Interview transcript:
Terry Gerton Well, back on August 7, the President issued another executive order, this one on improving oversight of federal grant making. So let’s start with the big picture. From your perspective, what is this executive order really all about?
Dan Ramish So Terry, I think it’s no secret that the administration has been making some changes to the federal grant and assistance area, and this executive order is kind of consolidating and reinforcing some of the things the administration’s been trying to do. So by way of example, there have been a substantial volume of terminations and there have been questions about termination rights in different grants and other assistance awards. That’s been a big issue. The first Trump administration actually increased the funding agency’s ability to unilaterally terminate awards. And this executive order is building on that. Another area is indirect cost rates. And a number of individual agencies have issued policies to cap indirect rates. And there have been legal challenges to those caps. This is another area addressed in the executive order. And then another significant theme in grants and contracts has been trying to conform spending to the administration’s policy preferences, or scrutinizing DEI initiatives has been a recurring theme of many of the executive actions since inauguration. And that’s another thing that is being reinforced in this executive order.
Terry Gerton Well, let’s dig into some of those in a little bit more detail. In fact, we’ll start with the last one first. One of the things that’s kind of eye-catching about this order is that it requires a lot more approval stops on the way to issue, and those approvals have to be granted by political appointees. So talk to us about what that means for agency processes. Are they ready for that? How much time do they have to get ready?
Dan Ramish That’s a very good question. And of course, much of it will be in the implementation and rollout of the executive order. The executive order is not totally self-implementing. I think there certainly will be questions about how it could affect timeframes for reviews, as well as obviously the outcomes of those reviews. So to maybe describe a little bit more the political appointee review process, there are new mandates for senior appointees or their designees to review and approve agency funding opportunity announcements, and then conducting pre-issuance reviews of discretionary awards to confirm consistency with applicable law, agency of priorities and national interest. And there are specific calls for discussions with grant review panels or program offices. So certainly the scope of that and the level of involvement of senior political appointees will add time to those processes and, probably depending on the type of award, the magnitude of the award, that’ll affect how much it has an impact. There are also directions to review annually, consistency with agency priorities and substantial progress on the awards. And there’s an accountability mechanism for officials responsible for selection and granting of the awards, so efforts to, within program offices and so forth, ensure everybody’s on the same sheet of music, so to speak.
Terry Gerton And every agency has to turn in a review plan, a review strategy to meet this requirement, right, before they can approve any more grants?
Dan Ramish Yes, that’s one of the important immediate impacts. No new funding opportunity announcements may be issued until the review processes are stood up. So, unless there’s prior approval by a senior political appointee. One of the other features in this is what seems to be an effort to kind of democratize federal assistance. And that’s been something that has happened in other policy initiatives as well. And so in this case, there are new requirements to minimize information and special requirements in funding opportunity announcements, have them be in plain English and minimize the need for legal or technical expertise, as well as eliminating redundancy between agencies.
Terry Gerton But a lot of that was kind of already in the latest revision of the uniform grants guidance. So is that really new, or is it just a re-emphasis here by the Trump administration?
Dan Ramish I think perhaps a re-emphasis, but I think the fact that it is something that they have been trying to do, there’s some new wrinkles in the references to legal or technical expertise, trying to make it easier for a broader array of potential recipients to apply for federal grants.
Terry Gerton I’m speaking with Dan Ramish. He’s a partner with Haynes Boone. Well, so that political review process, the democratization of who can apply, all also are a piece with some new guidance around some pretty strict limitations about what discretionary grants can be used for. So walk us through what’s on the table, what’s off the table.
Dan Ramish Well, so I mentioned already, of course, there have been efforts to scrutinize DEI and to promote other administration policy priorities. And so one of the provisions addressing this says that discretionary awards are prohibited from funding, promoting, encouraging, subsidizing or facilitating racial preferences or other forms of racial discrimination, in the terms of the executive order, by grant recipients. Including activities where race or intentional proxies for race will be used as selection criteria for employment or program participation. And then the second category, again, quoting from the order, denial by the grant recipient of the sex, binary and humans, or the notion that sex is a chosen or immutable characteristic, and illegal immigration. So common themes that the administration has been talking about and addressing across different executive actions. And now there will be specific prohibitions in the federal funding arena.
Terry Gerton And just to be clear, though, this is discretionary grants only. It’s not formula grants. It’s not grants that are statutorily required. It’s not Medicaid grants, those kinds of things. It’s research grants, human services support, those kind of things?
Dan Ramish Yes, that’s not to say that there couldn’t be statutory overlays that would interact with this policy, but yes, it is just specifically for discretionary awards.
Terry Gerton So then let’s go back to one of the things you mentioned up front, the termination for convenience. That’s sort of a new thing in the grant space. So walk us through how this EO envisions that implementation.
Dan Ramish Sure. So the order calls for revisions to the Uniform Guidance termination provisions to further clarify and require that all discretionary grants permit termination for convenience. And as you say, that was a relatively new development established in 2020. Previously, there wasn’t a unilateral agency right to terminate. The 2020 guidance introduced some ability of funding agencies to terminate if an award no longer advances agency priorities. The executive order here expands on that, to attempt to require that there be a termination for convenience right in federal awards, and specifically that it allow for termination if an award no longer effectuates program goals or agency priorities. One of the existing rights, but that is going to be kind of more standardized, there was a greater ability for a funding agency to leave out a termination clause under the existing uniform guidance. And the administration is saying now that will be mandatory for funding agencies.
Terry Gerton Is it also retroactive if you’re a current grantee? Do you now have to worry that your current grant might be terminated for convenience?
Dan Ramish So the current grants may have termination provisions that allow for unilateral termination already, and the order adds that, to the extent that it’s practicable and consistent with applicable law, agency heads are supposed to modify the existing grants to include termination provisions. Now there may be questions about whether there’s consideration for that change depending on the circumstance, so it may not be practicable to do it, but this is an additional move to try to give funding agencies greater ability to terminate awards.
Terry Gerton So it sounds like there’s a checklist, to-do list for both agencies and grant recipients right now. What would you say are on the top of those lists?
Dan Ramish Some of this will really be organization-specific when it comes to recipients and prospective recipients, because the changes in the review process will affect prospects for future awards, and the changes and how grants are evaluated and awarded will present new opportunities for some organizations and will present challenges for other organizations. One of the things I mentioned at the outset was indirect cost rates. So that that’s a new area of evaluation where there will be a preference, other things being equal for institutions with lower indirect cost rates. And so I think many grant recipients will be evaluating how they align with the current administration’s policy preferences, including lower indirect cost rates, as well as some of the other policy areas we talked about, and consider how their internal policies in those areas will align with their ability to win grants in the future.
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