Sneak Preview: OMB Proposes To Allow Discretionary Terminations
(The following was excerpted from a recent Thompson Grants Compliance Expert article.) The Office of Management and Budget (OMB), within its recent proposed rule to amend Title 2 of the Code of Federal Regulations, including the uniform guidance (2 C.F.R. Part 200), would implement much more policy-based termination provisions designed to give the federal government more control over decisions to halt federal funding.
OMB explained that the termination changes are meant to align federal spending with current law, executive orders (EOs) — primarily President Trump’s EO 14332 (see ¶101 in the Federal Grants Management Module) — and agency priorities, and to improve transparency, accountability and oversight while reducing recipient burden. In doing so, the amended provisions, if finalized, would offer the administration greater discretion to halt grants that it opposes, such as those pertaining to diversity, equity and inclusion (DEI) and gender ideology. Finalizing the proposed changes to the termination provisions at §§200.340-200.343 essentially would give the administration greater leverage in any future court cases filed by grantees challenging their award terminations.
The proposal also included the ability for federal agencies to temporarily suspend an award, either in part or its entirety, similar to a provision for federal contracts under the Federal Acquisition Regulation. It also would emphasize that federal agencies must always include the termination provisions under §200.340 in the terms and conditions of each federal award or expressly incorporate them by reference, and to inform recipients of any additional termination provisions that apply to the award, according to OMB, “to ensure recipients are always clearly and unambiguously informed of the potential for termination under §200.340, including termination based on discretion of the federal agency.”
The termination provision at §200.340 under the current uniform guidance allows four ways for a federal agency or pass-through entity (PTE) to initiate award termination — (1) the recipient/subrecipient fails to comply with award terms and conditions; (2) through mutually agreed consent with the recipient/subrecipient; (3) by the recipient/subrecipient upon sending written notification for a termination to the federal agency or PTE; and (4) “pursuant to the terms and conditions of the federal award, including, to the extent authorized by law, if an award no longer effectuates the program goals or agency priorities.”
The proposed rule, at §200.430(a)(2), aimed to amend the language for this fourth circumstance to state that an award can be terminated at the discretion of the federal agency or PTE. It states: “The federal agency or PTE, to the extent permitted by law, may terminate a federal award in part or its entirety if the federal agency or PTE determines that a termination is in the interest of the federal agency or PTE, 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 proposal would also add a fifth termination factor stating that a federal agency or PTE, to the extent permitted by law, “may terminate a federal award in part or its entirety pursuant to any additional termination provisions included in the terms and conditions of the federal award.”
(The full version of this story has now been made available to all for a limited time here.)
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