Background

On May 29th, the Office of Management and Budget (OMB) proposed new regulations that would significantly overhaul federal grantmaking by codifying increased oversight by political appointees of federal grants, with the stated goal of improving “transparency, accountability, and oversight for Federal awards across the Federal Government” and to “reduce recipient burden.” The regulations would apply to virtually all federal grants and cooperative agreements, totaling approximately $1.2 trillion per year, roughly 15% of which ($179 billion) goes to small entities. The Administration has indicated it will move quickly with a 45-day public comment period which ended on July 13, with the intent to issue a final rule effective by October 1^st, 2026 (the start of FY2027).

The proposal would extensively rewrite the “Uniform Guidance” that has been in place since 2014 (updated in 2020 and 2024), amending 91 parts across 256 different sections of these existing rules. At the highest level, it would further consolidate OMB’s regulatory authority, immediately applying the new rules and any subsequent revisions across the government without the need for agency-specific rulemaking processes.

The proposed rule would codify increased oversight by political appointees at each stage of the grantmaking process, including award topic selection, recipient selection, grant implementation, potential award cancellation, and any post-cancellation grantee challenges.

At the award creation stage, political appointees would be required to carry out a “pre-issuance review” to ensure awards “advance the President’s policy priorities.”

At the recipient selection stage, the rule would codify that the peer review process would be “advisory and does not replace agency discretion.” Political appointees would be empowered to prioritize “Gold-standard science.”  This is a reference to 2025 Executive Order that would effectively bar any funds for institutions that conduct research related to DEI or what the administration refers to as “gender ideology.” Applicants could also be denied based on organizational affiliation, and agencies could restrict eligibility based on Internal Revenue Code designation (for instance by limiting eligibility to 501c3 nonprofits and excluding 501c4s).

After recipients have been awarded funds, the proposed rule would place limits on implementation. It would prohibit funds from being used on international collaborative efforts linked to covered foreign entities. Additional restrictions would include limits on using federal funds to support conference attendance and publication-related expenses, along with general efforts to reduce allowable indirect costs.

Furthermore, the proposed rule would codify the authority to cancel a grant at any time for any reason, even mid-award. The rule would effectively put federal grantmaking in line with “termination for convenience” provisions for federal procurement contracts.

Should a grantee or awardee face cancelation, the ability to challenge the decision, appeal, or seek relief would be limited by the rule. Awards terminated in the name of the “national interest,” for instance, would not have the right to an administrative hearing or formal right to object within the agency.

CEBN’s Take

Given the sweeping nature of changes proposed under this rulemaking, this proposal could create significant uncertainty for federal grant applicants and awardees and increase administrative and compliance costs for recipients. Additionally, the changes proposed raise questions about expanded potential for political involvement in federal grantmaking by Administrations of either party, which may create greater instability in federal programs. CEBN submitted detailed comments to OMB on July 13th and also previously sent in a letter on June 24 requesting an extension of the public comment period. Please see opportunities to engage below.

How to Get Involved

1. Sign onto a Letter to Congress: CEBN and our partners are currently accepting signatures on a letter urging Congress to block implementation of the rule. We also sent a similar version of this letter to OMB on July 13 via the public comment portal.
   • • Business/organization coalition letter: Authorized representatives of businesses and organizations are encouraged to sign on.
2. Contact your Congressional Delegation: Congress ultimately holds the “power of the purse” and has the ability to override or delay implementation of many aspects of this proposal through federal funding bills.
   • • Send a message to you Members of Congress leveraging CEBN’s action alert
     • Call or email your Members of Congress to let them know your perspectives on this issue.
3. Learn More: Below are some expert analyses if you wish to read further about particular aspects of the proposed rule:
   • • Federation of American Scientists
     • Elizabeth Ginexi (former NIH official)
     • Ropes & Gray (legal analysis)
     • National Law Review (including implications for grantees seeking relief)