Research offices routinely lump every check that arrives from a federal agency into one mental bucket — “grant money.” Most of it genuinely is a grant, or a cooperative agreement, and the Uniform Guidance (2 CFR 200) covers it end to end. But a real share of federal R&D dollars — SBIR Phase III follow-on work, a good deal of DoD-funded development, and other deliverable-driven awards — arrives as a procurement contract instead, governed by an entirely different rulebook: the Federal Acquisition Regulation (FAR). Treating a contract like a grant administratively is not a paperwork nuance; it produces the wrong compliance obligations, the wrong intellectual-property posture, and, for a technology transfer office specifically, the wrong data-rights analysis.
This page assumes the legal test itself — is the instrument a grant, cooperative agreement, or contract? — is already settled. For the full two-step test (principal purpose, then degree of sponsor involvement) and how NIH and NSF apply it in practice, see CASRAI’s Grant vs. Contract vs. Cooperative Agreement comparison. This guide starts from “it’s a contract” and covers what changes next: which regulations now govern the award, what a university inherits as a subcontractor under FAR flow-down clauses, how intellectual property and data rights diverge from the Bayh-Dole framework research offices are used to, and the specific situations — SBIR Phase III chief among them — where a university is more likely to encounter a contract than the grant-based funding it typically expects.
The one-line version: acquisition vs. assistance
The Federal Grant and Cooperative Agreement Act of 1977 (31 U.S.C. §§ 6303–6305) draws the line on principal purpose. If the federal agency is acquiring a good or service for its own direct use or benefit, the instrument must be a procurement contract, governed by the FAR. If the agency is providing assistance to carry out a public purpose — with no direct benefit flowing back to the government — the instrument is a grant or cooperative agreement, governed by the Uniform Guidance (2 CFR 200). A university research office proposing an investigator-initiated project is almost always on the assistance side of that line; a business proposing to deliver a specific piece of hardware, software, or a defined dataset the agency will use directly is almost always on the acquisition side.
Two different rulebooks, not two flavors of the same rulebook
Once an award is a contract, it stops being a 2 CFR 200 document. The Federal Acquisition Regulation — Title 48 of the Code of Federal Regulations, issued jointly by the Department of Defense, GSA, and NASA and maintained by the FAR Council — takes over as the governing framework, supplemented by agency-specific rules (DFARS for the Department of Defense, NFS for NASA, and so on). The practical differences a research administrator actually feels:
- Scope and deliverables. A grant funds a described research aim with wide latitude to adjust methods as the science warrants. A contract specifies concrete deliverables against milestones in a statement of work, with formal government acceptance criteria — missing a deliverable is a performance issue under the Changes and Termination for Default clauses, not a matter of sponsor stewardship.
- Who leads the negotiation. Grant terms are largely standardized and published in the funding opportunity. A contract’s statement of work, pricing structure, delivery schedule, and specific FAR/DFARS clause set are individually negotiated before award, and modifications afterward go through formal contract-modification procedures rather than a prior-approval request to a program officer.
- Which office should be leading. Most universities route sponsored research through an Office of Sponsored Programs built around grant and cooperative-agreement administration. A procurement contract more closely resembles a commercial vendor relationship — some institutions route these through a separate contracts office or require direct involvement from general counsel and export-control staff earlier in the process, given the FAR’s formality around acceptance, disputes, and termination.
- Audit and compliance regime. Grants and cooperative agreements sit inside the Uniform Guidance’s administrative requirements (2 CFR 200 Subpart D) and are swept into the institution’s annual Single Audit. Contracts run under FAR Part 42 contract administration and, for larger or cost-type awards, Cost Accounting Standards (48 CFR Chapter 99) — a materially more formal inspection, acceptance, and disputes regime than a grant’s progress-report cycle.
FAR flow-down clauses: what a university inherits as a subcontractor
Universities are rarely the prime awardee on a federal procurement contract — more often they sit underneath a company (a defense contractor, a systems integrator, or an SBIR/STTR small business) that holds the prime contract. That matters because the FAR does not stop applying at the prime contractor’s door. Individual FAR and DFARS clauses each specify their own flow-down instructions — some require the prime to include “the substance of this clause” in every subcontract, others apply only above a dollar threshold or for a specific category of work — and the only reliable way to know what applies to a given subaward is to read the flow-down paragraph of each clause the prime contract carries. This is a genuinely different burden than reading a grant’s terms and conditions: a cost-reimbursement grant subaward typically flows down a short, standardized set of Uniform Guidance provisions; a contract subaward can flow down dozens of FAR/DFARS clauses covering everything from cybersecurity (DFARS 252.204-7012) to specialty-metals sourcing to intellectual-property and data-rights terms, each independently negotiable and each carrying its own compliance obligation for the university as subcontractor.
Because flow-down is clause-by-clause rather than blanket, a university’s contracts office needs to review the actual prime contract’s clause list on a subcontract-by-subcontract basis rather than assuming a template covers it — the same subaward-review discipline described in CASRAI’s subaward negotiation guide, applied to a FAR-governed instrument instead of a Uniform Guidance one.
The cost-allowability wrinkle: FAR still points back to 2 CFR 200
The compliance regimes diverge sharply on scope, deliverables, and disputes — but not completely on cost allowability. FAR Subpart 31.3 (Contracts with Educational Institutions) does not set an independent cost-principles regime for university contracts; instead, FAR 31.302 states plainly that “the OMB Uniform Guidance at 2 CFR part 200, subpart E and appendix III, provides principles for determining the costs applicable to research and development, training, and other work performed by educational institutions,” and FAR 31.303(a) directs the contracting officer to determine allowability “in accordance with” that same subpart. In practice: even on a FAR-governed procurement contract with a university, the question of which costs are allowable, allocable, and reasonable is still answered by 2 CFR 200 Subpart E — the same cost principles that govern the institution’s grants. What changes under a contract is everything around cost allowability — acceptance, disputes, IP, data rights, sourcing restrictions — not the underlying cost-allowability test itself. This is a real, frequently-missed nuance: an institution’s F&A rate agreement and cost-allowability policies still apply on a contract; its grant-administration workflow for deliverables, disputes, and IP does not.
Intellectual property and data rights: where the real divergence is
This is the sharpest practical difference for a technology transfer office, and the reason this topic sits in CASRAI’s federal-contracting-IP-rights material rather than purely in grants administration.
Under a grant or cooperative agreement, patent rights to a federally funded invention are governed by the Bayh-Dole Act (35 U.S.C. §§ 200–212): the university may elect to retain title to a “subject invention,” subject to disclosure obligations, a U.S.-manufacturing preference on exclusive licenses, and the government’s retained march-in rights and royalty-free use license. Bayh-Dole’s text does technically extend to inventions made under funding agreements broadly, including contracts — but a procurement contract layers on a separate, and often more consequential, set of rights specifically over technical data and computer software that a grant does not carry at all.
The FAR/DFARS data-rights framework (DFARS 252.227-7013 for technical data, with a parallel computer-software clause) sorts what the government can do with data and software delivered under a contract into three categories:
- Unlimited rights — the government may use, modify, reproduce, release, or disclose the data for any purpose, without restriction.
- Government purpose rights — the government may use and share the data within government and with other contractors for government purposes, but not for commercial purposes; DFARS 252.227-7013 sets a five-year period from the underlying development contract before government purpose rights convert to unlimited rights, unless the parties negotiate a different period.
- Limited rights — the government generally cannot release the data outside government without the contractor’s permission; this category applies to data developed exclusively at private expense and properly marked with a limited-rights legend.
None of this vocabulary exists in a standard grant’s terms and conditions. A grant leaves data-sharing obligations to funder policy (an NIH or NSF Data Management Plan requirement, for instance) and open-publication norms; a contract can specify, clause by clause, exactly what rights the government retains in data the university generates — and a university contracts or tech-transfer office negotiating that clause set is doing a fundamentally different job than one reviewing a grant’s standard terms.
When a university is more likely to see a contract instead of a grant
SBIR Phase III follow-on work
SBIR/STTR Phase I and Phase II awards to a small business are themselves typically grants, cooperative agreements, or contracts issued competitively by the funding agency — SBIR awards can take any of the three forms depending on agency. Phase III is different by design: it is not SBIR-funded at all, and under 15 U.S.C. § 638(r)(4) and FAR 6.302-5, an agency may award a Phase III contract to the small business on a sole-source, noncompetitive basis, with no requirement to publicize the award or justify it beyond citing that it derives from, extends, or completes the prior Phase I/II work. There is no statutory limit on a Phase III contract’s number, dollar value, duration, or contract type. A university encounters this most directly in two ways: as a subcontractor under the small business’s Phase III contract (inheriting the FAR flow-down obligations described above), or as the licensor of the underlying university-owned patent the small-business spinout is commercializing, in which case the relevant instrument for the university itself is the license agreement, not the government contract — but the university’s tech-transfer office still needs to understand what rights the government retained in the small business’s SBIR data, since the SBIR Policy Directive sets a 20-year data-rights protection period (running from the date of the underlying Phase I, II, or III award) before the government’s rights in that data narrow toward government-purpose use.
DoD-funded development and prototyping work
Defense-funded research is disproportionately likely to arrive as a contract rather than a grant, for a structural reason: a large share of DoD R&D funding is directed at a specific deliverable — a prototype, a defined technical capability, a piece of software meeting a stated specification — which is exactly the “acquisition for the government’s own direct benefit” fact pattern the FAR is built around, rather than the open-ended, investigator-proposed research a grant typically funds. A university department working on a DoD-funded prototype or specific technical deliverable should expect DFARS clauses (including the data-rights and cybersecurity clauses referenced above), formal deliverable acceptance, and, if serving as a subcontractor to a defense prime, the full flow-down review described earlier — not a grant-style progress-report relationship.
A related but separate category: Other Transactions
Some federal R&D funding — increasingly common at DoD and, since the CHIPS and Science Act of 2022, at NSF’s Technology, Innovation and Partnerships Directorate — arrives through Other Transaction (OT) authority rather than a FAR contract or a Uniform Guidance grant at all. OT agreements are a genuinely separate legal category, largely exempt from both the FAR and standard grant regulations by design, used for milestone- and phase-gated funding outside either rulebook. They are not a third variant of “grant vs. contract” — they are their own instrument type with their own negotiated terms. See CASRAI’s guide to NSF’s Other Transactions authority for how this plays out in a live program.
Practical checklist for a research office encountering a contract
- Confirm the instrument type from the actual award document — the Notice of Award, solicitation, or draft contract — rather than assuming from the funder or program name. A DoD program can issue a grant; an NSF program can issue a contract or an OT agreement.
- Route it to the office equipped to negotiate FAR terms. If sponsored-programs staff who normally negotiate 2 CFR 200 terms are handed a FAR-clause matrix, loop in contracts/legal expertise before accepting the award — acceptance criteria, disputes clauses, and termination-for-default provisions are not boilerplate the way standard grant terms usually are.
- Read the flow-down paragraph of every FAR/DFARS clause in the prime contract if the university is a subcontractor, rather than assuming a standard subaward template covers it.
- Separate the cost-allowability question from everything else. The institution’s existing 2 CFR 200 Subpart E cost-allowability practices likely still apply via FAR 31.302 — the contract-specific work is in deliverables, IP, data rights, and disputes, not in relearning cost allowability from scratch.
- Get the data-rights clause set to the technology transfer office early, before it is negotiated away by default — unlimited-rights, government-purpose-rights, and limited-rights determinations are made at the clause level and are far harder to renegotiate after award than before.
Frequently asked questions
Does the Uniform Guidance (2 CFR 200) ever apply to a federal contract?
Not as the general administrative framework — a procurement contract is governed by the FAR, not 2 CFR 200. The one significant exception is cost allowability: FAR Subpart 31.3 incorporates 2 CFR 200 Subpart E and Appendix III by reference for contracts with educational institutions, so the institution’s existing cost-allowability rules still govern what costs can be charged, even though the rest of the award is FAR-governed.
Does Bayh-Dole apply to federal contracts, or only grants?
Bayh-Dole’s patent-rights framework (35 U.S.C. §§ 200–212) applies to inventions made under a federal funding agreement broadly, which includes contracts as well as grants and cooperative agreements. What is different on a contract is that FAR/DFARS data-rights clauses add a separate layer of government rights over technical data and software that a grant’s terms and conditions do not carry — a contract can involve both a Bayh-Dole patent-rights analysis and a distinct data-rights analysis at the same time.
Can a university be the prime recipient of an SBIR Phase III contract?
Not under the standard SBIR framework — the small business is always the prime SBIR/STTR awardee; a university cannot be an SBIR awardee itself, only a subcontractor to one, or a partner institution under STTR. A university’s more common role in Phase III is as a subcontractor inheriting the small business’s FAR flow-down obligations, or as licensor of the university-owned IP the small business is commercializing.
Who at a university should negotiate a federal R&D contract instead of a grant?
Practice varies by institution, but because a contract carries formal acceptance, disputes, and termination provisions and a distinct data-rights clause set, many institutions involve contracts specialists, general counsel, and the technology transfer office earlier and more directly than they would for a standard grant, rather than routing it through the sponsored-programs workflow built around 2 CFR 200 terms.
