OMB Proposes Significant Revisions to the Uniform Guidance for Grants and Agreements

Go-To Guide: Sweeping Proposed Changes to the Uniform Guidance: On May 29, 2026, the Office of Management and Budget issued a proposed rule that would make sweeping changes to the Uniform Guidance for grants, cooperative agreements, and other forms of federal financial assistance. Implementation of Executive Orders and Presidential Policies: Many of the proposed changes implement 2025 and 2026 executive orders and policies related to diversity, equity and inclusion, and accessibility (DEI and DEIA) activities, as well as Executive Order No. 14332, Improving Oversight of Federal Grantmaking . Guidance to Regulation: OMB is proposing to reclassify 2 CFR Part 200 as a binding federal regulation, which would give future amendments the force of law governmentwide on a single effective date without individual agency adoption. OMB’s statutory authority has not previously been interpreted as authorizing it to issue regulations that bind recipients and subrecipients. Expanded Termination Authority: Agencies would have broad new authority to terminate or suspend awards based on the “national interest” at the time of termination with limited procedural protections for recipients. No Changes to Indirect Costs: The proposed rule does not include changes to the indirect cost rate negotiation system, citing congressional intervention in 2026 calling for further analysis before any changes are made. On May 29, 2026, the Office of Management and Budget (OMB), together with about 40 grantmaking agencies, published a proposed rule that would overhaul 2 CFR Part 200, commonly referred to as the “Uniform Guidance.” The Uniform Guidance is the U.S. governmentwide framework governing the management of federal grants, cooperative agreements, and other forms of federal financial assistance. According to the proposed rule, its three overarching objectives are: (1) improving transparency, accountability, and oversight of federal funds; (2) clarifying that the regulatory text carries binding regulatory effect (not merely “guidance”); and (3) reducing recipient burden. Many of the changes are designed to implement executive orders and policies issued in 2025 and 2026, including the executive orders on DEI; the July 29, 2025 Department of Justice (DOJ) guidance on DEI; and certain aspects of Executive Order (EO) 14332, Improving Oversight of Federal Grantmaking. The proposed rule also includes other significant changes that, if finalized, would likely reshape the federal financial assistance lifecycle. Comments on the proposed rule are due July 13, 2026. As of July 8, 2026, nearly 49,000 comments have been posted on Regulations.gov. The proposed rule states that OMB is targeting an effective date of October 1, 2026, for the final rule. This GT Alert provides a summary of some of the key proposed changes. Shift from ‘Guidance’ to Regulation Currently, the Uniform Guidance is “guidance” that is not binding on recipients and subrecipients — each agency must implement the guidance through codified regulations for it to apply to that agency’s recipients and subrecipients. The proposed rule would reclassify 2 CFR Part 200 as a binding federal regulation. If implemented, future OMB amendments to Part 200 would take effect governmentwide on a single effective date, without requiring each individual agency to separately adopt those changes through its own rulemaking process. This would eliminate some uncertainty for entities that receive grants and cooperative agreements from multiple agencies. While the proposed rule indicates that grantmaking agencies “will not be entirely removed from the process of 2 CFR updates,” this change would centralize authority over this process with OMB. The proposed rule would also make OMB’s governmentwide requirements controlling over individual agency regulations to the maximum extent permitted by law. OMB has authority to establish “governmentwide financial management policies for executive agencies” and to “[p]rovide overall direction and leadership to the executive branch on financial management matters by establishing financial management policies and requirements.” 31 U.S.C. § 503. It can also “issue supplementary interpretative guidelines to promote consistent and efficient use of procurement contracts, grant agreements, and cooperative agreements.” 31 U.S.C. § 6307. Because these authorities have not previously been interpreted as authorizing OMB to issue regulations that are binding on recipients and subrecipients, the Uniform Guidance has historically been characterized as guidance. In a July 1, 2026 letter , Senate Democrats requested that OMB rescind the proposed rule, arguing that the proposed changes exceed OMB’s statutory authority. The letter also argued that the proposed changes would undermine Congress’s constitutional power of the purse by allowing agencies broad discretion to terminate awards. Termination Provisions Termination and Suspension — § 200.340 Proposed § 200.340 would implement EO 14332’s directive, discussed in our August 2025 GT Alert , that OMB revise the Uniform Guidance to require that all discretionary grants permit “termination for convenience.” Consistent with EO 14332, the proposed rule would authorize a federal agency or pass-through entity to terminate an award, “to the extent permitted by law,” if termination is “in the interest of the Federal agency or pass-through entity, including if a Federal award does not effectuate program goals, Federal agency priorities, or the national interest as they exist at the time of the termination.” The proposed rule states that this revision would give agencies broad discretionary termination authority similar to the Federal Acquisition Regulation (FAR) termination for convenience clause “while also accounting for the unique context of grants.” Proposed § 200.340(e) would also authorize agencies and pass-through entities to issue a written order temporarily suspending performance under an award whenever suspension is “in the interest” of the agency or pass-through entity, drawing on the FAR’s stop-work order provisions. Suspensions would generally be limited to 90 days (extendable by mutual agreement), and the agency would be able to proceed to terminate the award during or after the suspension. Federal agencies have inherent authority to award procurement contracts for goods and services they need, provided the procurement is within the agency’s mission and not prohibited by statute. However, agencies do not have inherent authority to award grants — they must be specifically authorized by statute. The proposed rule states the discretionary termination and suspension provisions would not conflict with statutory authorizations for federal programs because they would only be used for discretionary awards “to the extent permitted by law.” It would not apply to “awards made under programs where legislation establishes an entitlement to the funds on the part of the recipient, such as block grants, those awarded based on a statutory formula, or disaster recovery grants,” agreements entered into in furtherance of international trade agreements, Creating Helpful Incentives to Produce Semiconductors (CHIPS) Act awards, and certain broadband-related awards under the Infrastructure Investment and Jobs Act. The proposed rule’s statement that discretionary terminations would be made based on program goals, agency priorities, or the national interest “at the time of the termination” appears to address arguments against the administration’s use of the current version of § 200.340(a)(4). That provision allows agencies and pass-through entities to terminate an award pursuant to its terms and conditions, “including, to the extent authorized by law, if an award no longer effectuates the program goals or agency priorities.” During oral argument in New Jersey v. OMB in May 2026, the district court observed that notices of funding opportunity require applicants to address how their projects will fit with program goals and agency priorities and questioned whether the priorities that formed the basis of award could change retroactively. If implemented, this provision would support the administration’s arguments that the relevant interests are those at the time of the termination, not at the time of award. The proposed rule asserts that the “discretionary termination and suspension provisions operate within the framework of Congressional authorization and appropriation” because “Congress provides agencies with discretionary authority to make awards for certain program purposes, leaving agencies with broad discretion as to which projects to fund.” While agencies have authority to select the recipients of funding for discretionary awards, the eligible recipient types and activities are typically established by Congress.[1] The proposed rule lacks guidance on the circumstances in which an award or entire “class of awards” ( see proposed § 200.341) could be found inconsistent with the national interest after award was made based on statutory criteria, and does not explain the steps agencies would take to ensure that such terminations are consistent with the program’s authorizing statute. Notification of Termination Requirement — § 200.341 Proposed § 200.341 would require agencies to provide notice of discretionary terminations with a “brief summary of the reason or reasons for finding that termination is in the interest” of the government or pass-through entity. While the notice would be required to “do more than merely citing the discretionary termination provision,” a “detailed or exhaustive analysis” would not be required. The proposed rule does not specify a minimum advance notice period for discretionary terminations. Opportunities to Object, Hearings, and Appeals — § 200.342 Proposed § 200.342 would limit objection, hearing, and appeal rights to terminations for noncompliance. For discretionary terminations and suspensions, agencies would have no obligation to offer any administrative review. Recipients wishing to challenge a discretionary termination would be required to seek review in the U.S. Court of Federal Claims, which can only award money damages, not injunctive relief. The proposed rule contends that this is a “minor clarifying” revision because the current rule is not required for “other types of terminations.” However, under the current version of § 200.340, awards have generally only been terminated for reasons other than noncompliance if the recipient or subrecipient either initiated the termination or consented to it. Current § 200.340(a)(4) (permitting terminations if the “award no longer effectuates the program goals or agency priorities”) was added at the end of the first Trump administration and had not been used until the current Trump administration took office. Subrecipient Damage to Reputation — § 200.332 Proposed changes to § 200.332 would require pass-through entities to ensure subrecipients do not take actions that could significantly damage the reputation of the pass-through entity, the awarding agency, or the federal government more broadly. If a pass-through entity determines that a subrecipient engaged in such conduct, it would be required to consult with the federal agency to determine whether the subaward should be terminated. If the federal agency determines that “significant reputational harm” occurred, the agency could “either direct the pass-through entity to terminate the subaward or terminate the Federal award to the pass-through entity.” The proposed rule does not define “significant reputational harm” and offers no examples of the conduct that would trigger this obligation. Federal Agency Review of Merit Proposals — § 200.205 The proposed rule would implement EO 14332, Improving Oversight of Federal Grantmaking by requiring that “senior appointees” perform a pre-issuance review for discretionary awards. This pre-issuance review would require agency officials to ensure that awards: (1) “demonstrably advance the President’s policy priorities”; (2) do not “fund, promote, encourage, subsidize, or facilitate” racial preferences or other forms of racial discrimination, denial of “the sex binary in humans or the notion that sex is a chosen or mutable characteristic,” illegal immigration, or “other initiatives that compromise public safety or promote anti-American values”; (3) ensure scientific research reflects a commitment to “Gold Standard Science,” consistent with EO 14303, Restoring Gold Standard Science ; and (4) “[a]ll else being equal,” favor institutions with lower indirect cost rates. Peer review recommendations on the selection of proposals would be advisory only. Review of Risk Posed by Applicants — § 200.206 The proposed rule would expand the factors that agencies should consider in evaluating applicant risk beyond financial and performance factors. If adopted, agencies would also consider (1) a “history of questionable practices,” including plagiarism, discredited or non-replicable studies, and “activities or initiatives” that are “inconsistent with” federal civil rights or religious liberty laws; (2) “membership in or affiliation with organizations engaged in activities that violate Federal law, undermine public safety or national security, or advocate for the overthrow of the United States Government”; and (3) for institutions of higher education, compliance with the foreign gift and contract disclosure requirement of Section 117 of the Higher Education Act (20 U.S.C. § 1011f). Statutory and National Policy Requirements — § 200.300 The proposed changes to § 200.300(b) would require federal agencies and pass-through entities, to the maximum extent permitted by law, to ensure that federal awards are not used to “fund, promote, encourage, subsidize, or facilitate”: (1) DEI or DEIA policies, principles, or practices that violate federal anti-discrimination laws — including racial preferences or activities where race or intentional proxies for race will be used as selection criteria for employment or program participation; (2) “gender ideology” as defined in EO 14168; or (3) the “transition” of a child under 19 years of age from one sex to another, as defined in EO 14187. The proposed rule states that OMB believes it has provided “sufficient clarity regarding prohibited forms of discrimination,” but that “OMB anticipates that some commenters for this rulemaking may contend that the Unlawful DEI Provision is excessively vague or open to misinterpretation[.]” The proposed rule points recipients to the DOJ’s July 29, 2025, memorandum ; the Supreme Court’s decision in Students for Fair Admissions v. Harvard ; and a December 2025 DOJ Office of Legal Counsel opinion for interpretive guidance on the Unlawful DEI Provision. The proposed rule states that OMB is seeking comments on whether additional clarity is needed regarding the Unlawful DEI Provision. The proposed rule recommends that commenters consider the model contract clause in EO 14398 (described in our GT Alerts on EO 14398 and the FAR Council’s implementing deviation ) “and provide input regarding whether any similar language would be appropriate or informative in the context of this rulemaking, such as language further clarifying the application of disparate treatment standards in connection with activities under Federal awards.” The proposed rule would also remove existing language extending sex-discrimination protections to sexual orientation and gender identity based on the Supreme Court’s Bostock v. Clayton County decision, stating that the prior administration’s interpretation of Bostock is “legally untenable.” A new paragraph (c) would prohibit federal agencies and pass-through entities from discriminating against or in favor of applicants based on religious character, affiliation, exercise, or lack thereof, and would require consideration of reasonable accommodations for religious or conscience-based objections where required by law. OMB cautions that recipients “should not assume that practices previously viewed as consistent with prior Executive Branch guidance will necessarily satisfy applicable Federal anti-discrimination requirements as applied to Federal awards.” The proposed rule states that violations would constitute a “material breach” of the federal award. Both DOJ’s July 2025 memorandum and the President’s DEI executive orders indicate that the administration intends to pursue violations under the False Claims Act. However, proposed § 200.300 does not explicitly state that compliance with this provision would be material for purposes of the False Claims Act. The proposed rule emphasizes OMB’s position that “the proposed revisions to § 200.300 are focused on activities within the scope of federally-funded programs.” However, the terms “promote, encourage, subsidize,” and “facilitate” might encompass activities outside of those specifically funded by the grant (for example, if the government took the position that providing any grant funding to a recipient “facilitated” unrelated DEI activities by freeing the recipient’s unrestricted funds for such purposes). OMB has received a number of comments on this language and may clarify the provision’s scope in the final rule. Prohibition on Disparate-Impact Liability — § 200.218 Implementing EO 14281, proposed § 200.218 would require federal agencies and pass-through entities to ensure that federal awards are not administered in a way that promotes or supports the use of “disparate-impact liability” based on federally protected characteristics such as race, sex, or age. This would include “ensuring, unless expressly required by law, that Federal awards are not used in support of disparate-impact studies, disparate-impact litigation, or other related activities[.]” The proposed rule would create an exception to this prohibition for internal statistical or demographic analysis for program evaluation or research purposes, provided that federal award funds are not used for that analysis and the results are not applied to or used in connection with award activities. Prohibition on Discriminatory Event Services — § 200.219 Proposed § 200.219 would bar public-entity recipients and subrecipients from discriminating in the provision of event-related services, including facility access, staffing, and security, on the basis of the viewpoint, content, or subject matter of speech, or on the basis of a speaker’s political, ideological, or religious affiliation. The proposed rule identifies “colleges and universities charging additional fees — sometimes referred to as ‘heckler's fees’ — to provide security for conservative speakers” as an example of discriminatory event services. The prohibition would apply to all events occurring on property under the control of the public entity, regardless of whether the event is directly funded by a federal award. For non-public entities, the restriction would apply only to the extent that the relevant event or activity is funded by the federal award. Internal Controls — § 200.303 Proposed § 200.303(f) would require all recipients and subrecipients to participate in the E-Verify program to confirm the employment eligibility of all employees and contractors hired in, or performing work in, the United States under a Federal award. Previously, only federal contractors were required to participate in E-Verify. In addition, OMB is proposing to amend § 200.303(a) to remove the requirement that internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Federal Payment — § 200.305 Proposed § 200.305 would require payment requests from recipients and subrecipients other than states to “include a brief, written justification regardless of whether the payment is made in advance or to reimburse the recipient or subrecipient.” The justification “must include information on the activities or aspects of the Federal award that correspond to the payment request,” such as “project milestones, project activities, administrative activities,” or other requirements for the award. OMB ties the change to EO 14222, Implementing the President’s “Department of Government Efficiency” Cost Efficiency Initiative, which directed agencies to record a brief written justification for every payment they issue. This requirement was also reflected in EO 14332 . Lobbying — § 200.450 Proposed § 200.450 would further restrict allowable lobbying and election activity-related costs. Unallowable costs would include: (1) costs of establishing, administering, contributing to, or paying the expenses of a voter registration campaign, drive, or similar activity; (2) costs for issue advocacy or public messaging that promotes or opposes a social, political, or public policy position unrelated to the statutory objectives or performance requirements of the award; and (3) costs related to influencing a state government’s executive branch on matters unrelated to the award, including efforts to influence state agency policymaking, rulemaking or administrative actions. The allowability requirements under § 200.450 apply to both direct and indirect costs. See 2 CFR § 200.420. Enforcement Mandatory Disclosures — § 200.113 The mandatory disclosure rule requires applicants, recipients, and subrecipients to disclose to the awarding agency or pass-through entity, and the relevant Office of Inspector General (OIG), credible evidence of criminal violations involving fraud, conflict of interest, bribery, or gratuities, and civil False Claims Act violations in connection with the federal award. The proposed rule would add a requirement for OIGs to transmit mandatory disclosures to the U.S. Attorney’s Office for the District of Columbia within 10 days of receipt. According to the proposed rule, the “purpose of this revision is to strengthen enforcement and accountability by ensuring that credible allegations of fraud or misconduct are promptly transmitted to prosecutorial authorities.” The proposed rule does not explain why the disclosures would be directed to the U.S. Attorney’s Office for the District of Columbia, rather than to Main Justice or the U.S. Attorney’s Office in the district where the recipient or subrecipient is located. The 10-day transmission requirement, if implemented, may ultimately discourage recipients and subrecipients from making disclosures in close cases, given the nebulous “credible evidence” standard.[2] Remedies for Noncompliance — § 200.339 In addition to existing remedies (e.g., withholding payments, disallowing costs, suspension, debarment, withholding future funds), OMB proposes a new subparagraph (b) indicating that “a Federal agency, may, at its discretion, cooperate with individuals or organizations in their pursuit of private causes of action and civil remedies based on the failure of a recipient or subrecipient to comply with the U.S. Constitution, Federal statutes, regulations, or the terms and conditions of a Federal award.” Procurement Standards The proposed rule would make several changes to the procurement standards. Proposed § 200.318 would provide that: Material costs under time-and-materials contracts must be documented and priced consistently at market rates; Recipients and subrecipients may still use project labor agreements (PLAs) or other pre-hire collective bargaining agreements, but only where doing so advances the federal government's interest in the program, accounting for practicability and cost-effectiveness; Recipients and subrecipients may communicate a requirement that workers be authorized to work in the United States; and “[R]ecipients and subrecipients are also responsible for ensuring consistency with applicable law, and that employment practices should be consistent with the foundational principles of recognizing merit and the ability of employees to fulfill the requirements of the contract.” Proposed § 200.320 would “strongly discourage” recipients and subrecipients from awarding cost-reimbursement contracts. Recipients and subrecipients that do so would be required to notify the awarding agency and keep a written justification in their records. Agencies would also be permitted to require prior approval for cost reimbursement contracts. Proposed § 200.321 would change the name of that section from “[c]ontracting with small businesses, minority businesses, women's business enterprises, veteran-owned businesses, and labor surplus area firms” to “[c]ontracting with small businesses” and would remove references to specific types of small businesses within the section. While this change, on its face, is consistent with the administration’s DEI policies, recipients and subrecipients would still be permitted to consider “subcategories” of small businesses “enumerated in federal statute” when awarding contracts under federal awards. However, recipients and subrecipients may want to consider this change in tandem with DOJ’s July 2025 DEI Guidance, which suggests that prioritizing contract awards to women- and minority-owned businesses violates anti-discrimination laws. Proposed § 200.322 would replace the prior domestic content provision for non-infrastructure awards that are not subject to the Build America, Buy America Act. The current provision encourages, but does not require, domestic preferences. Proposed § 200.322 would require that agencies include award terms maximizing the use of goods, products, and materials produced in the U.S. “to the greatest extent practicable and consistent with law.” The proposed rule notes that “[t]he authority of Federal agencies to impose domestic purchasing requirements for non-infrastructure awards will generally depend on appropriations and authorizing statutes for individual award programs.” Finally, proposed § 200.323 would eliminate the requirement that “to the greatest extent practicable and consistent with law,” recipients and subrecipients “purchase, acquire, or use products and services that can be reused, refurbished, or recycled; contain recycled content, are biobased, or are energy and water efficient; and are sustainable,” except to the extent § 6002 of the Solid Waste Disposal Act applies. Subrecipient and Contractor Determinations — § 200.331 Proposed § 200.331 would prohibit recipients and subrecipients from treating payments to subsidiaries, affiliates, or other related entities as internal transfers exempt from the requirement to make a contractor or subrecipient determination. If finalized, recipients and subrecipients would be required to evaluate all such transfers and classify them as either subawards or contracts. Fixed Amount Awards and Subawards — §§ 200.201, 200.333 The proposed rule would prohibit use of fixed amount awards and subawards unless authorized by statute.[3] Prohibition of Using Federal Funds for Covered Foreign Collaborations — § 200.220 Proposed § 200.220 would create a new requirement prohibiting recipients and subrecipients from obligating or spending federal funds “to support a bilateral or multilateral collaboration, agreement, program, or activity with a covered foreign country or covered foreign entity,” absent express statutory authorization or written approval from the agency head. The proposed new section does not define “collaboration,” “agreement,” “program,” or “activity” but would be applicable to all federal funds, “regardless of whether Federal funds are used for direct programmatic activities, research, technical assistance, travel, or indirect costs allocable to such collaborations.” “Covered foreign country” includes China, Russia, Iran, North Korea, Cuba, and Venezuela, and covered foreign entity includes any “entity owned or controlled by, or acting on behalf of, a covered foreign country,” as well as an “entity identified as an ‘entity of particular concern’ on a list maintained by a Federal agency pursuant to statute (including lists maintained under a National Defense Authorization Act or the International Emergency Economic Powers Act).” The provision would effectively extend the principles of the “Wolf Amendment” (which prohibits the National Aeronautics and Space Administration from using appropriated funds to “develop, design, plan, promulgate, implement, or execute a bilateral policy, program, order, or contract of any kind to participate, collaborate, or coordinate bilaterally in any way with China or any Chinese-owned company unless such activities are specifically authorized by” statute[4]) to all federal programs. Key Takeaways The proposed amendments to the Uniform Guidance are expansive. Broadly speaking, the proposed changes would (1) implement administration social policy directives that have drawn substantial attention over the past year; (2) expand executive agency authority to shape congressionally authorized grant programs; and (3) give executive agencies broad discretion to make funding determinations or discontinue funding based on executive priorities, the foreign ties of recipient organizations, and activities of those recipients that could be viewed as contrary to national priorities. With OMB targeting an Oct. 1, 2026, effective date, recipients and subrecipients should carefully monitor issuance of the final rule and may wish to work with counsel to understand the implications of specific provisions. Selena Juarez Hernandez contributed to this article [1] See Adam G. Levin, Cong. Rsch. Serv., R42769.6, Federal Grants-in-Aid Administration: A Primer (2026). [2] See Prusock & O’Brien, “Feature Comment: OMB Releases Final Guidance For Federal Financial Assistance,” 66 GC ¶ 96 . [3] For a discussion of fixed amount awards and subawards, see Prusock & O’Brien, “Feature Comment: OMB Releases Final Guidance For Federal Financial Assistance,” 66 GC ¶ 96 . [4] Department of Defense and Full-Year Continuing Appropriations Act, 2011, Pub. L. No. 112-10, § 1340(a), 125 Stat. 38, 123.