The Office of Management and Budget (OMB) and over 40 Federal agencies are proposing sweeping revisions to 2 CFR Parts 1, 25, 170, 175, 176, 180, 182, 183, and 200, among others. The proposed rule advances three stated objectives: (1) improving transparency, accountability, and oversight of Federal awards; (2) clarifying the regulatory status of 2 CFR as a binding OMB regulation rather than mere “guidance”; and (3) reducing recipient burden. Comments are due 45 days after publication in the Federal Register.

Reclassification of 2 CFR as Binding Regulation (“Uniform Grants Regulation”)

OMB proposes to remove the statement in 2 CFR 1.105 that the regulatory text is “guidance, not regulation,” and to redesignate Part 200 as the “Uniform Grants Regulation” (UGR). Under this framework, future OMB amendments to subtitle A will carry binding regulatory effect government-wide on their effective date without requiring secondary agency rulemakings.

Effect on Recipients: This change eliminates what was previously a two-step implementation process (OMB issuance followed by agency adoption), meaning new requirements will take effect more rapidly across all agencies simultaneously. Recipients will no longer have a buffer period while individual agencies adopt changes.

Elimination of Fixed Amount Awards and Subawards

OMB proposes to eliminate fixed amount awards (§ 200.201(b)) and fixed amount subawards (§ 200.333) unless otherwise authorized by Federal statute. Fixed amount subawards are flatly prohibited: “Fixed amount subawards are not permitted.”

Effect on Recipients: This is a significant reduction in budget flexibility. Fixed amount awards allowed recipients to receive funding based on deliverables without routine cost monitoring or financial reporting. Their elimination means all recipients will now be subject to full cost-reimbursement requirements, including detailed financial reporting, cost documentation, and real-time cost monitoring. Existing fixed amount awards issued before the effective date are not affected.

National Policy Provisions (§ 200.300) — DEI, Gender Ideology, and Related Prohibitions

OMB proposes to amend § 200.300(b) to prohibit the use of Federal award funds to “fund, promote, encourage, subsidize, or facilitate” three categories of activities:

Unlawful DEI Provision: DEI/DEIA policies that violate Federal anti-discrimination laws, including racial preferences or the use of race/intentional proxies for race as selection criteria.

Gender Ideology Provision: Theories denying the biological reality of sex or the sex binary, or that endorse sex as a mutable characteristic.

Protecting Children Provision: The “transition” of a child under 19 from one sex to another, including “chemical and surgical mutilation.”

Non-compliance constitutes a “material breach” of the Federal award and strengthens the government’s rights to recover funds or terminate awards.

Effect on Recipients: These prohibitions apply to all activities performed under Federal awards and would require recipients to affirmatively certify and monitor compliance. Faith-based organizations receive explicit protections, including eligibility on the same basis as secular organizations.

New Prohibition on Disparate-Impact Theories (§ 200.218)

OMB proposes a new § 200.218 prohibiting agencies, pass-through entities, recipients, and subrecipients from using Federal award funds to “promote or support theories of disparate-impact liability” based on federally protected characteristics. An exception exists for analysis conducted for internal use if not funded by the award and not used in connection with award activities.

Effect on Recipients: Recipients engaging in disparate-impact analysis—common in employment, housing, and civil rights programs—face significant compliance uncertainty regarding what activities cross the line from permissible internal analysis to prohibited support of disparate-impact theories.

Prohibition on Discriminatory Event Services (§ 200.219)

A new § 200.219 would require public entities receiving Federal awards not to discriminate on the basis of viewpoint, content, or subject matter of speech in providing services for events. For non-public entities, the requirements apply to activities within the scope of the Federal program.

Effect on Recipients: Universities and other public institutions must ensure viewpoint-neutral allocation of event services and security fees (e.g., no differential “heckler’s fees” for speakers based on ideology). Non-public recipients who accept awards involving public forums must also comply within the scope of award activities.

Prohibition on Covered Foreign Collaborations (§ 200.220)

A new § 200.220 prohibits recipients from using Federal funds for bilateral or multilateral collaborations with “covered foreign countries” or “covered foreign entities,” extending Wolf Amendment-type restrictions government-wide. The prohibition applies regardless of whether funds support direct activities, research, travel, or allocable indirect costs.

Effect on Recipients: Research institutions with international collaborations—particularly with China—face a de facto government-wide prohibition absent express statutory authorization or agency-head approval. The exception process requires senior-level determination that the activity does not pose a national security risk. Recipients remain free to use non-Federal funds for such collaborations.

Discretionary Termination and Temporary Suspension (§ 200.340)

OMB proposes a significantly expanded discretionary termination authority, permitting agencies to terminate awards “in the interest of the Federal agency or pass-through entity,” including when an award “no longer effectuates program goals, Federal agency priorities, or the national interest.” A new temporary suspension provision allows agencies to issue stop-work orders for up to 90 days.

No administrative hearing right for discretionary terminations—only for terminations based on noncompliance.

Discretionary terminations will not be reported in SAM.gov.

Agencies must provide a “brief summary” of termination reasons, but this need not be a “detailed or exhaustive analysis.”

The terminated recipient may submit a written statement of termination costs.

Payment of post-termination costs is discretionary—the agency “may consider” allowing them, but is not required to.

Judicial review is available in the U.S. Court of Federal Claims.

The discretionary termination provision does not apply to statutory entitlements (block grants, formula grants, disaster recovery grants), international trade agreements, CHIPS Act awards, or IIJA Division F awards.

Payment Accountability Reforms (§ 200.305)

OMB proposes requiring: (a) Federal agencies to use the Treasury’s Do Not Pay (DNP) system before disbursing any Federal payment; and (b) payment requests from non-State recipients to include a “brief, written justification” describing the purpose and specific award-related work the payment supports.

Effect on Recipients: All non-State recipients must now justify each payment request with a description linking it to specific milestones or activities. States must conduct pre-payment verification checks through DNP or equivalent.

Expanded Risk Assessment and Applicant Screening (§ 200.206)

Agencies may now consider: financial capacity for high-dollar awards; history of questionable practices based on publicly available information; compliance with foreign gift and contract disclosure requirements (§ 117 of the Higher Education Act); and affiliations with organizations that “violate Federal law, undermine public safety or national security, or advocate for the overthrow of the United States Government.”

Specific Conditions and Mid-Award Adjustments (§ 200.208)

Agencies may add or remove specific conditions throughout the period of performance based on risk factors, with 15 calendar days for implementation. Examples include requiring reimbursement-only payments, additional financial reports, and financial integrity site visits. Program-level conditions may also be imposed when elevated risks are identified across an entire program.

Cost Principles Changes (Subpart E)

Conflict of Interest and Mandatory Disclosure Changes (§§ 200.112, 200.113)

Recipients must now disclose whether any employees who worked on the proposal or will support the award were employed by the awarding Federal agency within the preceding two years. Mandatory disclosures received by an Inspector General must be transmitted to the U.S. Attorney’s Office for the District of Columbia within ten days.

Subaward Reporting and Related Entity Determinations (§§ 200.329–200.332)

Pass-through entities may not treat payments to affiliates, subsidiaries, or related entities as “internal transfers” exempt from subrecipient/contractor determinations. Pass-through entities must ensure subrecipients do not take actions that “could significantly damage the reputation of the pass-through entity, awarding Federal agency, or the Federal Government.”

E-Verify Requirement (§ 200.303(f))

Recipients and subrecipients must participate in DHS’s E-Verify program to confirm employment eligibility of all employees and contractors hired or performing work in the United States under a Federal award. Final Nonconfirmation notices must be reported to the Federal agency.

Data Storage and Cybersecurity (§§ 200.303, 200.336)

Recipients must safeguard confidential business information through reasonable cybersecurity measures. Recipients are “strongly encouraged” to use domestic storage for electronic records.

Pre-Issuance Merit Review (§ 200.205)

Awards must undergo pre-issuance review by senior political appointees to ensure consistency with applicable law, Federal agency priorities, and the national interest. Awards should preference institutions with lower indirect cost rates, prioritize rigorous scholarship over “historical reputation or perceived prestige,” and incorporate “Gold Standard Science” benchmarks.

Audit Provisions (§ 200.503)

Additional audits beyond the Single Audit may only be imposed by Federal agencies, IGs, or GAO when “authorized by statute,” limiting discretionary audit expansion.

Provisions Particularly Burdensome to Grant Recipients

• • Discretionary termination without administrative hearing rights. The absence of any right to a formal hearing or appeal for discretionary terminations, combined with the low bar for agencies to articulate reasons (merely a “brief summary”), creates profound uncertainty for recipients’ reliance interests. Even well-performing recipients can face termination if political priorities shift.
  • Vagueness of the Unlawful DEI Provision. The prohibition on “policies, principles, or practices that violate any applicable Federal anti-discrimination laws” requires recipients to make legal determinations about the boundaries of evolving (and actively litigated) anti-discrimination law. The consequences of error are a material breach and potential fund recovery.
  • Government-wide foreign collaboration ban. Applying Wolf Amendment-type restrictions to all agencies—even where no underlying statutory mandate exists for a particular agency—imposes significant operational burdens on research institutions with existing international partnerships.
  • Elimination of fixed amount awards. This removes a key tool that allowed recipients operational simplicity and budget certainty in delivering results.
  • Publication cost restrictions. Making publication costs presumptively unallowable, absent statute or case-by-case agency approval, is particularly burdensome for research institutions where dissemination of findings is integral to scientific work.
  • Reputational harm standard for subawards. The requirement that pass-through entities ensure subrecipients do not take actions “significantly damag[ing]” to the reputation of the Federal Government introduces a subjective and potentially chilling standard.

Provisions Favorable to Grant Recipients

• • Multi-year awards encouraged (§ 200.202(f)). Agencies are encouraged to design awards with budget periods longer than one year, reducing the frequency of reapplication and providing greater funding stability.
  • Statements of Interest (§ 200.204(c)). Agencies are encouraged to use SOIs to reduce burden on applicants who would otherwise prepare resource-intensive proposals with limited funding chances.
  • 30-day minimum posting period maintained. Agencies must still post NOFOs for at least 30 days and document any exigent circumstances justifying shorter windows.
  • Reduction in superfluous policy conditions. The stated removal of DEI mandates and other “add-on” conditions that previously increased project complexity and cost may reduce compliance burden for some recipients.
  • Limitation on additional audits (§ 200.503). Requiring a statutory basis for additional audits beyond Single Audit protects against arbitrary audit layering.
  • Protection from additional prior approvals (§ 200.308(e)). Unless specified in Part 200, agencies cannot impose additional prior approval requirements without OMB approval.
  • Termination cost recovery. Recipients whose awards are terminated for discretionary reasons retain the right to submit a detailed written statement of termination costs. While payment is discretionary, costs properly incurred before the effective termination date remain allowable.

This article summarizes aspects of the law and opinions that are solely those of the authors. This article does not constitute legal advice. For legal advice regarding your situation, you should contact an attorney.