OMB proposes sweeping revisions to the Uniform Guidance: What federal grants recipients need to know

The proposed rule is generational development in federal grants policy. If finalized, it would fundamentally reshape the regulatory architecture governing billions of dollars in annual federal financial assistance—transforming what has long been characterized as “guidance” into binding regulation, expanding the authority of federal agencies and political appointees to direct, condition, and terminate discretionary awards, and embedding a series of administration policy priorities directly into the government-wide framework that governs how grant funds may be used. The proposed changes touch virtually every stage of the federal award lifecycle.

The proposed expansion of political appointees’ role in the grantmaking process is noteworthy. Under the proposed requirements, “senior appointees”—defined as non-career officials—must review discretionary awards to confirm alignment with agency priorities and the President’s policy agenda before funds are obligated. This represents a marked departure from the historically merit-driven grant review process, in which scientific and programmatic quality served as the primary criteria for award decisions. The proposed rule’s expanded discretionary termination authority further concentrates decision-making power in agency leadership, permitting termination of awards based on evolving priorities rather than fixed criteria established at the time of award.

Academic institutions, nonprofit organizations, research institutes, state and local governments, and other recipients of federal financial assistance should closely evaluate the proposed changes and their potential operational, financial, and programmatic implications.

Overview

OMB’s proposed revisions to the Uniform Guidance pursue three stated objectives: (1) improving transparency, accountability, and oversight for the use of federal taxpayer dollars; (2) clarifying the regulatory status as an OMB regulation rather than mere guidance; and (3) reducing recipient burden. The proposed rule in part implements Executive Order 14332 of August 7, 2025, “Improving Oversight of Federal Grantmaking,” which directed OMB to revise the Uniform Guidance to align federal grant programs with administration priorities, enhance oversight, and introduce termination for convenience authority. (See our advisory, “Federal grantmaking transformed: Executive Order brings sweeping changes to grant process and oversight”.) OMB frames the proposed rule as a response to what it characterizes as wasteful spending and unlawful discrimination under the prior administration, including the imposition of DEI mandates and “gender ideology” through federal award programs. OMB contends that the proposed reforms are necessary to restore focus on legally authorized program purposes and to improve stewardship of taxpayer dollars for the American people.

The Uniform Guidance would become the “Uniform Grants Regulation”

A significant structural change in the proposed rule is OMB's move to reclassify 2 C.F.R. Part 200 from “guidance” to a binding OMB “regulation.” Since the Uniform Guidance was consolidated in 2013, the regulatory text has stated its nature as guidance rather than regulation. The proposed rule would remove that statement and rename Part 200 the “Uniform Grants Regulation” (UGR), reflecting its new status as a government-wide regulation carrying binding legal effect. OMB cites statutory authority under 31 U.S.C. § 503(a)(2) to provide overall direction and leadership on financial management matters, along with authorities under the Federal Grant and Cooperative Agreement Act, the Single Audit Act, and the Transparency Act, among others. OMB asserts that the proposed change largely institutionalizes practices that are already in place since 2014 and will provide regulatory clarity rather than introduce a fundamentally new approach.

This reclassification has significant practical consequences. The current framework has led to some uncertainty around implementation of OMB amendments to subtitle A, including the need for secondary agency rulemakings and effective dates for amended requirements. Under the proposed framework, future OMB amendments to 2 C.F.R. subtitle A would take effect government-wide on a single effective date established by OMB following notice-and-comment rulemaking, without any secondary agency rulemakings to implement 2 C.F.R. 200. Federal agencies would continue to participate in OMB's policy development process and interagency review but would not need to conduct their own independent rulemaking procedures. OMB draws an analogy to the “adoptable guidance” model used for the suspension and debarment requirements in 2 C.F.R. Part 180, under which agencies completed one initial adoption and subsequent OMB amendments applied automatically. The structure of Title 2 would remain generally unchanged, with OMB requirements in subtitle A and agency “adopting” chapters in subtitle B, though certain agencies would add or update their subtitle B chapters so that it provides, for the first time, a complete listing of all federal grantmaking agencies.

For the grants community, this change means that recipients, subrecipients, and auditors will be able to look to a single, authoritative regulatory text in subtitle A to determine the requirements that apply to federal awards and the date on which those requirements become effective. However, it also means that OMB will be able to amend the government-wide grants framework more quickly and with less procedural friction, which may increase the pace of future regulatory changes applicable to all federal financial assistance programs.

Key provisions

Conflict of interest and mandatory disclosures (§§ 200.112, 200.113)

Recipients and subrecipients would be required to disclose whether any employees who worked on the proposal or will support the resulting award were employed by the awarding agency within the preceding two years. Additionally, the proposed rule would require Offices of Inspector General to automatically transmit disclosures received under § 200.113 (i.e., mandatory disclosures of credible evidence of a violation of Federal criminal law involving fraud, conflict of interest, bribery, or gratuity violations found in Title 18 of the United States Code or a violation of the civil False Claims Act) to the U.S. Attorney’s Office for the District of Columbia within ten days after receipt. In effect, a grantee’s mandatory disclosure to the funding agency under § 200.113 would also be a disclosure to the U.S. Department of Justice, immediately raising the stakes.

Merit review and pre-issuance review (§ 200.205)

Consistent with Executive Order 14332, the proposed rule would require agencies to ensure through a pre-issuance review process that proposals selected for funding are consistent with applicable law, agency priorities, and the national interest. Senior appointees must conduct these reviews using specified principles, including that discretionary awards advance the President’s policy priorities, prohibit funds for discriminatory purposes, and ensure compliance with applicable law. The proposed rule also provides that, all else being equal, preference for discretionary awards should be given to institutions with lower indirect cost rates and that awards should be given to a broad range of recipients. It’s unclear how much preference agencies will afford to lower rates, or how this would be scored in the grant review process.

Expanded termination and suspension authority (§ 200.340)

The proposed rule significantly expands federal agency authority to terminate discretionary awards for “discretionary reasons,” including when an award “no longer effectuates program goals, Federal agency priorities, or the national interest as they exist at the time of the termination,” and the agency need not offer an opportunity for appeal. The new provision more closely aligns OMB’s grant termination authority with the long-standing termination for convenience clause in federal procurement contracts under the Federal Acquisition Regulation. The discretionary termination provision would not apply to statutory entitlements such as block grants, formula grants, or disaster recovery grants, nor to agreements entered into pursuant to certain specified statutes including the CHIPS Act of 2022 and the Infrastructure Investment and Jobs Act. For terminations based on grantee noncompliance, the UGR preserves an appeal process. The proposed rule would also grant agencies authority to temporarily suspend a federal award, lasting up to 90 days.

Expanded applicant risk assessment (§ 200.206)

OMB proposes to significantly expand the factors agencies may consider when evaluating applicant risk. Beyond existing criteria such as financial stability, management systems, and audit findings, agencies could now assess an applicant’s capacity to manage high-dollar awards and evaluate prior performance against the specific goals of the funding opportunity, with positive and negative outcomes given equal weight.

The proposed rule introduces several new categories of risk. Agencies may consider an applicant’s “history of questionable practices”—including plagiarism, discredited or non-replicable research, and engagement in activities inconsistent with federal civil rights or religious liberty laws—as well as the applicant’s affiliations with organizations that “violate Federal law, undermine public safety or national security, or advocate for the overthrow of the United States Government.” For higher education institutions, agencies may also consider compliance with foreign gift and contract disclosure requirements under Section 117 of the Higher Education Act (20 U.S.C. § 1011f). The breadth of these new factors—particularly the “questionable practices” and “affiliations” provisions—may raise concerns about consistency of application and the potential for viewpoint-based screening.

National policy requirements: DEI, gender iIdeology, and protecting children (§§ 200.300, 200.218)

OMB proposes to amend § 200.300(b) to provide that, to the maximum extent permitted by law, federal agencies and pass-through entities must ensure that federal awards are not used to fund, promote, encourage, subsidize, or facilitate: (i) DEI or DEIA policies, principles, or practices that violate federal anti-discrimination laws, including racial preferences or use of intentional proxies for race as selection criteria; (ii) gender ideology as defined in Executive Order 14168; or (iii) the so-called “transition” of a child under 19 years of age from one sex to another, including chemical and surgical mutilation as defined in Executive Order 14187.

The proposed rule also adds a new § 200.218 prohibiting the use of federal awards to promote or support theories of disparate-impact liability based on federally protected characteristics such as race, sex, or age.

A new paragraph (c) regarding non-discrimination against faith-based organizations would provide that federal agencies may not discriminate against or in favor of applicants on the basis of religious character, affiliation, or exercise.

Prohibition of discriminatory event services (§ 200.219)

A new § 200.219 would require public entities (including, for example, public universities) that are recipients or subrecipients of federal financial assistance not to discriminate on the basis of viewpoint, content, or subject matter of speech—including political, ideological, or religious affiliation—in providing services for events, meetings, or other expressive activities. This provision targets practices such as “heckler’s fees” charged by universities to provide security for disfavored speakers.

Research and development eligibility restrictions (§ 200.202(e))

OMB proposes that, to the extent permitted by law, R&D awards must be made to entities organized under the laws of the United States, a State, or Tribal government, and that agencies must apply a “domestic-first framework” under which international elements may be included only if justified and in the national interest. Agencies may not issue R&D awards to foreign entities except where expressly authorized by statute or where a compelling interest exists as determined by the agency’s senior appointee.

Prohibition on covered foreign collaborations (§ 200.220)

A new § 200.220 would establish a government-wide prohibition on the obligation or expenditure of federal funds to support bilateral or multilateral collaborations with “covered foreign countries” or “covered foreign entities,” unless expressly authorized by statute or approved by the agency head. The 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. Accordingly, the proposed rule would effectively eliminate federally-funded collaboration with researchers and institutions in China, Russia, Iran, or other countries of concern, except in very limited circumstances.

Note that the Wolf Amendment already prohibits NASA from using appropriated funds for any bilateral program or agreement with China or any Chinese-owned company, absent specific statutory authorization. New § 200.220 of the UGR would be like a government-wide extension and expansion of the Wolf Amendment.

Domestic preferences for procurements (§ 200.322)

OMB proposes to direct agencies, to the greatest extent practicable and consistent with law, to include terms and conditions in federal financial assistance awards to maximize the use of goods, products, and materials produced in the United States. For infrastructure projects, the mandatory Buy America preferences under 2 C.F.R. Part 184 would remain in place.

Drawdown and payment controls (§ 200.305)

OMB proposes that agencies must verify recipient eligibility through Treasury’s Do Not Pay (DNP) system before making any disbursement, and that payment requests from recipients and subrecipients (other than States) must include a “brief, written” justification describing the purpose of the payment and the specific award-related work it supports.

E-Verify requirement (§ 200.303(f))

The proposed rule would require all recipients and subrecipients of federal financial assistance to participate in DHS’s E-Verify program to confirm employment eligibility of employees and contractors hired in or performing work in the United States under a federal award.

Elimination of fixed amount awards (§ 200.201)

OMB proposes to eliminate the use of fixed amount awards and fixed amount subawards unless otherwise authorized by federal statute. Fixed amount awards and subawards originally were introduced in 2014 as a time-saving and burden-reducing feature of the Uniform Guidance, as such awards largely are spared from the cost accounting regime. OMB now explains that this award type can limit transparency and hinder effective oversight, and that existing standards in Part 200 remain inadequate to address these concerns. The change is not intended to affect existing fixed amount awards or subawards issued prior to the effective date of the final rule.

Cost principles changes (Subpart E)

The proposed rule includes significant revisions to cost allowability. Advertising and public relations costs are generally made unallowable with limited exceptions. Publication costs (including open access fees) would be unallowable unless required by statute or approved in advance by the agency. Conference attendance costs would be allowable only if expressly approved by the agency and included in award terms and conditions. Costs of memberships in professional and technical organizations would require prior written approval, and costs of periodical subscriptions would be unallowable. Consistent with the Hyde Amendment and longstanding appropriations restrictions prohibiting the use of Federal funds for elective abortions, costs associated with elective abortions would be unallowable except as expressly authorized by federal law. New lobbying restrictions would expressly prohibit funding voter registration campaigns, issue advocacy unrelated to award objectives, and attempts to influence state executive branches on matters unrelated to the award.

Indirect cost rates

Although Executive Order 14332 directed OMB to limit the use of grant funds for facility and administration (F&A) costs, OMB notes in the proposed rule that changes to the indirect cost rate structure are not included in this rulemaking. OMB explains that Congress included appropriations riders for fiscal year 2026 that required specified agencies to continue applying negotiated indirect cost rates as they existed in fiscal year 2024 and prohibited development of changes during that period. OMB signals that indirect cost reform remains under consideration, but defers substantive regulatory changes.

Subrecipient oversight and reporting (§§ 200.329, 200.331, 200.332)

The proposed rule purports to strengthen obligations related to subaward reporting. Pass-through entities would be expressly prohibited from treating grant fund transfers to affiliates, subsidiaries, or related organizations as internal allocations exempt from subrecipient/contractor determinations. Grantees routinely operate within a broader corporate umbrella designed to facilitate operations domestically and internationally. Under the proposed rules, grantees that leverage corporate affiliates would need to classify the affiliate as either a subrecipient or a contractor, which could lead to major inefficiencies. For example, if the affiliate is a “contractor”, would the agency expect the grantee to run a competitive procurement process for that affiliate’s services? And if the affiliate is a subrecipient, must the affiliate replicate the pre-award and post-award financial, administrative, and scientific infrastructure of the recipient to qualify as a standalone subrecipient?

Pass-through entities must also ensure subrecipients do not take actions that could significantly damage the reputation of the pass-through entity, the awarding agency, or the Federal Government.

Compliance implications

Heightened obligations for grantees

The proposed rule introduces several new affirmative compliance obligations for recipients and subrecipients. Significantly, recipients must ensure that no federal award funds are used for activities that violate the national policy prohibitions in § 200.300(b) – including provisions protecting free speech and religious liberty, and those prohibiting promotion of gender ideology, and DEI policies, principles, or practices that violate any applicable Federal anti-discrimination law. Violation would constitute a material breach of the federal award and could result in fund recovery or termination.

Expanded agency discretion and oversight

Federal agencies have significantly broader discretion under the proposed rule, potentially allowing them to terminate any discretionary award at any time if they determine the award no longer serves the national interest, program goals, or agency priorities—as those priorities exist at the time of termination, not at the time of award. The pre-issuance review requirement places political appointees in a direct oversight role over individual award decisions.

The suspension authority gives agencies new power to issue stop-work orders mid-performance, creating potential cash flow and operational risks for recipients performing long-term projects.

Pass-through entity responsibilities

Pass-through entities face heightened responsibilities under the proposed rule. They must ensure proper subrecipient/contractor determinations for all downstream transfers and report all subawards on SAM.gov. The new reputational-risk provision requiring pass-through entities to consult with the federal agency about potential termination where subrecipient conduct could damage the government’s reputation also introduces a novel and somewhat ambiguous compliance obligation.

Cost principles: New restrictions and prior approval requirements

The tightening of cost principles will directly affect the budgets and administrative practices of many recipients, particularly institutions of higher education and research organizations. Longstanding necessary costs, including article processing charges and fees for publishing in professional journals, would require prior approval. Subscriptions to business, professional, academic, and technical periodicals would be unallowable, with no exception. And costs for attending conferences would be permitted only if participation in the conference is expressly approved by the agency and included in the terms and conditions of the Federal award.

Practical takeaways

Recipients and subrecipients should consider the following steps in light of the proposed rule:

Assess current programs and policies against the national policy provisions. Organizations should review pertinent institutional activities, policies, procedures, manuals, and practices to assess whether they raise compliance risks relative to national policy priorities that will be codified in the regulations, including national policy priorities related to DEI policies, principles, and practices and promotion of “gender ideology” as defined by Executive Order 14168.

Evaluate the impact of the expanded termination authority. Recipients should assess federally-funded projects that may be susceptible to midstream suspension or termination, including what risk-mitigation strategies may be appropriate given that agencies may now terminate awards based on evolving policy priorities.

Prepare for E-Verify implementation. Organizations that do not already participate in E-Verify should begin evaluating the systems, processes, and staffing necessary to comply with this requirement for all employees and contractors performing work under federal awards.

Assess federally-funded relationships withaffiliates. Recipients that leverage corporate affiliates, subsidiaries, or related entities in grant performance must evaluate whether and how such relationships can be reclassified into subawards or contracts.

Determine effect of applicant risk assessment. Applicants need to gauge whether “questionable practices” could adversely affect their competitiveness for funding, including past instances of plagiarism, discredited studies, activities or initiatives allegedly inconsistent with Federal civil rights or religious liberty laws, membership in or affiliation with organizations that “violate Federal law, undermine public safety or national security, or advocate for the overthrow of the United States Government”, and compliance with foreign gift and contract disclosure requirements under section 117 of the Higher Education Act.

Review drawdown and payment documentation practices. Finance teams should begin developing or refining processes for submitting payment justifications with each drawdown request, linking each request to specific award-related work.

Assess cost principles impacts. Budget offices should evaluate the effect of new unallowable costs—including publication, advertising, conference attendance without prior approval, and memberships—on existing and future award budgets.

Update subaward templates and monitoring protocols. Pass-through entities will need to revise subaward agreements to incorporate all new UGR terms that go into effect and which flow to subrecipients, including the national policy requirements, and enhanced reporting and classification requirements.

Contribute to the rulemaking record. The comment period closes July 13, 2026. Given the breadth and significance of the proposed changes, affected organizations should consider submitting detailed comments on provisions that may raise concerns regarding implementation feasibility, legal authority, or impact on research and educational programs. OMB has specifically requested comments on whether additional clarity is needed regarding the Unlawful DEI Provision and its relationship to other parts of the regulation.

Monitor indirect cost developments. Although indirect cost rate reform is not included in this proposed rule, organizations should continue to monitor developments in this area.

Next steps

The proposed rule represents one of the most significant revisions to federal grants policy in a generation. The July 13, 2026 comment deadline provides a very short window for stakeholders to engage with OMB on the substance and implementation of these proposed changes. If you have questions about the proposed rule or the rapidly evolving federal grantmaking landscape, please contact one of the authors or any member of our experienced Hogan Lovells Government Contracts and Education practice.

Authored by Bill Ferreira, Stephanie Gold, Stewart Forbes, and Ambia Harper.