The Conflict OMB Missed

On May 29, 2026, the Office of Management and Budget proposed a rewrite of 2 CFR Part 200, the Uniform Guidance that has governed federal grants management for over a decade. The proposal would convert that guidance, which agencies have historically implemented with some flexibility, into binding regulation across every grantmaking agency in the federal government. It touches nearly $1.1 trillion in annual federal spending. Comments are due July 13, 2026.

Rules of this size come with paperwork of their own. Executive Order 12866 requires agencies to prepare a Regulatory Impact Analysis for any “economically significant” rule, one likely to affect the economy by $100 million or more. The Regulatory Flexibility Act separately requires an assessment of how a rule will affect small entities: small nonprofits, small local governments, small businesses. Neither document is optional. Both are supposed to show that OMB looked closely at what its own rule would do before finalizing it. Both are available for download on the Federal Register page for this rule.

OMB’s Small Entity Analysis for this rule, filed in the public docket, states plainly: “OMB has not identified any Federal rules that duplicate, overlap, or conflict with the proposed rule.”

That statement is false, and the proof is sitting in NIH’s own guidance.

Buried in the proposed rule’s program design section, § 200.202(e), is a new eligibility restriction for research and development awards. Going forward, federal agencies generally may not issue R&D awards directly to a foreign entity. An exception exists only where a statute expressly authorizes it, or where the agency’s senior appointee determines a “compelling interest” justifies it. Foreign entities can still participate as subrecipients or contractors under an award to a U.S. institution. As a direct recipient of federal research money, they are presumptively out.

Four months earlier, NIH had gone a different direction. NOT-OD-25-155, effective for applications due on or after January 25, 2026, eliminated the traditional foreign subaward structure. Under the old model, a U.S. institution held the prime award and passed a portion of the funds to its foreign collaborator as a subrecipient, one layer removed from NIH. Under the new model, that foreign collaborator gets pulled out of the application entirely and issued its own separate award, using activity codes RF2 or UL2. NIH’s own guidance describes the result without ambiguity: the award is “awarded directly to the foreign organization.” The foreign institution registers in SAM.gov and eRA Commons in its own name, receives its own Notice of Award, and reports its own finances directly to NIH.

NIH built this structure to solve a stated problem: the old subaward model gave the government limited visibility into how foreign partners used federal research dollars. The fix worked by making the foreign organization more visible, not less. It made them a direct party to the federal award relationship.

That is exactly the category § 200.202(e) restricts by default.

Put the two documents side by side and the conflict is not a matter of interpretation. NIH already requires that every foreign research collaborator become the direct recipient of a separate federal award. The OMB rule already presumes that direct federal R&D awards to foreign entities are prohibited unless a senior political appointee finds a compelling interest. Since the subaward option no longer exists at NIH, every international collaboration NIH funds now runs into a restriction the rule proposes to impose for the first time. What used to be a program officer’s routine decision would become a case-by-case political determination, for every foreign component of every NIH grant, with no acknowledgment anywhere in OMB’s paperwork that this is what would happen.

The Regulatory Impact Analysis rates the cost of § 200.202(e) as “minimal” and “primarily one-time.” It does not mention NOT-OD-25-155. The Small Entity Analysis says no conflicting rules were identified. It does not mention NOT-OD-25-155 either. Both documents were prepared by the same office responsible for coordinating with NIH in the first place; the interagency coordination that produced this rule was supposed to catch exactly this kind of conflict before publication.

There is a methodological reason the gap may have gone unnoticed, and it does not make the omission better. The RIA’s own data appendix states that the underlying analysis excluded foreign recipients: “Individuals and Foreign Recipients – Removed from analysis.” The population directly affected by the collision between § 200.202(e) and NIH’s new award structure was removed from the dataset before OMB ever looked for conflicts. An analysis built this way was not positioned to find the problem, regardless of how carefully anyone read the resulting numbers.

Agencies are required to engage in reasoned decision-making, and courts reviewing a challenge to a final rule can examine an agency’s own analysis as evidence of whether that standard was met. An impact analysis that overlooks a demonstrable conflict with another agency’s binding guidance, issued four months earlier, on the exact topic the analysis claims to have checked, is difficult to defend as reasoned. It does not require speculation about intent to make this point. The comparison is available to anyone willing to read both documents.

This matters beyond any one office’s compliance calendar. A scientist with a foreign collaborator, a research administrator trying to plan around this rule, a member of the public who simply wants federal science policy made carefully: none of them can afford to wait for OMB to notice the conflict on its own. The public comment record is the mechanism built for exactly this purpose, to put in front of the agency the facts its own process missed. This one is documented, dated, and drawn entirely from the government’s own words.

Comment against the OMB rule: Deadline: July 13, 2026 at 11:59 PM Eastern

https://www.regulations.gov/commenton/OMB-2026-0034-0001

Call your representatives. Email your representatives.

They can take action against this through a joint resolution that can be added to appropriations bills or stand alone. However; a joint resolution would need to pass both houses.

Stand up for Science Action page: https://fight2win.standupforscience.net/

My substack articles:

· How to write a comment on the Federal Register - https://elizabethginexi.substack.com/p/what-we-need-to-do-next-ombs-proposed

· Summary of Key Changes in OMB’s Proposed Federal Financial Assistance Rule -https://elizabethginexi.substack.com/p/summary-of-key-changes-in-ombs-proposed

· A Rule Nobody Voted On Could Cut Federal Funding to Your Community -https://elizabethginexi.substack.com/p/a-rule-nobody-voted-on-could-cut

· This new OMB Rule Is Bigger Than Science. Much Bigger. -https://elizabethginexi.substack.com/p/this-new-omb-rule-is-bigger-than