Grants vs. Contracts: What's the Difference?

Updated November 10, 2026. Facts come from official pages read on that date (listed under Sources). EasBid is an independent bid search service and is not affiliated with any government agency.

A government contract buys goods or services for the government's own use, while a grant transfers money to a recipient to carry out a public purpose that a law supports. The difference matters to a business: contracts are what most vendors bid on, grants are mostly for governments, schools and nonprofits, and grant money often comes back to vendors as local bids. This guide explains the legal line, where each is posted, and how to find the bids that grants pay for.

What does federal law say the difference is?

The Federal Grant and Cooperative Agreement Act draws the line. Under 31 U.S.C. 6303, an agency uses a procurement contract when the principal purpose is to acquire, by purchase, lease or barter, property or services for the direct benefit or use of the federal government. Under 31 U.S.C. 6304, it uses a grant agreement when the principal purpose is to transfer a thing of value to a state, local government or other recipient to carry out a public purpose of support or stimulation authorized by federal law, rather than to acquire property or services for the government, and when substantial involvement by the agency is not expected.

A third tool sits between them. Under 31 U.S.C. 6305, an agency uses a cooperative agreement when the principal purpose is the same as for a grant (supporting a public purpose rather than buying for the government) but substantial involvement between the agency and the recipient is expected while the work is carried out. Grants.gov posts both grants and cooperative agreements. For a business, the practical test is simple: look at who the customer is. If the agency will receive and use what you deliver, the instrument should be a contract, and the federal contracting rules in the FAR apply. If the agency is paying for a project that serves the public and the recipient runs it, you are looking at assistance, and the uniform guidance in 2 CFR 200 applies instead.

In short: if the government is the customer, it is a contract; if the government is funding someone else's public-purpose project, it is a grant.

Who can apply for each?

Federal contracts are open to businesses of any size that meet the solicitation's requirements and have an active SAM.gov registration, with many reserved for small businesses. Grants.gov's eligibility page lists the kinds of applicants funding opportunities can be open to: state, county, city and township, special district and tribal governments; education organizations; public housing organizations; nonprofits; for-profit organizations; small businesses; and individuals. It notes that small business grants go to companies meeting SBA size standards. Each funding opportunity names its own eligible applicants, and many are open only to governments and nonprofits.

Grants.gov describes a grant as one of many forms of federal financial assistance, a broad term for the ways the government sends resources to eligible recipients.

Where is each posted?

Federal contract opportunities are posted on SAM.gov; FAR 2.101 names it as the single point where opportunities above $25,000 can be reached by the public. Federal grant and cooperative agreement opportunities are posted on Grants.gov. States and cities post their own grant programs and their own contract bids on their own sites. EasBid lists contract bids, not grant opportunities.

How does grant money become bids for vendors?

When a state, city, school district or nonprofit receives a federal grant and spends it on goods or services, it has to buy competitively under the federal uniform guidance. 2 CFR 200.331 explains that a pass-through entity decides case by case whether an organization receiving federal funds is a subrecipient or a contractor, and that the same entity can be a recipient, a subrecipient and a contractor at once. A contractor is the vendor that sells to the grant recipient.

2 CFR 200.319 says procurement under a federal award must give full and open competition, and it excludes contractors who wrote the specifications from competing on them. 2 CFR 200.320 sets out informal methods for micro-purchases and simplified acquisitions, formal methods (sealed bids or proposals with public notice) above the recipient's simplified acquisition threshold, and noncompetitive methods only in limited cases; it says sealed bids are preferred for construction. 2 CFR 200.321 asks recipients, when possible, to include small, minority, women-owned and veteran-owned businesses on solicitation lists.

That is why so many grant-funded projects appear as ordinary local bids: road and transit work, school technology, water systems and public health services. Search them on EasBid by state or by keyword.

Which is better for a small business?

For most vendors, contracts. A contract pays you to deliver something the buyer defines, and the work is posted for open competition. Grants usually fund a project you propose and carry their own reporting and cost rules, and most are not open to for-profit firms. Grants.gov says small business grants may go to companies that meet SBA size standards, so check the eligibility section of each listing before you spend time on an application. A practical approach is to bid on contracts directly and watch for the local bids that grant money creates.

What are common mix-ups?

"Free government grants" ads. Federal grants are posted on Grants.gov and applying there does not require paying a third party.
Treating a grant-funded bid like a federal contract. The local owner runs it under its own rules plus the federal uniform guidance, so you bid on the owner's portal, not SAM.gov.
Confusing subawards and subcontracts. A subaward funds part of a grant project; a subcontract buys goods or services. 2 CFR 200.331 explains how the pass-through entity tells them apart.

Frequently asked questions

Is a grant the same as a contract?

No. Under 31 U.S.C. 6303 and 6304, a contract acquires property or services for the government's own use, while a grant transfers money to carry out a public purpose authorized by law.

Can a for-profit business get a federal grant?

Sometimes. Grants.gov lists for-profit organizations and small businesses among possible applicant types, but each funding opportunity names who is eligible, and many are open only to governments and nonprofits.

Where are federal grants posted?

On Grants.gov. Federal contract opportunities are on SAM.gov, and state and local programs are on their own sites.

Do grant-funded purchases have to be competitive?

Yes. 2 CFR 200.319 requires full and open competition for procurement under a federal award, and 2 CFR 200.320 requires formal methods with public notice above the recipient's simplified acquisition threshold.

Does EasBid list grants?

No. EasBid lists government contract bids, including local bids paid for with grant funds, and links each one to the official notice.

Sources

31 U.S.C. 6303 Using procurement contracts (uscode.house.gov, read November 10, 2026)
31 U.S.C. 6304 Using grant agreements (uscode.house.gov, read November 10, 2026)
Grants 101 (Grants.gov) (grants.gov, read November 10, 2026)
Grant eligibility (Grants.gov) (grants.gov, read November 10, 2026)
FAR 2.101 Definitions (acquisition.gov, read November 10, 2026)
2 CFR 200.319 Competition (ecfr.gov, read November 10, 2026)
2 CFR 200.320 Procurement methods (ecfr.gov, read November 10, 2026)
2 CFR 200.321 Contracting with small, minority and women's businesses (ecfr.gov, read November 10, 2026)
2 CFR 200.331 Subrecipient and contractor determinations (ecfr.gov, read November 10, 2026)
31 U.S.C. 6305 Using cooperative agreements (uscode.house.gov, read November 10, 2026)

General information, not legal advice. Always follow the instructions in each solicitation.

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Grants vs. contracts: what is the difference?