OMB Proposes Major Overhaul Of Federal Grant-Making Rules: What It Means For Research Institutions And How To Prepare

On May 29, 2026, the Office of Management and Budget (OMB) issued a proposed rule titled Regulation for Federal Financial Assistance that would significantly revise the Uniform Guidance (2 C.F.R. Part 200) governing federal grants. If finalized, the rule would convert longstanding guidance into binding regulation, expand federal oversight and embed administration policy priorities into grantmaking decisions. For research institutions, including universities, academic medical centers and affiliated nonprofits, the rule would materially reshape how federal research funding is awarded, administered and monitored.

The proposed rule is currently open for public comment through July 13, 2026, with OMB indicating a target effective date of Oct. 1, 2026, making preparation critical.

Key Changes and Implications

1. Indirect Costs as a Competitive Factor in Award Decisions

Agencies will consider an applicant’s indirect cost rate, or Facilities & Administrative (F&A) costs, when making discretionary funding decisions. OMB proposes that “All else being equal, preference for discretionary awards should be given to institutions with lower indirect cost rates” (§ 200.205).

Implication: Institutions with higher F&A rates may face increased competitive pressure.

2. Increased Political Review of Awards

Senior political appointees would review discretionary awards, with peer review treated as advisory. OMB proposes that “senior appointees must conduct these reviews and apply specific principles … (that) include ensuring that discretionary awards advance the President's policy priorities, prohibit the use of funds for discriminatory or otherwise impermissible purposes and emphasize ensuring compliance with applicable law” (§ 200.205) and that “peer review recommendations remain advisory and are not ministerially ratified, routinely deferred to, or otherwise treated as de facto binding by senior appointees or their designees” (§200.202).

Implication: Greater uncertainty in funding outcomes and potentially longer award timelines.

3. Expanded Termination and Modification Authority

Agencies would have broader discretion to suspend or terminate awards based on policy priorities or the national interest. The proposed rule states that “OMB proposes the new discretionary termination provision to provide that the Federal agency or pass-through entity, to the extent permitted by law, may terminate a Federal award in part or its entirety if the Federal agency or pass-through entity determines that a termination is in the interest of the Federal agency or pass-through entity … (and) that this includes if a Federal award no longer effectuates program goals, Federal agency priorities or the national interest as they exist at the time of the termination” (§ 200.340).

Implication: Elevated risk to ongoing projects and funding continuity.

4. New Limits on Publication and Conference Costs

Certain publication and conference costs would be restricted or require prior agency approval. OMB proposes to make “publication costs unallowable unless such costs are expressly required by statute or approved in advance by the Federal agency on a case-by-case basis” (§ 200.432). OMB proposes that conference attendance costs would be “allowable only if participation … is expressly approved by the agency and included in the terms and conditions of the award” (§ 200.432).

Implication: Constraints on dissemination strategies and conference participation.

5. Restrictions on International Collaborations

Additional requirements would apply to foreign partnerships. OMB proposes that “Federal awards for research and development must be made to entities that are organized under the laws of the United States, a State, or Tribal government,” and that “Federal agencies may not issue awards for research and development to foreign entities except where expressly authorized by statute or where a compelling interest exists for the agency’s mission, the administration’s priorities and for the United States, as determined by the agency’s senior appointee” (§ 200.202[e]).

Implication: International research programs and collaborations with foreign institutions may require additional review and oversight.

How to Prepare

Bond can advise clients now on how to stay ahead of these changes and protect funding and operations if the rule is finalized:

• Regulatory readiness assessments: Identify impacts across your research portfolio
• Contingency planning: Prepare for award delays, modifications, or terminations
• Contract and grant “hardening”: Strengthen internal policies and third-party agreements
• F&A positioning strategies: Support and defend indirect cost structures
• International collaboration reviews: Enhance compliance for foreign partnerships

Bond will continue to monitor the status of the proposed rule and will provide further updates as they arise.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.