1. "Contractor" means something specific in the Defense industry. Every employee, including members of the armed forces and employees of DHS, are "paid to perform a service based on the terms of a contract" (the employment contract). But, of course, literally everyone knows that when I say "contractor" I definitely do not mean "someone who has signed an employment contract with the federal government".

2. The expectations associated with grants are different enough from most other contracts that there's a useful distinction between "grant work" and "contract work".