Question

what do federal grants and contracts provide

Answer 1

A Federal Contract, like a grant or cooperative agreement, is a mechanism used by the Federal  Government to provide funding for research and development projects. The principal purpose of the Federal Contract instrument is to purchase property or services for the direct benefit or use of the United States Government.

Answer 2

A federal contract works with the government to provide services, supplies, and other work. 
A federal grant works with the government to provide economic aid(this is issued out of general federal revenue.)
So basically they both revolve around money and help to get money out there, just one you are earning it and the other is for people that need the money and don't earn it :-)