There are two types of funding mechanisms which have different budget structures and have different governing regulations.  It is important to understand the funding mechanism you are pursuing so that you also understand how to structure your budget and which regulations to reference.  The funding mechanism is defined in the solicitation.

  • Cooperative agreements and grants
  • Contracts

First of all I am going to explain the structure of Cooperative Agreements and Grants and after that the same about Contracts Management.

Cooperative Agreements and Grants

In Cooperative agreements and grants according to US rules and regulations, there are three cost elements which cater the needs of project.

  • Direct Cost
  • Indirect Cost
  • Total Cost

Direct Cost + Indirect Cost = Total Cost

The Governing regulations for cooperative Agreements and Grants are:

  • 22CFR 226/OMB A110
  • 22CFR228
  • USAID Stander provisions


In Contracts according to US rules and regulations, there are three cost elements which cater the needs of contract.

  • Cost Plus Fixed Fee
  • Fixed Price
  • Time and Materials

The Governing regulations for Contracts are:

  • Federal Acquisition Regulations (FAR)
  • AID Acquisition Regulations (AIDAR)

A grant or cooperative agreement is the mechanism for Organization, which is most accustomed to and allows an organization to recover their costs as direct costs and indirect costs.  A cost plus fixed fee type contract is a cost reimbursement contract that provides for a negotiated fee for payment to the contractor.  Time and materials provides for acquiring supplies or services on the basis of direct labor hours at specified fixed rates that include salary or consulting fee, fringe benefits, ICR and fee. Materials at cost, including if appropriate, material handling costs as part of material costs can also be charged.

Evaluation Criteria

There are three major components in which the US government will evaluate a cost proposal.  Effectiveness, realism and cost share should be considered throughout development of the proposal.  When preparing a budget you should also consider compliance and completeness.

Cost Effectiveness

The effectiveness of a budget is directly linked to the proposed activities.  The cost proposal team and the technical proposal team should collaborate closely to ensure effectiveness with the budget.

The US government also see cost share as effectiveness because it reduces the amount of funds they have to contribute to achieve certain objectives.