OMB's May 29 Rewrite Of 2 CFR Part 200: Political Pre-Issuance Review, Termination For Convenience, And The End Of The Uniform Guidance As You Know It

On May 29, 2026, the Office of Management and Budget published in the Federal Register a notice of proposed rulemaking titled "Regulation for Federal Financial Assistance" — a 400-plus-page document that, if finalized substantially as written, will be the most consequential rewrite of the rules governing federal grants since 2 CFR Part 200 was first promulgated in 2013. Comments are due July 13, 2026 at regulations.gov under docket OMB-2026-0001. OMB has signaled an effective date of October 1, 2026, which lines up with the start of FY2027.

This is not an incremental update. The 2024 Biden-era refresh of Part 200 tightened indirect-cost language, plain-language drafting, and the single-audit threshold. The May 29 proposal does something different: it restructures the relationship between a federal agency and a grantee from one anchored in peer-reviewed merit, statutory program goals, and a tightly bounded set of disallowance categories, to one anchored in alignment with administration priorities, expansive agency discretion, and political pre-issuance review. The proposal even renames the regulation itself — what every federal grants office has called the Uniform Guidance for a decade becomes the Uniform Grants Regulation.

Anyone holding a federal grant, applying for one, or budgeting against one needs to read the NPRM in full. The 45-day comment window is the only formal opportunity to influence the final rule before it locks in for the entire executive branch.

This post walks through what changed, what it means operationally, and what the realistic comment-and-prepare strategy looks like for universities, nonprofits, and state and local governments holding the roughly $1.2 trillion in annual federal financial assistance the rule covers.

The political pre-issuance review

The single most-discussed change is a new requirement that federal agency heads designate one or more senior appointees — political appointees, in the practical sense — to conduct a pre-issuance review of every discretionary award before it can be obligated. The stated standard is that selected proposals must be "consistent with applicable law, federal agency priorities, and the national interest."

In current practice, peer review panels at NSF, NIH, and similar agencies score proposals on scientific merit and broader-impacts criteria. Program officers then assemble a fundable line based on those scores, the appropriated budget, and program-balance considerations. Political leadership has always had ultimate signing authority, but in the modal case the political layer either approves the program-officer slate or, occasionally, asks questions before approving. The new rule converts that quiet final approval into an affirmative pre-issuance check against administration priorities, codified for every agency.

What this means practically:

• Every discretionary grant goes through a political review gate. Formula grants, block grants, and disaster recovery grants are categorically excluded. Discretionary research awards from NSF, NIH, DOE Office of Science, ARPA-H, USDA NIFA, ED IES, and similar agencies are squarely in scope.
• The "agency priorities and national interest" standard is not defined. OMB explicitly leaves the substantive content of those terms to each agency to articulate, which in practice will be a function of the administration's standing executive orders, the agency head's interpretive memos, and any FAQ guidance the agency issues post-rule.
• Peer review remains advisory. The proposal does not eliminate peer review. It does subordinate it. A peer-reviewed top-ranked proposal that does not survive senior-appointee review will not be funded; a lower-scored proposal that better aligns with administration priorities can be advanced.
• Timing and notification. OMB has not specified a maximum number of days between selection-by-program-office and pre-issuance review completion, which means awards may sit longer in the pipeline. Applicants should expect notice-of-award dates to slip relative to historical norms.

The Union of Concerned Scientists characterized the change as replacing "merit with loyalty to a political leader." The American Council on Education called it potentially "historic" and warned that "the devil is going to be in the details." The Association of Public and Land-grant Universities expressed relief that indirect-cost rate caps were left out of this rulemaking — OMB explicitly states it is not revising the indirect-cost provisions and discourages public comments on that topic.

Termination for convenience: from narrow to broad

The current Uniform Guidance allows an agency to terminate a federal award only in narrowly specified circumstances: noncompliance with terms, agreement of the parties, or in limited cases when the award no longer effectuates program goals. Terminations have historically been rare events that survived legal challenge only when well-documented against those narrow categories.

The proposed rule rewrites the termination section to import the Federal Acquisition Regulation's termination-for-convenience standard — the standard used for federal contracts — and to extend it across all federal financial assistance. The rule explicitly allows termination when the award "no longer advances agency priorities or the national interest." A new temporary suspension authority is also introduced, allowing the agency to pause an award without formally terminating it.

Three operational consequences for grantees:

1. Multi-year awards are now less reliable as a planning instrument. A five-year cooperative agreement signed in year one can be terminated in year three because the administration's priorities have shifted. The dollars are appropriated for multi-year obligation but the spend authority can be revoked.
2. Subaward and consortium structures absorb more risk. Pass-through entities that have flowed federal funds to dozens of subrecipients now need termination clauses that mirror the federal-to-prime relationship, or the prime absorbs the wind-down cost.
3. Carryforward, no-cost extensions, and program-income reinvestment require fresh attention. Any flexibility built into a grant that depends on multi-year continuity should be re-papered against the assumption that the agency may use the new authority.

Existing case law on FAR terminations-for-convenience for contracts is well-developed and largely favorable to the government — challenges typically succeed only on bad-faith showings or specific contract clauses. The grants version will accrete its own case law over the next several years, but in the interim, grantees should assume termination authority will be exercised as broadly as the rule allows.

Restricted allowable costs: advertising, publications, conferences, lobbying

The proposed rule adds new restrictions to the allowable-costs sections of Part 200 (the §200.420-475 series). The four most consequential for research grantees:

• Advertising and public relations. Restricted beyond the existing carveouts for recruitment, public health alerts, and similar narrowly-defined cases.
• Publication costs. This is the change that has the research community most alarmed. Federal grants cannot fund most publication costs or open-access fees unless the publication is expressly required by statute or has received case-by-case pre-approval. Public-access mandates from NIH and others still exist as a policy matter, but the rule restricts the federal-grant funding mechanism for compliance.
• Conferences. Researchers must obtain pre-approval from the agency to attend conferences or to join professional memberships related to the grant work, beyond the current de minimis exemptions.
• Lobbying. The current ban on federal lobbying is extended and clarified, including for state and local pass-through arrangements.

For a research university, the practical effect is that the indirect-cost-recovery model that historically subsidized faculty travel to conferences, page charges, and APCs now requires either fresh institutional general funds, foundation support, or an explicit statutory carveout. NIH's public-access mandate is statutorily anchored in the Consolidated Appropriations Acts, which provides a potential statutory hook; NSF's parallel mandate is policy-based and more exposed.

The DEI prohibition and "covered foreign collaborations"

Two further substantive restrictions:

DEI prohibition. Federal awards cannot "fund, promote, encourage, subsidize, or facilitate" diversity, equity, and inclusion policies, or "gender ideology" as defined in the administration's executive orders. The prohibition reaches both the grant's direct activities and any subrecipient passthrough. For universities, this affects broader-impacts proposals that lean on DEI language, several NSF programs that were rebranded from prior diversity-anchored solicitations, and any HBCU/MSI/HSI capacity-building line that uses race-conscious eligibility criteria. The Strengthening Institutions Program rewrite announced in May was a preview of the substantive policy direction; the Part 200 rule extends it to every federal grant.

Foreign collaborations. The proposed rule extends the "Wolf Amendment" restrictions — historically applicable to NASA collaborations with the People's Republic of China — across all federal financial assistance. Grants cannot support research with foreign entities affiliated with sanctioned or covered countries unless explicit statutory or agency-head exceptions are authorized. Research and development funding must go to entities organized under U.S. or tribal law, which is a tighter standard than the existing "responsible conduct of research" disclosures.

Universities with active international research consortia, federally-funded centers with foreign collaborators on faculty, and labs that have visiting researchers from covered jurisdictions will need to map their portfolios against the new standard before October 1.

Eliminated: fixed-amount awards

The proposed rule eliminates fixed-amount awards and fixed-amount subawards. OMB's stated rationale is that fixed-amount structures limit transparency and avoid routine cost-monitoring and financial-reporting requirements. The practical effect: programs that operated on a fixed-amount model — including a number of Department of Education, USDA, and DOL community-services lines — will revert to cost-reimbursement or cost-reimbursement-with-budget-flexibility structures. Grantees that have built finance-and-administration operations around fixed-amount simplicity will need to rebuild for full cost accounting.

Mandatory E-Verify, Do Not Pay, and SAM.gov subaward reporting

Three administrative additions worth flagging:

• Mandatory E-Verify participation for federal grant recipients above a threshold to be specified in the final rule.
• Mandatory use of Treasury's Do Not Pay system before disbursing payments to subrecipients and contractors.
• Strengthened subaward reporting to SAM.gov, increasing administrative burden for pass-through entities that manage multiple subrecipients.

For state and local governments serving as pass-through entities, the SAM.gov reporting expansion is the most material burden increase. The National Association of Counties has flagged that pass-through entities also bear new responsibility for ensuring subrecipient compliance with viewpoint-neutrality requirements for events held on county property, regardless of whether the events themselves receive federal funds.

What the rule does not touch

Notably excluded from the rewrite:

• Indirect cost rate caps. OMB explicitly discourages comments on this topic. The 15% indirect cost cap fight from earlier in the administration is not re-litigated in this rulemaking.
• Single audit thresholds. The 2024 Biden-era increase of the single audit threshold from $750K to $1M is preserved.
• The micro-purchase and simplified acquisition thresholds. Unchanged.
• Block grants, formula grants, and disaster recovery grants. Categorically excluded from the new termination and pre-issuance review authorities.

The exclusions are nearly as important as the inclusions for any organization assessing exposure. A state department of education receiving Title I formula funds, a county receiving Community Development Block Grant dollars, or a disaster-affected jurisdiction receiving FEMA Public Assistance is largely outside the scope of the more aggressive new authorities. A research university holding NIH R01s and NSF cooperative agreements is squarely inside.

The 45-day comment window: what counts

OMB will receive thousands of comments by July 13. The comments that empirically influence final rules in rulemakings of this scale share three characteristics:

1. Specific section-and-paragraph references. Comments that say "§200.340(a)(4) should be revised to read…" are read by the rulewriter; comments that say "we oppose this rule" are tallied but not engaged.
2. Quantified operational impact. A university comment that documents the FTE cost and timeline delay of the pre-issuance review on its specific NIH R01 portfolio carries more weight than a values-based objection.
3. Concrete alternatives that achieve OMB's stated goals. OMB has stated three goals — transparency, anti-discrimination compliance, and reduced recipient burden. Comments that demonstrate the proposed rule defeats the third goal (reduced burden) by quantifying it tend to land.

Organizations should be drafting two parallel work streams in June. The first is the comment itself, anchored in section-level analysis with documented impact. The second is an internal operational readiness assessment against an October 1 effective date — even if the rule is delayed or modified in finalization, the operational lift on E-Verify, Do Not Pay, SAM.gov reporting, and DEI-clause review across active awards will take more than 90 days.

What to do this week

For a research university, an academic medical center, or a large nonprofit prime grantee, four immediate actions:

• Pull a portfolio map of active discretionary awards by agency, end date, and obligation status. Awards ending after October 1, 2026 with substantial remaining obligated balance are the highest-exposure cases under the new termination authority.
• Audit current and pending broader-impacts language and DEI-coded program elements in every pending proposal. The standards will tighten between now and finalization; a proposal submitted in June that survives review in October needs to clear the October standard.
• Begin scoping the operational lift for E-Verify, Do Not Pay, and SAM.gov subaward reporting changes. Procurement and grants-management systems vendors are already preparing patches; institutions on home-grown ERPs have a longer runway.
• Draft a substantive section-level comment for submission by July 13. The first 10 days of June are the window when comment drafts can incorporate the full text of the NPRM with time for institutional review before submission.

The Granted news brief covering the initial filing is at Granted News. The Federal Register notice itself is the authoritative source — the docket page on regulations.gov is where comments are submitted and where the full 400-plus-page text is available for downloading. Every federal grants office should already have it printed.

What changed on May 29 is not the politics — the executive orders driving the rule have been in place since August. What changed is that the politics now has a regulatory vehicle that survives the next administration unless it is itself rescinded through notice-and-comment. The Uniform Guidance era is ending. The Uniform Grants Regulation era begins October 1.