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On Friday, May 29th, the Office of Management and Budget (OMB) issued a proposed rule to revise government-wide requirements for federal financial assistance, including grants and cooperative agreements. The proposed revisions would impact the Regulation for Federal Financial Assistance, referred to as the Uniform Grant Guidance or 2 CFR Part 200. OMB describes the proposed rule as intended to “improve transparency, accountability, and oversight” for federal awards, clarify the regulatory status of 2 CFR, and reduce recipient burden.
Please note, these are proposed changes that do not immediately take effect, but if finalized, would make significant changes to the federal grants process, including agency discretion in merit review, alignment with the Administration’s federal priorities, restrictions on certain uses of federal funds, expanded subaward and payment documentation expectations, limitations on fixed amount awards and subawards, and more prominent termination and suspension provisions.
Your WSW Grants Team has reviewed the proposed rule and below is a summary of the various provisions that could impact institutions of higher education, and current and future federal funding.
If your institution would like to weigh in directly on the recommended changes, comments to the proposed rule are due by July 13th, and we would be happy to help in drafting and submitting comments a response. In the meantime, please do not hesitate to contact us if we can provide additional information.
From Guidance to Regulation
One of the major structural changes is OMB’s proposal to refer to the “Uniform Guidance” as the “Uniform Grants Regulation” while retaining its formal title, “Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards.” The stated purpose is to provide clearer notice of when OMB’s requirements take effect and how they apply across federal awards. This means that future changes to 2 CFR may apply government-wide on the effective date established by OMB, rather than through separate agency-by-agency rulemaking processes. This could make federal grants management more uniform across agencies, but it also means organizations will need to track OMB-level changes closely because they may apply broadly across federal award portfolios.
Changes to Notices of Funding Opportunities
OMB proposes several changes to notices of funding opportunities (NOFOs). OMB proposes that applicants use Grants.gov unless a program-specific exception is authorized by statute or approved by the federal agency head or designee.
The proposed rule also encourages agencies to use Statements of Interest when high application volume or lengthy proposals are expected. OMB frames this as a way to reduce the burden on applicants that might otherwise prepare lengthy proposals with limited likelihood of selection.
In addition, OMB proposes to make the current best practice that NOFO executive summaries do not exceed 500 words into a requirement, while allowing agency-approved exceptions. This could change the way some opportunities are structured. More programs may include preliminary concept steps or Statements of Interest, and NOFOs may be expected to provide clearer, shorter summaries. However, these are proposed government-wide standards and would still be implemented through individual agency funding opportunities.
Award and Merit Review Process
OMB also proposes changes to merit review. Under the proposed requirements, agencies would ensure that proposals selected for funding are consistent with applicable law, federal agency priorities, and the national interest. The proposal states that senior appointees must conduct certain pre-issuance reviews. Peer review would remain advisory and inform funding decisions, but OMB emphasizes that agencies retain discretion in final award determinations.
OMB proposes to revise program planning and design requirements so that federal program goals and objectives “aim to achieve meaningful results,” are consistent with the public purpose of the authorizing legislation, and are aligned with administration policies and priorities. For research institutions, OMB proposes a government-wide policy addressing eligibility and the use of international elements in federal research and development awards. OMB states that this is intended to strengthen alignment between federal research and development (R&D) funding and national priorities, while preserving flexibility for international engagement that demonstrably advances U.S. interests. The proposed rule also would require agencies issuing federal financial assistance for scientific research to categorize awards as basic research, applied research, or experimental development, consistent with OMB Circular A-11, and to communicate that categorization in the award terms and conditions. The proposal does not ban all international collaboration, but it would create more explicit government-wide expectations around foreign elements in R&D awards and their relationship to U.S. interests.
Foreign Collaboration
OMB proposes a new section, 2 CFR 200.220, addressing the use of federal funds for certain foreign collaborations. The proposed rule would prohibit recipients and subrecipients from using federal funds to support bilateral or multilateral collaborations, agreements, programs, or activities with covered foreign countries or covered foreign entities, unless expressly authorized by statute or approved by the agency under the proposed exception process. OMB states that this prohibition would apply regardless of whether federal funds are used for direct programmatic activities, research, technical assistance, travel, or indirect costs allocable to such collaborations. The proposal also states that it would not prohibit recipients from engaging in foreign collaborations using non-federal funds.
Diversity, Equity, and Inclusion (DEI)
OMB proposes several changes to statutory and national policy requirements under 2 CFR 200.300 and related provisions. The proposed language would require, to the maximum extent permitted by law, that federal awards not be used to fund, promote, encourage, subsidize, or facilitate DEI or DEIA policies, principles, or practices that violate applicable federal anti-discrimination laws. OMB describes this as including racial preferences or other forms of racial discrimination that violate applicable federal anti-discrimination laws, including activities where race or intentional proxies for race are used as a selection criterion for employment or program participation.
OMB also proposes provisions related to “gender ideology,” the “transition” of a child under 19 years of age from one sex to another, and theories of disparate-impact liability. These provisions are framed by OMB as limitations on the use of federal award funds and as clarifications of federal nondiscrimination requirements.
Subawards
The proposed rule emphasizes subaward transparency and reporting. OMB proposes to require recipients to confirm in performance reports that all subawards issued during the reporting period have been reported to SAM.gov. OMB also proposes to clarify that pass-through entities must make subrecipient and contractor determinations for downstream entities, including affiliates, subsidiaries, and related organizations.
OMB also proposes to eliminate fixed amount awards and fixed amount subawards unless otherwise authorized by statute. OMB states that fixed amount awards can limit transparency and hinder effective oversight. This could affect programs that currently use fixed amount subawards or milestone-based structures, although OMB states that the proposed change is not intended to affect existing fixed amount awards or subawards issued before the effective date of the rule.
Termination and Suspension
OMB proposes to revise 2 CFR 200.340 to clarify termination and suspension authorities for federal awards. The proposal would require agencies, with limited exceptions, to include termination provisions in awards, including termination when the agency determines that the award no longer effectuates program goals, federal agency priorities, or the national interest as they exist at the time of termination. OMB also proposes provisions related to temporary suspension, including written stop-work orders.
Indirect Costs
OMB states in the proposed rule that it does not propose updates to the indirect cost rate negotiation system through this document and that it may consider issuing a future request for information on indirect costs. The immediate takeaway is that the proposed rule discusses concerns about the current indirect cost system, including complexity, administrative burden, transparency, oversight, and accountability, but does not itself propose a new negotiated indirect cost rate structure. Indirect costs remain an active area of federal interest and could be addressed through a separate future process.
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