Discretionary Grant

A discretionary grant is a federal grant in which the awarding agency selects recipients through a competitive merit-based process, exercising discretion over who receives funding, how much each recipient receives, and which projects advance the agency's programmatic goals.

What is a Discretionary Grant?

Discretionary grants, also called project grants or competitive grants, are awarded through a formal application process in which eligible entities submit proposals responding to a Notice of Funding Opportunity (NOFO). The agency evaluates applications against published criteria, typically including scientific or technical merit, organizational capacity, feasibility of the proposed approach, and alignment with the agency's mission, and selects the strongest projects for funding.

Unlike formula grants, which distribute funds automatically based on predetermined formulas, discretionary grants require competition. The agency makes affirmative selection decisions, choosing which projects to fund and at what level, often negotiating the scope and budget with selected applicants before making a final award.

The federal government awards hundreds of billions of dollars in discretionary grants annually. NIH's competitive research grants, NSF awards, and SBIR Phase I and Phase II awards are all discretionary grants. Most grants made to universities, hospitals, nonprofit organizations, and small businesses for research, public health, education, and community development are discretionary.

Successful applicants sign a grant agreement that establishes the authorized scope of work, the period of performance, the budget, and the applicable terms and conditions under 2 CFR Part 200.

Why Discretionary Grants matter for government contractors

Discretionary grants are the primary pathway through which small technology businesses, research institutions, and nonprofits access federal R&D funding. Understanding the competitive nature of discretionary grants, and the rigorous merit review processes agencies use, helps applicants craft stronger proposals and allocate resources to the highest-probability opportunities.

Example

A biotech startup submits a Phase I SBIR application to NIH responding to a NOFO seeking innovative cancer diagnostic tools. NIH convenes a Scientific Review Group of independent experts who evaluate the application for scientific merit, feasibility, and innovation. The application scores in the top 20% of reviewed applications and receives a Notice of Award for a $300,000 Phase I SBIR grant, which is fully discretionary, NIH selected the project based on its review process.

Frequently Asked Questions

How competitive are discretionary grants?

Competition varies significantly by program and agency. SBIR Phase I programs across agencies have typical success rates of 15-25%. NIH R01 research grants have success rates of approximately 20-25%. Some highly competitive programs fund fewer than 5% of applications.

Can a discretionary grant be renewed?

Many discretionary grant programs offer renewal or continuation funding for projects that demonstrate satisfactory progress. Renewal is not guaranteed and typically requires a competitive application or at minimum a non-competitive continuation request reviewed against performance milestones.

Is there a limit on how many discretionary grants a single organization can receive?

Most programs do not set a formal limit per organization, though some programs have restrictions to ensure broad distribution of funds. Organizations that receive significant federal discretionary grants are subject to Single Audit requirements when total federal expenditures exceed $750,000 in a fiscal year.

What is the typical timeline from NOFO publication to award?

Timelines vary by agency and program complexity. Most competitive grant programs award within 6-12 months of the application deadline. SBIR programs typically award Phase I grants within 6 months of submission.