From The Vault: Grants v. Contracts

[Occasionally, we like to revisit posts from days gone by that either (1) are always relevant, or (2) are the subject of recent questions received by our office.  In today’s From The Vault, we look at the differences between grants and contracts.]

While both grants and contracts are generally processed in the same office, and even, on occasion , by the same person, each have their own characteristics that are unique.  Because we’ve received many questions concerning their differences, we thought it would be helpful to provide a brief overview of each to highlight issues of which to be aware.  We’ll start with focus on the general differences between federal grants and contracts, and, in later posts, will discuss the different obligations and terms to negotiate in each award.

By definition, 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 (31 USC 6101(3)).  Given its more generalized intent, the work to be performed by a PI under a grant is very much at his/her discretion.  While the PI must remain within the scope of work incorporated into the proposal, he/she has much more scientific freedom to accomplish the funded purpose.  As a result, there is usually less scientific direction provided by the agency, and the parties are more likely to be able to amend the terms of the grant (e.g. budget, scope of work) to better reflect the PI’s efforts.

Financially, disbursements under a grant are usually made annually in lump sum payments, as any milestones contemplated in the award are typically not tied to a specific payout.  Consequently, the PI’s focus is on the provision of results at the end of the research project and not on interim deliverable.

On the flip side, a contract is an award whereby one entity agrees to provide goods or services to another entity in exchange for consideration.  Since a contract is effectuated when the ‘buyer’ has a specific task in mind, the PI is relatively constrained as to the efforts he/she can take to perform the research.  As a result, the scientific personnel of the sponsor may have significant input as to the method of the PI’s research and the manner in which it is undertaken.  Correspondingly, there is much less flexibility to modify the scope of work or the budget as compared to a grant.

From a financial perspective, payments are tied to specific deliverables and milestones that are attained by certain agreed-upon dates.  As a result, there is increased pressure for the PI to hit his/her milestones in a timely fashion, as the monies received will go to the reimbursement of any costs incurred to that point.

[Next: Post-award requirements, such as reporting and close-out responsibilities.]