Study Background: This study delves into the intricacies of policy implementation within diverse institutional contexts, focusing on a federal initiative aimed at increasing low-income students' participation in dual enrollment programs through Pell Grants. Despite the policy's equity-oriented intentions, the actual impact varied significantly across institutions (Bettinger et al, 2022). The research highlights the crucial role of three types of institutional capacities: foundational, execution, and provision capacities. These capacities collectively influence an institution's ability to effectively implement policies, especially those intended to enhance educational equity. Our findings suggest that institutions most in need of equitable policies often face the most significant challenges in their implementation due to limited capacity, thereby exacerbating existing inequalities rather than mitigating them. Research Question: In this study, we ask: how do variations in institutional capacity influence the implementation of equity-oriented education policies? By examining the dual enrollment Pell Grant initiative's outcomes across different colleges, this research identifies critical capacity constraints that institutions encounter while pursuing equity-oriented policy outcomes. These constraints include foundational resources, execution capabilities, and the provision of access to the target population. This question guides an exploration into the mechanisms through which policy implementation diverges, with a focus on understanding the tension between policy aims and institutional realities. Policy Context: The core policy of this study is the experimental federal initiative allowing income-eligible high school students to use Pell Grants for dual enrollment. Intended to democratize access to dual enrollment and alleviate income disparities , this policy aimed to make college more accessible for low-income students. However, its implementation has revealed significant challenges, underscoring the importance of understanding institutional capacities. This initiative is situated within a broader discourse on education equity, highlighting the critical need for policies that not only aim to reduce inequalities but also consider the varied capacities of implementing institutions. The study's insights into the Pell Grant initiative serve as a valuable case for policymakers, educators, and scholars to reflect on the complexity of translating policy intentions into effective outcomes in diverse educational contexts. Data and Methods: This study employs a mixed-methods approach, integrating quantitative data analysis with qualitative insights from 29 interviews conducted across four of the participating colleges. We use this data to create informative case studies. We describe these four cases in Table 1. The analysis of these cases focuses on identifying and understanding the constraints faced by these institutions in implementing the dual enrollment Pell Grant initiative. Interviews with admissions counselors, program leads, college deans, and school counselors provide a nuanced view of the institutional challenges encountered. This methodological approach allows for a comprehensive examination of how foundational, execution, and provision capacities influence policy implementation. By situating these findings within the broader policy context, the study sheds light on the critical factors that shape the efficacy of equity-oriented educational policies. Findings: The study reveals that despite the equitable intentions of the dual enrollment Pell Grant initiative, its implementation was significantly hindered by a lack of institutional capacity across three key dimensions: foundational, execution, and provision. We define these constructs and their sequential relation to each other in Figure 1. Firstly, foundational capacity issues, such as pre-existing resource limitations and inadequate staff support, created initial barriers to policy implementation. Colleges with fewer foundational resources were particularly challenged when adapting to the new policy, often lacking the necessary infrastructure to support effective policy execution. For example, some institutions had not previously engaged extensively in dual enrollment programs and lacked institutional knowledge and experience to draw upon. This lack of foundational capacity critically impeded the trajectory of implementation, often causing delays in program starts and difficulties in recruiting program participants. Regarding execution capacity, the study found that the administrative and financial requirements of the Pell Grant initiative imposed significant burdens on colleges. The need to navigate complex financial aid processes, including Pell Grant eligibility verification and the allocation of financial aid resources, placed a heavy strain on institutional resources. Colleges with limited execution capacity struggled to manage these demands, leading to delays and difficulties in policy implementation. This was exacerbated by the initiative's tight timelines and the substantial administrative workload, highlighting the critical importance of execution capacity in translating policy into practice. Provision capacity issues were particularly striking in their impact on the target population's ability to access and benefit from the policy. Despite the initiative's goal of expanding access to dual enrollment for low-income students, barriers such as limited awareness of the program among eligible students, challenges in the application process, and insufficient support structures significantly hindered student participation. These barriers underscored the disconnect between policy intentions and on-the-ground realities, emphasizing that provision capacity is essential for ensuring that policies reach and effectively serve their intended beneficiaries. Conclusions: The study underscores the critical role of institutional capacity in the implementation of equity-oriented education policies. It reveals that disparities in foundational, execution, and provision capacities across institutions can lead to significant variations in policy outcomes. These findings challenge policymakers to consider institutional capacities in policy design and implementation strategies. For policies like the dual enrollment Pell Grant initiative to achieve their intended equitable outcomes, there is a clear need for implementation support that accounts for the varied capacities of implementing institutions. Ultimately, enhancing institutional capacity is essential in ensuring that equity-oriented policies do not inadvertently perpetuate the inequalities they aim to address.