Assistance and Acquisition: Key Differences from the Perspective
of an Acquisition Professional
Author: Edward Girovasi, Adjunct Faculty, Graduate School USA

In FY 2019, federal agencies cumulatively obligated over $767 billion in grants and cooperative agreements, compared to $589 billion obligated by procurement contracts. This trend of greater grant and cooperative agreement obligations has been consistent over the last decade. Many federal agencies rely on their contracting personnel to also handle the business side of the assistance process—soliciting applications, overseeing merit reviews, and executing the resulting grants award documents. For this reason, it is important to understand the fundamental differences between the federal acquisition and assistance systems.   
Federal assistance is defined as “the transfer of anything of value for a public purpose of support or stimulation authorized by U.S. law.” Assistance includes grants, cooperative agreements, loans, loan guarantees, mortgage insurance, and other types of financial transfers. Acquisition, in contrast, is purchase of goods or services for the direct benefit and use of the federal government.
As noted, both grants and cooperative agreements are forms of assistance. The only distinction between the two is the presence of substantial federal involvement during performance under a cooperative agreement. For example, Agency X is authorized to fund science and technology projects that advance its mission, and which offer viability in commercial application. Those selected will work with agency representatives to share the risks and benefits of the funded research-- a classic cooperative agreement relationship.
For purposes of this comparison, we will focus on grants and cooperative agreements; they most closely parallel the acquisition process used when conducting competitive negotiations (FAR Part 15). In addition, this paper will use the term “grant” to refer to both grants and cooperative agreements. It will review several features and characteristics of the acquisition and assistance systems to illustrate key differences between them.

Key Authorities and Statutes

On the acquisition side of the ledger we have the Constitution and its grant of sovereign authority to the Executive branch to enter into contracts necessary to carry out governmental operations. General contracting authority vests in the secretaries, administrators and other agency heads and is delegated down to appropriate agency personnel. Then we have specific statutes that outline how the acquisition system must operate. The most significant are the Armed Services Procurement Act (1948) and the Federal Property and Administrative Services Act (1949).

Assistance does not have a similar overarching set of laws. Instead, we have the Federal Grant and Cooperative Agreement Act of 1977, an administrative statute. It was passed to clarify the purpose and use of the named instruments; however, it does not authorize the award of grants or cooperative agreements. That requires a specific program statute to authorize the use of assistance awards for specific activities and types of eligible recipients.

Regulatory System

The two primary acquisition statutes (and their separate regulations) were harmonized in 1984 when the Federal Acquisition Regulation (FAR) was first issued. Individual agencies issue FAR Supplements to implement FAR requirements and, as necessary, supplement its content to meet agency-specific acquisition missions.  

Federal assistance has an overarching regulatory regimen; however, it addresses only its administrative requirements.
These are:

  • 2 CFR Subtitle A, Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards; and
  • 2 CFR Subtitle B, Federal Agency Regulatory Implementation of OMB Guidance (2 CFR Parts 300 – 5999)

Specifics about projects or activities that may be funded, the use of grants and/or cooperative agreements, eligible recipients, possible selection criteria, etc. are found only in the program authorization statutes or in agency implementing regulations.

Competition Standards

The Competition in Contracting Act established competition as the expected norm for the federal acquisition system. Under the Act’s “full and open competition” standard, any supplier may elect to respond to the government’s solicitation. Authorized variances include “full and open competition after exclusion of sources” and “other than full and open competition”. The former covers several situations under which the government may exclude some suppliers from submitting offers, most frequently to “set-aside” a procurement for competition among small business concerns of various types. The latter authorizes restriction of competition to a single source (or a limited number of sources) based on the application of one of seven statutory exceptions to the full and open standard.

The Federal Grant and Cooperative Agreement Act encourages competition in the award of grants and cooperative agreement. Statutes authorizing grant or cooperative agreement programs generally define the types of recipients eligible to receive funding; only those entities included may receive an award. Another factor affecting the extent of competition is whether the program is mandatory or discretionary. Mandatory programs require awards to be made to specific organization(s) that meet statutorily defined eligibility and compliance requirements. The applicable law may provide a formula by which funds are distributed or may set specific amounts. In contrast, discretionary programs permit the government to select the recipient and project to be supported within statutorily defined limits. Discretionary awards most closely resemble the acquisition process in that competition among eligible recipients is the norm. Noncompetitive awards are only permitted if expressly authorized in the program statute and agencies generally require some form of supporting justification.

Evaluation/Selection Criteria

The establishment of criteria used to evaluate offers in a competitive acquisition is a matter of agency discretion, provided they represent the key areas of importance and emphasis to be considered in the selection decision, and will support meaningful comparison and discrimination between and among competing proposals. Generally, agencies must consider price (or cost), quality of the product or service and past performance.

Evaluation criteria for grant awards may be defined in the authorizing program statute or agency implementing regulations. They may also include program policy factors designed to facilitate the selection of a range of projects that would best serve program objectives. Examples include geographic distribution, diversity among the types and size of recipients, and diversity in methods, approaches or kinds of projects supported.

Selection and Award

One of the cardinal rules in federal acquisition requires that offers received in response to a solicitation must be evaluated solely based on the evaluation factors and subfactors contained in the solicitation. The government’s selection decision must be documented and include the rationale for any business judgments and tradeoffs made, including benefits associated with any additional costs. Most typically, a single source is selected as the “best value” and will be awarded the contract after an affirmative determination of responsibility is made. Fixed-price contracts are preferred, and the payment of a profit or fee is the norm.  

All competitive grant awards are subject to a merit review of applications received in response to a Notice of Funding Opportunities (2 CFR 200.204). The awarding agency must (unless prohibited by Federal statute) design and execute a merit review process for all applications. That process must be described or incorporated by reference in the applicable funding notice. This is analogous to the review of competitive proposals under the negotiation method of procurement; the agency is bound to follow the process it has established.

Finally, prior to making any grant award, the agency is required to conduct a review of risk posed by the applicant (2 CFR 200.205). This includes the review of information through any OMB-designated repositories of governmentwide eligibility or financial integrity information. This “suitability for award” assessment is analogous to a contracting officer’s responsibility determination prior to executing any contract.

Payment Terms

Federal contracts have a strong preference for payment after delivery or performance. Commonly called invoice payments, they are subject to the Prompt Payment Act; the contractor must be paid an interest penalty if a proper invoice is not paid within 30-days from agency receipt or acceptance of the associated supplies or services.

While the FAR provides for financing payments to pay the contractor before acceptance of supplies or services, their use less common and subject to greater controls. Advance payments in contracts are very rare; the FAR identifies them as the least preferred method of contract financing. Agencies are directed to use them sparingly and their authorization requires higher-level approval and coordination with the appropriate financial activity/office.     

In marked contrast, advance payments under grants are required as long as the recipient maintains: 1) written procedures that minimize the time elapsing between the federal transfer of funds and the recipient’s disbursement by the non-federal entity; and 2) financial management systems that meet the standards for fund control and accountability as established by OMB’s guidelines (2 CFR § 200.302).  

If advances are not possible, reimbursement is the next preferred method. When used, the agency must make payment within 30 calendar days after receipt of the reimbursement request, unless the agency reasonably believes the request to be improper. In this respect, payment by reimbursement is analogous to Prompt Payment Act timelines, except there is no requirement to pay interest penalties.    


A contract may be terminated using one of two methods: termination for default (cause) or termination for the convenience of the government. A default termination is based on the contractor’s anticipated or actual failure to meet performance requirements. While some terms vary by contract type, the government is not liable for the contractor’s costs on undelivered work and is entitled to the repayment of any advance or financing payments made.

A contract may be terminated for convenience (in whole or in part) when it is in the best interest of the government. This unique aspect of federal contracting only requires the contracting officer’s signature to be effective. Situations when a convenience termination may be appropriate include: funds are insufficient to continue performance; requirements are no longer needed; the quantity needed must be reduced; or, there has been a radical change in the requirement that is beyond the contractor’s expertise. Because this form of termination is not due to any failure by the contractor, the government is responsible for providing an equitable adjustment in the contract price or terms for any work completed and reasonable preparations made to cease performance after receipt of the termination notice (e.g., severance pay to employees, settle subcontract costs, etc.).      

Grants may also be terminated in whole or in part. OMB’s guidance (2 CFR § 200.339) establishes four different types of terminations applicable to grants. The first two types are akin to a termination for default. An agency may terminate a grant award: 1) if the recipient fails to comply with the terms and conditions of a federal award; or, (2) for cause (performance failure). The latter is the more serious sanction.
The third type of termination is analogous to acquisition’s termination for convenience in that it is not based on noncompliance or performance failure. However, it is not a unilateral right of the government; it requires the recipient’s consent, i.e., a mutual parting of the ways. It also requires agreement on termination conditions, the effective date and, in the case of partial termination, the portion to be terminated.

Finally, there is one form of termination that is unique to grants. The recipient may unilaterally terminate an award. This requires written notification to the federal awarding agency providing the reasons for the action, the effective date, and, if a partial termination, the portion to be terminated. In the case of partial termination, if the federal agency determines that the reduced or modified portion of the grant will not accomplish the purposes for which the award was made, it may terminate the grant in its entirety.


The federal acquisition and assistance systems offer interesting parallels and distinct differences. Acquisition professionals who also are involved in executing assistance awards need to understand these distinctions to ensure that their agencies use: 1) the most appropriate type of agreement based on the nature and purpose of the transaction; and 2) effectively apply the appropriate requirements for award and administration.

1. Data from accessed on September 9, 2020
2. 31 U.S. Code §6101(3).
3. Affirmed in 1841 by the Supreme Court (U.S. vs. Tingey), declaring that the federal government has inherent power to enter into contracts.  
4. Public Law 95-224 codified at 31 U.S Code §6301.
5. Now called non-federal entities in OMB’s guidelines. This paper uses the term recipient for simplification and clarity.
6. 41 USC 253.
7. Other exclusions may be applied to establish or maintain an alternative source(s) of supply or limit competition to local firms in an area affected by a federally declared major disaster or emergency.  
8. FAR 6.302
9. FAR 15.304.
10. Unless multiple awards are contemplated and described in the solicitation.
11. FAR Subpart 9.1. Considerations include financial resources, compliance with delivery/performance terms, past performance record, integrity and business ethics, not ineligible for award, etc.
12. For example, Treasury’s Do Not Pay analytics tool and the Exclusions Records in the System for Award Management.
13. FAR 32.905
14. FAR 32.402
15. FAR Part 49.