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The government uses grants and cooperative agreements as a means of assisting researchers in developing research for the public good, whereas it uses contracts as a means of procuring a service for the benefit of the government. Grants are much more flexible than contracts.
A grant-in-aid is money coming from central government for a specific project. This kind of funding is usually used when the government and parliament have decided that the recipient should be publicly funded but operate with reasonable independence from the state.