What's the difference between a Federal Government grant and contract

Many times when I talk with small businesses, they don't fully understand the difference between a Federal Grant and a Federal Contract. It is important for a small business to completely understand if their government funds are coming from a grant or a contract.  The terms and conditions surrounding each have somewhat unique requirements that may have implications on how the business handles the award and, in particular, the accounting related to that award. 

The Government defines the difference in fairly easy to understand terms (for the government) at the grants.gov website:

A Grant is an award of financial assistance, the principal purpose of which is to transfer a thing of value from a federal agency to a recipient to carry out a public purpose of support or stimulation authorized by a law of the United States (see 31 U.S.C. 6101(3)). A grant is distinguished from a contract, which is used to acquire property or services for the federal government's direct benefit or use.

So, in essence the Federal Government is expecting something to be delivered from a contract, either a good or a service.  A grant, on the other hand, usually doesn't expect a deliverable. Pretty simple, right?  Let's look at the SBIR program for a minute.  There are 11 agencies with budgets; (Defense{DOD}, Health {NIH}, Energy {DOE}, Aeronautics & Space {NASA}, Science {NSF}, Agriculture {USDA}, Education {ED}, Homeland Security {DHS}, Transportation {DOT}, Environment {EPA} and Commerce {NOAA & NIST}).  Of those 11 agencies, a little over half are what is called contracting agencies and the remainder are considered granting agencies (where most of their awards are grants, not contracts).  Yet, the SBIR program is fairly uniform in it's objectives.  The primary differences can be summarized as follows:

Contracting Agencies	Granting Agencies
Highly focused topics	Less specific topics
More fiscal requirements	More flexibility in use of funds
Procurement Mechanism for some agencies	Assistance mechanism

 

 

 

 

 

 

 

The requirements for the awardee's accounting system vary somewhat as well.  While all the agencies tend to like the same type of job cost accounting system, some agencies are more strict about having the awardee follow complex guidelines in their accounting practices.  Again, those tend to line up along the difference between contracting and granting agencies with contracting agencies expecting more from their awardees and going to greater lengths usually to verify this.  It is fairly interesting to note the differences when comparing all agencies in a chart (based on 2012 numbers):

	DOD	NIH	DOE	NASA	NSF	USDA	ED	DHS	DOT	EPA	NOAA/NIST
SBIR	X	X	X	X	X	X	X	X	X	X	X
STTR	X	X	X	X	X
Contract (CO) Grant (GR)	CO	GR (some CO)	GR	CO	GR	GR	GR (some CO)	CO	CO	CO	CO
Approx SBIR/STTR Budget	$1.1B	$717M	$188M	$162M	$151M	$19M	$13M	$13M	$9M	$5M	$5M

 It is always best to check with an expert when a company moves from one agency to another for an award or from one type of award to another type of award.  This will help ensure that the company can comply with all the government regulations and be successful.