Resource 1. Federal Spending on Grants and Contracts: A Big Picture Primer


Overall federal spending and accountability
The U.S. government today spends over 4 trillion dollars per year on everything from pencils to social security checks to aircraft carriers.  Spending is authorized mainly by some two dozen large federal agencies and hundreds of programs within those agencies.  Historically, the federal government has struggled to efficiently track and report how each tax dollar is allocated and spent.  As a result, few have been able to truly comprehend the universe of opportunities that arises from our government infrastructure and tax base.  In this section, Proposal Exponent attempts to put things in perspective so that you can see where you fit in the grand scheme of things.

In September 2006, the Federal Funding Transparency and Accountability Act (Coburn-Obama sponsors) mandated that the Office of Management and Budget (OMB) create a free, searchable database of federal spending for use by the American public.  OMB’s response was launched in 2007 – nearly six years after the launch of the super websites www.Grants.Gov and www.FedBizOpps.Gov.

Interestingly, OMB followed the lead of OMB Watch, a non-profit group committed to citizen participation and promotion of government accountability.  In October 2006, OMB Watch launched its pioneering website,  This database elegantly captured federal spending during the period 2000-2007 according to expenditure type, geography or congressional district, agency sponsor, contractor or grantee, and competition category (very revealing!).  This ground-breaking resource was accomplished on a relative shoestring – a $342K grant from the Sunlight Foundation.

The OMB website is now the go-to resource because it (a) draws from more databases; (b) contains information about subcontracts and sub-grants; and (c) is required to be updated every 30 days.  The folks at OMB Watch, however, continue to update their own website fed chiefly by the FPDS and FAADS federal databases.  This is probably a good thing given the complexity of the task and likelihood of errors.  

Let’s look at some historical data obtainable from these website resources to gain some big-picture perspective.

Table 1.  Federal Spending in Billions of Dollars  (from


FY 2000

FY 2001

FY 2002

FY 2003

FY 2004

FY 2005

FY 2006

FY 2007




























Dir. Payments (i.e. social security)




























From Table 1, we can see that total federal spending from 2000-2007 (2007 being the last year for which complete data appears to exist) increased from $1.8T to nearly $2.9T.  In recent years, spending on Contracts and Grants has exceeded $1 trillion per year, or about 1/3 of the total federal expenditures listed.  These are the pools of greatest interest for most of you reading this website.  

Using 2006 as a model, we find that comparable amounts were awarded in the form of contracts (15%) and grants (17%). The total U.S. R&D budget in 2008 was only $147B.  This means that overall federal grant and contract expenditures were over six times that dedicated to R&D alone.

Who gives away and who receives these funds and what proportion is awarded on the basis of formal proposals?  Let’s explore more deeply by hand building some charts and tables that can be extracted from either website.

Federal grants
The dominant federal sponsor of “grants” is the Department of Health and Human Services. In 2006, this agency distributed $282B, or 58% of the $489B available.  About $200B of this was provided by DHHS’ Health Care Financing Administration (formerly Medicare and Medicaid Services) for medical assistance programs.  For the research crowd reading this, NIH awarded $22.6B that year by comparison.  The next most important federal grant sponsors are DOT, Dep’t of Education, and the Dep’t of Housing and Urban Development (see pie chart below).  Interestingly, DOD ranks only 8th among grant sponsors if Army, Air Force, Navy, and DOD category 9700 expenditures are combined.

federal grant distributionIn terms of recipients, the lion’s share, 88% ($427B), went to state and local governments in 2006. 7% ($34B) went to higher education (universities), and 3% ($15B) to nonprofits (Table 2).  The government is not in the business of funding most for-profit enterprises, and so their take of the pie was only 1% ($5B).  Individuals (mostly disaster relief victims) collected another 1% ($4B) of awards included in the “grant” category.  The top five sponsors and top five recipients of 2006 grant funding in each of these awardee groups are listed in Table 2. 


A more comprehensive overview of 2006 grant expenditures (Table 3) allows one to obtain a feel for which recipient groups are favored by particular granting agencies.  For example, the general bias favoring state/local government recipients is not so apparent within DOED, DOD, Commerce, and NASA. These agencies depend heavily upon universities and nonprofits to execute projects.  While grant pickings for for-profit companies are slim, there is significant money to be had from DHHS, DOT, DOED, DOD, and DOE. 

federal grants chart

OMB Watch does not split out competitive from non-competitive grant awards as they do for contracts. Consequently, it is difficult to estimate what proportions of these respective grant pools might have been distributed on the basis of RFPs. It is likely that state and local governments are allocated funds largely by formulas and earmarks. Of course, these non-federal government recipients likely issue their own solicitations in order to spend many of these federal dollars. One would expect university, nonprofit, and for-profit grants to be awarded predominantly on competitive grounds. However, it is useful to dig deeper into the database when looking at these global numbers. For example, $8.5B of the reported $34B grant intake by higher education in 2006 went toward direct student loans underwritten by the Department of Education (see DOED line under Higher Ed in Table 2).

In conclusion, the amount of grant money accessible in 2006 through competitive proposal submissions is likely to have been substantially less than the $489B total reported as “grant” expenditures. We know that only 12% ($58B) of the total $489B was available to higher education, nonprofits, companies, and individuals. After accounting for grant renewals, sole sourcing, and other non-competitive situations, perhaps half of this $58B was accessible via full and open competition among non-governmental organizations.

Federal contracts
Sourcing of federal contracts is even more lopsided than that of grants. Here, the Department of Defense is the heavy hitter, accountable for $295B or 71% of all U.S. contract expenditures in 2006 (see pie chart below). The costliest products and services required by DOD in 2006 consisted of aircraft ($18B), liquid propellants and fuels ($11B), logistics support services ($7.5B), general healthcare ($7.5B), and defense aircraft R&D ($7B). Favored DOD contractors in 2006 included Lockheed Martin ($27B), Boeing ($20B), Northrup Grumman ($16.5B), General Dynamics ($10.5B), and Raytheon ($10B). The six next richest agency players are Energy, Homeland Security, NASA, the General Services Administration, Health and Human Services, and the Veterans Administration.

federal contract distributionContract recipient information extractable from is rich and detailed. Contractors are grouped into 25 searchable categories, or you can search by exact contractor name. And so, for example, if one wanted to know the top three “small businesses” utilized by the U.S. Army in 2006, a search reveals that these were “miscellaneous foreign contractors” ($5.4B), DRS Technologies ($425M), and Ninilchik Native Association, Inc. ($297M). The precise agency source and nature of products and services sold to the Army by these contractors are a few clicks away.

Perhaps most interesting is the information provided by on how contracts have been awarded. OMB Watch breaks out seven categories of competition:

  1. full and open
  2. full and open but only 1 bid
  3. competition after exclusion of sources
  4. follow-on contract
  5. not available for competition
  6. not competed
  7. unknown

In Table 4, Proposal Exponent provides a comprehensive survey of 2006 contract expenditure data for the top 21 agency sponsors, including competition data. For simplicity, I condense OMB Watch’s seven compete categories into three (1+2, 3-6, 7). Coming out on top insofar as sponsorship of full and open competitions were USAID (82.5%), DOED (76.7%), DOE (66.8%), DHHS (66.1%), and Labor (60.2%). Those agencies least prone to open solicitations were the VA (11%), Justice (28.1%), Homeland Security (28.6%), EPA (33.6%), and the SBA (34%). Congress should probably take a hard look at exactly how a few agencies disburse contracts – for example, the nature of 55.3% of the VA’s awards in 2006 is "unknown". Going back to an earlier example, we can discover that Ninilchik Inc.’s 17 transactions with the US Army in 2006 were almost entirely “not available for competition”. There may have been very good reasons for this – but this is where the database stops providing clear answers.

federal grants table 

In conclusion, assuming that 2006 was a representative year, it appears that a relatively healthy proportion of federal contracts is competitively awarded. The weighted average % of funds competed full and open in 2006 (including those for which only 1 bid was solicited) was 44%. If we subtract out some $35B in contracts that went (competitively) to the top ten defense industry giants, this leaves $380B, 44% of which equals $167B of contracts ostensibly up for bid in 2006. This number has increased in 2007-2008 (databases are playing catch-up) and should continue to rise.

The numbers of contractors and awards arrived at in Table 4 should probably be interpreted cautiously. A quarter million contractors suggests a robust system in terms of participation (note that the actual number is probably fewer as many contractors work with more than one federal agency and are therefore over-counted by this method of reckoning). A blind computation of average award size results in the number $114K/award. This suggests that many, many very small “contracts” (tens of thousands of dollars) are included in the FPDS and FAADS databases.

Although the American system of government calls for full and open disclosure, the burden of record keeping has stood in the way of understanding how taxes are distributed by the vast federal infrastructure each year. For those of us interested in competing for government funds by way of grants and contracts, this limits our ability to grasp the big picture, prospect intelligently, evaluate competitors, and anticipate shifts in political and social priorities.

In 2006, the private citizens group OMB Watch proved that the tools exist to do better. OMB Watch's prototype database/website, was a gift to the American public and to the Office of Management and Budget that enabled this behemoth agency to jump start its own congressionally mandated resource, Now, contractors and researchers have an alternative to painstaking independent analysis or hiring of professional government business consultants.

Proposal Exponent has prepared this primer to give grant and contract seekers a sense of how they fit into the one trillion dollar world of federal spending on grants and contracts. I hope the charts, tables, and illustrations  described will help you improve your awareness of the opportunities available to your organization.