In my last post I discussed the various types of grants the federal government uses to support national priorities. But grants aren’t the only way that the federal government provides financial assistance to eligible entities–other funding instruments include cooperative agreements and contracts. While the overwhelming majority of grants are awarded to non-business entities (e.g., state and local governments, schools and universities, nonprofit organizations, etc.), many cooperative agreements and contracts are awarded to for-profit businesses. Below is an overview of the key differences between grants, cooperative agreements and contracts.
In addition to grants, the federal government also awards funds directly to business entities through cooperative agreements. Like grants, cooperative agreements are typically awarded through a competitive process. A key difference between the two is that cooperative agreements include a much higher level of active involvement by the funding party than a typical grant does. Here is what the federal government says about cooperative agreements: “An executive agency shall use a cooperative agreement as the legal instrument reflecting a relationship between the United States Government and a State, a local government, or other recipient when—
- The principal purpose of the relationship 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 instead of acquiring (by purchase, lease, or barter) property or services for the direct benefit or use of the United States Government; 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.
Essentially, a cooperative agreement is a form of assistance relationship where the Federal agency is substantially involved during the performance of the award. Other than that, a cooperative agreement operates much like grant, with the same competitive application process.
Federal contracts are often awarded through a competitive bidding process—somewhat similar to grants—and are agreements between local, state or federal government agencies and private businesses, non-profit organizations or other entities. Contracts require the provision of specified services and often incorporate specific performance standards that contractors must meet. Other than the terms outlined in the agreement, there is generally little direct federal government involvement in the execution of contracts.
In an upcoming post I’ll talk more about how to find federal grant, cooperative agreement and contract opportunities to which you can apply.