Grant: A type of financial assistance awarded for the conduct of research or other program as specified in an approved proposal. A grant is used whenever the awarding office anticipates no substantial programmatic involvement with the recipient during the performance of the activities.
Cooperative Agreement: An award similar to a grant, but in which the sponsor anticipates having substantial involvement in research activities once the award has been made.
Contract: A procurement mechanism for procurement of a product or service with specific obligations for both sponsor and recipient. Typically, a research topic and the methods for conducting the research are specified in detail by the sponsor, often in the Request for Proposal (RFP) which announces the funding opportunity. In general, there are greater performance expectations associated with contracts, including project milestones and detailed deliverables (e.g., reports). The arrangement is usually designed to benefit the sponsor by achieving an expected outcome or product.
The primary difference here is that financial assistance awards are intended to transfer something of value to the recipient to carry out a public purpose of “support or stimulation” as authorized by U.S. law. Student aid, research grants, and U.S. Department of Education block grants to states are examples of federal financial assistance. The federal government uses contracts for the purpose of acquiring goods and services for the direct benefit of or use by the U.S. government. In other words, the government has decided what it needs, and then looks for an entity that can provide that service or commodity for the best price.