Federal award money can buy equipment, but not the way a founder outfitting a first lab would like it to. The rules turn on two distinctions: whether an item is equipment or a supply, and whether it is general-purpose or special-purpose. Get either one wrong and the cost gets questioned during budget negotiation or, worse, during an audit years later.
Equipment or supplies: the capitalization line
Under the Uniform Guidance, equipment is tangible personal property with a useful life of more than one year and a per-unit acquisition cost at or above your organization's capitalization threshold — subject to a federal ceiling that has been raised more than once, so look up the current figure rather than quoting one from memory. Anything below the line is a supply, even if it is a piece of hardware.
The distinction matters for three reasons. Equipment usually needs specific justification and sometimes prior written approval. Equipment is commonly excluded from the base used to calculate indirect costs, so it does not carry overhead. And equipment has to be tracked in property records, inventoried, and accounted for at the end of the project. If your company has no written capitalization policy, write one before you submit; auditors ask for it.
General-purpose versus special-purpose
Special-purpose equipment is usable only for research, medical, scientific, or technical activities — an environmental chamber, a specific analyzer, a custom test rig. It is normally allowable as a direct charge when the proposal justifies it against the work plan.
General-purpose equipment is anything usable for purposes other than the research: laptops, office furniture, standard printers, air conditioning, ordinary shop tools. Agencies treat it as something indirect costs are meant to cover, and charging it directly generally requires explicit prior written approval. That approval is not routine, and "we need it for this project" is not the argument that wins it.
Title, disposition, and the end of the award
On grants, title to equipment purchased with award funds normally vests in the recipient, conditionally — you own it, but the agency retains rights and you must use it for the funded work first. On contracts, which several defense components use for SBIR, the property clauses are different and the government may hold title outright. When the project ends and the item is no longer needed, disposition rules apply, and above a fair-market-value threshold the agency may ask for a share or for the item back. Which regime you are under depends on your agency and your award instrument, so read the terms and conditions attached to your specific award.
The mistake founders keep making
The common one is treating a Phase I budget as a way to build out a lab or an office. A general-purpose printer, a workstation for the founder, a bench, a coffee-area build-out — reviewers see this immediately, and it reads as a company using research money for infrastructure. If you genuinely need a capability for a few weeks, price outside services against a purchase first; the same logic that decides whether to buy a printer or use a service applies here. Phase I is small and short by design, which the Phase I versus Phase II breakdown covers, and equipment-heavy budgets rarely survive it. More failure patterns are in budget mistakes that sink an application and the application guide.
This is general information, not accounting advice — confirm with your CPA and your grants officer. Projects House can help you scope what the work actually requires; use the contact form.