopping you from pursuing both federal grants and contracts. What would matter the most, is how the money you made from contracts was distributed throughout your organization (to keep your nonprofit status).

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