Government Funding: Navigating Contracts vs. Grants

When it comes to securing government funding for your business, contracts and grants offer two viable options. However, it can be challenging to understand the key differences between the two and navigate the application processes. In this article, we'll provide a clear and comprehensive breakdown of the key differences between contracts and grants. With this information, you'll be equipped to make a well-informed decision for your organization's future, whether you pursue a contract or a grant. We'll also guide you through the application process, giving you the knowledge and tools you need to succeed.

A contract is a legally binding document in which the parties (i.e., the contract sponsor and the contractor) agree to terms for the delivery of a product or services that benefit the sponsor in exchange for a fee paid to the contractor. A grant, on the other hand, is an award, usually financial, given by one the government to an organization to facilitate that organization’s goal (typically a public purpose such as addressing food insecurity or aiding the unhoused population). If the task is not fully accomplished there are rarely legal ramifications as would be the case in a contract.

	Contracts	Grants
Basic Purpose	To procure goods or services that benefit the sponsoring agency for a fee.	To provide funds to support the grantee’s mission or accelerate the development of innovative technology.
Scope	Conceived by contract sponsor. Defined and inflexible scope, scale, and budget.	Conceived by the grantee. Flexible scope, scale, and budget.
Solicitation Format	Request for Proposals (RFP) or Quotes (RFQ).	​Notice of Funding Opportunity (NOFO) or Request for applications (FRA)
Requirements	Myriad including large vs. small and disadvantaged business status; specific labor categories; security clearances; etc.	Typically include registration with relevant governing entities, non-profit status, in-kind or cost-sharing matching funds.
Resource Investment	High. Requires a proposal team including capture manager, proposal manager, multiple volume leads/writers, graphic artists, desktop publishing (DTP), editors, review teams; and hard copy proposal production.	Minor. No capture efforts required, smaller team (often just one or two writers), limited (or no) graphics/DTP. Allows for bidding on multiple grants.
Decision Timeframe	Generally 9-12 months.	Generally 1-3 months.
Award Amount	Varies but generally in the millions - $1B+.	Generally between $100,000–$5 million
Period of Performance	Generally multi-year. Provides reliable funding.	Generally one year or less. Not a long-term funding source. Requires continuous applications.
Payment	Based on deliverables and milestones met.	Awarded in lump sum generally upon award.
Reporting	Monthly reporting requirements.	Typically an annual reporting requirement.
Flexibility	Low. Must achieve agreed-upon performance goals. Failure can result in criminal/civil actions.	High. Often some freedom to adapt project parameters and fewer requirements on producing results.

Proposal Elements:

The government contracting process begins with an issuance of a request for proposal (RFP). The RFP details the specific goods or services the government seeks in exchange for payment. While these voluminous and technically complex documents vary by issuer, RFPs typically contain a statement of work (SOW) or a performance work statement (PWS) detailing the tasks the contractor must perform. The RFP also contains detailed instructions for producing the proposal (e.g., font and formatting; organization of the material; and proposal delivery) and evaluation factors for award. Any deviation from instructions risks disqualification. The specific required content varies, but proposals generally contain at least these four volumes:

• Technical Approach: Detailed description of the offerer's approach to performing the required tasks.

• Past Performance: Substantiation of the offerer's ability to perform the work based on previous successful efforts.

• Management Approach: Discussion of the protocols and systems to be used to manage the contract.

• Cost: Detailed accounting of all associated costs (labor, time, materials, etc.)

Submittal timelines vary but are traditionally between 30 and 90 days.

Grant Application Elements:

While varying by grantor, the process generally begins with a Notice of Funding Opportunity (NOFO) which outlines its purpose, eligibility constraints, application requirements, and evaluation criteria. Required elements generally include: organization background; organization's mission statement and evidence of mission impact; list of other major donors; description of alignment with grantor’s funding priority areas; and project summary (problem to be addressed; objectives and strategy for achieving them; understanding of other efforts to address the same problem and substantiation of unique approach; analysis of the project's risks and limitations, including how these factors will be addressed or minimized; project timeline and budget, etc.)

Applying for both contracts and grants offers diversification in funding sources to help organizations weather economic downturns and shifts in funding priorities. It also increases the universe of funding opportunities.

If you’re interested in pursuing grants or dissatisfied with your current prospects, consider GrantExec. GrantExec offers full grantseeking support from finding relevant grants, continuously searching for new opportunities, writing compliant and compelling grant applications, and assisting with reporting requirements.