In May 2026, the Office of Management and Budget published a 412-page proposed revision to 2 CFR Part 200, the federal regulation that governs how every federal grant program in the United States is administered. Known as the Uniform Guidance, this regulation sets the rules for how federal funds flow from agencies to states, from states to subgrantees, and from subgrantees to the communities they serve. The proposed revision is a major overhaul of these rules, and its comment period closes July 13, 2026.
The proposed rule has attracted significant attention from the research grant community, where a requirement that senior political appointees conduct pre-issuance reviews of every discretionary grant award has alarmed scientists and university administrators. Grants compliance publications have described it as a change that “understates the situation in the same way that ‘tax code amendments’ understated the 2017 Tax Cuts and Jobs Act.”
Less noticed, but no less significant, is what the proposed rule does to the $42.45 billion Broadband Equity, Access, and Deployment (BEAD) program and to the approximately $21 billion in nondeployment funds currently being considered for a second round of broadband procurement. This article examines the proposed rule’s provisions as applied to BEAD, traces their relationship to a series of documented actions by the National Telecommunications and Information Administration, and situates both within the broader regulatory strategy that OMB Director Russell Vought has publicly described as his governing philosophy.
The argument presented here is not that any single action is impermissible or unprecedented in isolation. Rather, that the provisions of the proposed rule, when read alongside NTIA’s documented enforcement posture and the impoundment strategy Vought has pursued across multiple federal programs, describe a coherent regulatory sequence whose cumulative effect would be to make BEAD’s continued implementation and any second-round deployment of its savings administratively and legally untenable.
The Document and Its Author
Understanding the proposed rule requires understanding its institutional origin. Russell Vought, currently serving his second term as OMB Director, authored the chapter on the Executive Office of the President in the Heritage Foundation’s Project 2025, a 920-page governance blueprint published in 2024 to guide a potential Republican administration. In that document, Vought described his vision for OMB explicitly: “The Director must view his job as the best, most comprehensive approximation of the President’s mind.” OMB, he wrote, should be “a President’s air-traffic control system” and must be powerful enough to override implementing agencies’ bureaucracies.
Vought’s role in Project 2025 extended beyond the chapter he authored. ProPublica reported in December 2025 that he led the transition portion of Project 2025, which included drafting approximately 350 executive orders, regulations, and other implementation documents. The proposed 2 CFR Part 200 revision is one of those documents, in the sense that it directly implements the governance philosophy Vought described in print before taking office, using OMB’s regulatory authority over the Uniform Guidance to project control over every federal grant program simultaneously.
The proposed rule’s preamble is explicit about this lineage. It cites Executive Order 14332, signed in August 2025, as its primary authority, and describes the regulation as implementing a series of January 2025 executive orders on DEI, gender ideology, and merit-based opportunity. Time Magazine observed that the rule “echoes statements that OMB director Russell Vought wrote in the Heritage Foundation’s conservative governance blueprint Project 2025.”
Though these initiatives may seem disparate to BEAD, their origin establishes that this proposed rulemaking is not a routine administrative update. It is the regulatory implementation of a documented policy agenda written by the official now responsible for its execution, planned in documents that predate his own employment in his current position. This framing is purposive. States need to believe that Russ Vought expects to pass his NPRM priorities as they are written.
What the Proposed Rule Does in its Provisions
The proposed rule contains six interlocking provisions that, applied to BEAD specifically, create what grants compliance experts would recognize as a cascading enforcement pipeline. Each provision is addressable individually; their cumulative effect is what warrants examination.
The proposed revision to § 200.340(a)(2) authorizes federal agencies and pass-through entities to terminate awards when they determine the award “does not effectuate program goals, Federal agency priorities, or the national interest as they exist at the time of the termination.”
The operative phrase, “as they exist at the time of termination”, explicitly untethers the termination standard from the conditions at the time of award. A grant made under one administration’s priorities can be terminated because the current administration has different priorities, with no detailed justification required and no administrative appeal right under the companion provision at § 200.342.
Importantly, the carve-out in § 200.340(b)(2) states that the discretionary termination provision in (a)(2) ‘does not apply’ to BEAD awards. The scope of that exemption and whether it removes only the mandatory inclusion requirement or the underlying authority itself is ambiguous on the face of the proposed text. The provision further specifies that any questions about the carve-out’s applicability require consultation with OMB, and that any class exceptions not listed in (b)(2) require OMB approval. In practice, this places interpretive control over the carve-out’s scope within the same office that authored the rule… ambiguously written, the protection the carve-out provides is only as durable as OMB’s willingness to honor it.
The proposed § 200.333 eliminates fixed-amount subawards entirely, requiring states to convert milestone-based payment structures to cost-reimbursement arrangements. The November 2025 BEAD General Terms and Conditions explicitly built the program’s subgrant payment architecture on the fixed-amount model, granting OMB-approved exceptions to 2 CFR 200.333 and 200.201(b)(2) specifically so that states could issue fixed-amount subgrants without per-award NTIA approval and so that subgrantees would not be required to comply with the federal cost principles in 2 CFR Subpart E.
NTIA framed fixed-amount awards as the strongly encouraged default for BEAD infrastructure projects precisely because they simplify oversight and tie disbursement to measurable construction milestones rather than to subgrantee accounting systems. Elimination of § 200.333 would require states that have structured their subaward agreements around fixed-amount authority to either renegotiate those agreements. Importantly, the downstream impacts of this change are that many ISP subgrantees like cooperatives, rural telephone companies, and tribal entities are simply not operationally equipped to undertake.
The definition of what violates federal anti-discrimination law is supplied by a chain of executive branch legal documents: the March 21, 2025 DOJ Memorandum on implementing Executive Orders 14151 and 14173, the July 29, 2025 DOJ Guidance for Recipients of Federal Funding Regarding Unlawful Discrimination, and a December 2, 2025 OLC opinion on the constitutionality of race-based Department of Education programs. All three are cited in the NPRM’s own footnotes at 91 FR 32198.
States that designed their BEAD programs under the Biden administration’s Notice of Funding Opportunity which required or strongly encouraged equity plans, affordability provisions, and targeted outreach to underserved communities face a compliance paradox under this provision.
The conditions they incorporated were required by the federal government at the time of approval. The proposed rule now characterizes those same conditions as potentially prohibited uses of federal funds, and requires NTIA to review existing award documents for compliance.
New § 200.218 prohibits use of federal award funds for “disparate-impact studies, disparate-impact litigation, or other related activities,” and for “adjusting activities or performance under the Federal award based on theories, or the assumed risk of, disparate-impact liability.” The provision defines disparate-impact liability to include any analysis identifying “differences or disparities in outcomes… among different races, sexes, or similar groups.”
The challenge process that states conducted under BEAD in order to identify where the FCC’s Broadband Serviceable Location Fabric inaccurately reported coverage produced documentation of systematic misreporting that, in many states, correlated with the demographic and economic characteristics of unserved areas by nature of their construction and the fact that zip code still remains the most accurate predictor of income, education, and other socioeconomic patterns (NaNDA).1 Whether such documentation constitutes a “disparate-impact study” under § 200.218’s definition will depend on both the breadth of interpretation NTIA applies and the specific contents of each state’s challenge record.
The provision also creates a retroactive review obligation: federal agencies are required to examine existing award terms and conditions for compliance with § 200.218, meaning that challenge process documentation already in the grant record becomes subject to review under a standard that did not exist when it was produced.
New § 200.219 requires public entities receiving federal funds to apply viewpoint-neutral standards to any event or meeting services they provide, with the standard triggered by any policy with the “purpose or effect” of suppressing speech. The provision extends to non-public entities “within the scope of activities funded by a Federal award,” and explicitly includes indirect costs for buildings and facilities.
Community engagement processes, stakeholder consultations, and public meetings conducted as part of BEAD program administration may fall within its scope. Complaints under this provision feed into a reputational harm monitoring obligation at § 200.332(i), discussed below.
The proposed revisions to the subrecipient monitoring provisions create a suite of new obligations for states as pass-through entities. States must attest in every performance report that all subawards have been reported to SAM.gov, an attestation whose accuracy implicates the federal False Claims Act if any reporting gap exists. New § 200.332(h) eliminates existing workarounds that treated payments to related entities as internal transfers, retroactively reclassifying cooperative structures, joint ventures, and affiliated entities that states may have approved as subgrantees.
New § 200.332(i) requires states to ensure that each subrecipient “does not take actions that could significantly damage the reputation of the pass-through entity, the Federal agency making the award, or the Federal Government”, a standard whose definition is left entirely to agency discretion.
Five states with active BEAD awards are simultaneously parties to significant litigation against the Trump administration over federal funding conditions. California has filed or joined more than 34 lawsuits against the administration, at four times the pace of its first-term litigation, spanning disputes over climate funding, education, immigration enforcement, and grant terminations. Among the most directly relevant, California sued to block the termination of $1.2 billion in federally appropriated energy and infrastructure funds, arguing the terminations violated the constitutional separation of powers. Illinois has filed 63 lawsuits since January 2025, with 93 percent of decided cases resolved in the state’s favor, protecting approximately $8.6 billion in federal funding. Illinois specifically accused the federal government of “withholding funds as a means of applying pressure over policy differences.” Minnesota, Virginia, and New Mexico are co-plaintiffs alongside California and Illinois in a March 2026 multistate lawsuit challenging USDA’s imposition of new grant conditions requiring states to certify compliance with administration policies on DEI, immigration, and gender identity as a condition of receiving already-appropriated food program funds, arguing that USDA “does not fully identify or limit which policies the states must comply with, leaving states at the mercy of the administration for enforcement.” Virginia’s newly seated Attorney General Jay Jones announced on his first day in office in January 2026 that his office would join multistate litigation against the Trump administration on multiple fronts, including challenging the dismantling of the CFPB and opposing education funding conditions. The USDA conditions lawsuit is analytically significant for BEAD because it presents the identical legal theory the proposed 2 CFR Part 200 revision would deploy against state broadband programs: federal grant conditions imposed on already-appropriated funds, predicated on state compliance with administration policy priorities, with enforcement standards deliberately left undefined.
The § 200.332(i) reputational harm standard requires NTIA consultation if a subgrantee takes actions that damage the federal government’s reputation almost certainly captures litigation activity by state attorneys general as a reputational harm trigger. A state suing the federal government is, by definition under this standard, taking actions that damage the federal government’s reputation.
§ 200.339(b) — Private Cause of Action Cooperation
The proposed § 200.339(b) authorizes federal agencies, at their discretion, to cooperate with private individuals or organizations pursuing civil remedies against grant recipients and subrecipients. The cooperation decision is unreviewable and “solely in the discretion of that agency”. It requires no prior notice to the state, and carries no specified judicial review standard.
The Texas abortion law (SB 8, 2021) was legally novel because it removed enforcement from the state and vested it in private citizens: any private citizen could sue anyone who “aided or abetted” an abortion after six weeks, for a $10,000 bounty, with no requirement that the plaintiff have any personal connection to the abortion. The state’s fingerprints were off the enforcement mechanism. Courts couldn’t enjoin the state because the state wasn’t the enforcer.
§ 200.339(b) replicates this architecture with two modifications: the federal government retains discretionary cooperation authority rather than mandating private enforcement, and the cause of action is the False Claims Act rather than a newly created private right. But the functional logic is identical: enforcement is projected through private parties, the agency’s direct accountability is minimized, and the target (the state) faces litigation it cannot prevent by negotiating with the government.
The FCA qui tam mechanism adds one element SB 8 didn’t have: the relator receives 15-30% of any recovery. That is a financial incentive structure for private enforcement of federal compliance standards. The bigger the BEAD award, the bigger the potential recovery, the stronger the incentive for a well-capitalized organization to invest in building a case.
The question to consider isn’t “will NTIA terminate BEAD awards?”; NTIA may never need to terminate anything directly. The question is: does the compliance architecture create sufficient litigation risk, at sufficient financial scale, with sufficient federal cooperation available to plaintiffs, that:
- Subgrantee ISPs can’t close construction financing because their legal exposure is unquantifiable
- States can’t defend their program designs without disclosing internal compliance records that become evidence against them
- The regulatory uncertainty alone causes states to voluntarily strip equity conditions from their programs before any enforcement action occurs
That third effect, voluntary compliance in advance of enforcement, is exactly what the abortion example cited in SB 8 achieved. Many clinics stopped performing abortions before a single lawsuit was filed because the litigation risk was uninsurable. A precedent exists that highlights the how and why: the mechanism doesn’t need to be invoked or manifested to work; it needs only to exist and be credible to stifle BEAD.
The difference in scale is that a BEAD state’s exposure isn’t the $10,000 bounty, but compounded damages on a nine-figure federal award, plus per-claim AFCA penalties on every quarterly performance report attestation for the program’s duration. The Administrative False Claims Act2 allows agencies to pursue civil penalties administratively for false claims up to $1 million, with penalties of up to $5,0003 per false claim or false certification without court intervention (Seyfarth Shaw, Venable LLP). Separately, private qui tam relators pursuing the same conduct under the judicial False Claims Act face per-claim penalties of $14,308 to $28,619 plus treble damages, meaning NTIA’s cooperation with a private relator under § 200.339(b) activates a penalty structure orders of magnitude larger than the administrative track alone.
The Targeting Signal in the Preamble
The proposed rule is a government-wide regulation affecting over $1 trillion in annual federal grant spending. Its preamble, however, contains a passage that policy observers in the broadband sector will recognize immediately.
Under a section labeled “Objective 1: Improved Transparency, Accountability, and Oversight,” the preamble states:
“In one notorious example, under a $42.5 billion broadband internet access program, the previous administration failed to connect a single person to the internet over the course of three years, instead focusing efforts and attention on imposing a long list of burdensome policy requirements.”
The rule does not name BEAD. The description, however, of $42.5 billion + broadband + three years + zero connections = unambiguously a citation of the BEAD program to anyone working in federal broadband policy.
The choice to characterize BEAD as the “notorious example” of Biden-era grant mismanagement, in the preamble to a government-wide regulation, is a deliberate framing decision. It establishes in the regulatory record that the program this rule most visibly targets had already failed under the prior administration, a characterization that shapes how NTIA applies the rule’s provisions in the event of subsequent enforcement proceedings.
NTIA’s Documented Enforcement Posture
The proposed rule does not exist in isolation. It follows a series of documented actions by NTIA under Administrator Arielle Roth that establish a consistent enforcement posture.
Roth’s public characterization of Biden-era BEAD conditions is documented across multiple official speeches. At the Hudson Institute on October 28, 2025, she described BEAD as having been “weighed down by red tape and extralegal conditions that slowed down states, deterred providers, and sidelined innovative technologies.” At the Free State Foundation Luncheon on December 2, 2025, she characterized those conditions more specifically as “heavy-handed, extralegal social mandates.” The term “extralegal” is not rhetorical imprecision. It is a legal characterization, asserting that the equity conditions built into BEAD’s approved state programs were outside the law. Her citation is the predicate the proposed rule’s § 200.300(b) and § 200.218 provisions require in order to trigger a noncompliance determination.
At the same Hudson Institute event, Roth described NTIA’s ongoing review of state Final Proposals as including the identification and rejection of “outlier projects with unreasonably expensive costs or questionable feasibility.” This high-cost-location enforcement standard was subsequently applied in a documented enforcement action against Washington, D.C.
In a March 9, 2026 Wall Street Journal op-ed, Roth announced that NTIA was revoking Washington D.C.’s original $100.7 million BEAD allocation, citing a per-location cost of approximately $70,000 and the inclusion of locations she described as a shed, a nonexistent building, and an open field. The $100.7 million was D.C.’s original statutory allocation from IIJA and what NTIA actually revoked was a far smaller amount: NTIA zeroed out D.C.’s deployment request of approximately $4 million covering 55 physical addresses. D.C. is currently the only state or territory to have had its BEAD funding revoked.
The response from D.C.’s Chief Technology Officer Stephen Miller, published as a letter to the Wall Street Journal’s editor and reported by Inside Towers and Broadband Breakfast, added a dimension that received less attention than Roth’s original op-ed. Miller stated: “These locations were identified by the federal government, not the District of Columbia. The District doesn’t choose those locations: the FCC does. Operating under the rules approved by the current administration, we submitted proposals to connect a shed and a field — we didn’t pick the locations, and we didn’t pick the cost.”
Miller’s response identifies a structural problem that extends beyond D.C.’s individual case. The FCC Broadband Serviceable Location Fabric is a federal government product and defines which locations are eligible for BEAD funding. States were and are required to submit proposals for those locations. When the Fabric includes locations of questionable serviceability, states have limited ability to unilaterally remove them without NTIA’s concurrence, since NTIA holds “exclusive final authority to remove locations from the list,” as Miller’s letter noted. The high-cost-location enforcement mechanism, in this context, holds states responsible for the accuracy of data they did not produce and cannot unilaterally correct.
In a separate incident, NTIA publicly characterized Wisconsin’s decision to allocate $60 million in state funds to serve locations BEAD left unconnected as “extremely disappointing.” Wisconsin Governor Tony Evers had attributed the coverage gap to NTIA’s June 2025 decision to adopt technology-neutral standards, which he argued left approximately 34,000 locations without service. NTIA’s public response to a state using its own funds to address a coverage gap created by federal policy changes is notable in the context of § 200.332(i)’s reputational harm standard: states that publicly identify problems with NTIA’s program design risk characterization as acting against federal government interests.
The Impoundment Precedent and the Pattern Across Programs
More broadly, the application of regulatory compliance architecture to prevent disbursement of congressionally appropriated funds has a documented history in this administration’s approach to the Infrastructure Investment and Jobs Act.
In October 2025, during a government shutdown, OMB Director Vought froze approximately $32 billion in infrastructure projects in Democratic-led states, including $18 billion in New York City projects and $2.1 billion in Chicago transit projects, citing the pretext that the projects were unconstitutionally related to DEI principles. The Government Accountability Office has documented eight instances of the administration disregarding congressional spending decisions and violating the Impoundment Control Act.
The Transportation for America policy organization has documented an additional pattern: the administration intentionally delayed IIJA grant implementation to allow appropriations to lapse, resulting in Fiscal Year 2022 grants that expired before obligation, a mechanism the organization characterized as “likely an illegal impoundment of funds.”
Vought has publicly argued that the Impoundment Control Act of 1974 is unconstitutional, and ProPublica reported that between Trump’s first and second terms, Vought and attorney Mark Paoletta developed a legal argument that presidents have inherent authority to withhold appropriated funds.
The proposed 2 CFR Part 200 revision, in this context whether by design or structural convergence, can be understood as an alternative pathway to the same outcome: rather than directly impounding funds (a mechanism courts have repeatedly blocked) it creates the compliance conditions under which funds cannot legally be disbursed, or under which disbursement creates serious enforcement exposure for the recipient.
The distinction is procedural, not substantive. Congressional appropriations remain technically intact, creatively, however, this compliance architecture makes their lawful expenditure excessively structurally difficult.
The $21 Billion Question
Commerce Secretary Howard Lutnick confirmed in a February 2026 Senate hearing that the $21 billion in BEAD nondeployment savings “would be spent in accordance with the law.” Administrator Roth stated in March 2026 that NTIA is “proceeding with the assumption that the funding is going to be spent” and warned against both wasteful and “distortionary” uses of the funds.
These public commitments create a credibility question the proposed rule makes difficult to answer. A second-round procurement of the $21 billion nondeployment pool in whatever form it takes would likely be subject to the proposed 2 CFR Part 200 framework upon finalization.
Any state or territory participating in that procurement would face the same compliance architecture described in this article: the § 200.300(b) prohibition on equity-framed program design, the § 200.218 prohibition on disparity analysis, the enhanced subrecipient monitoring obligations that exceed the capacity of most state broadband offices, and the § 200.339(b) authorization for NTIA to cooperate with private litigation against states that run into compliance problems.
Additionally, any state whose current BEAD award is terminated under the proposed rule’s framework would carry a SAM.gov derogatory record under § 200.341(b) for five years, a record that federal agencies are required to consider when evaluating future award applications. A state terminated from BEAD Round 1 faces a material barrier to participation in any second-round procurement and is the mechanism that converts a BEAD program termination into a 2RPN block.
NTIA has an incentive to use the noncompliance termination pathway rather than the discretionary pathway precisely because it generates the SAM.gov derogatory record that creates the future-award barrier. The discretionary pathway requires less justification and has no appeal right but does not produce the five-year record. If NTIA wants both to terminate and to create a lasting barrier to future participation, it will use the noncompliance route and tolerate the procedural requirements that come with it.
The Benton Institute for Broadband and Society, in a June 2026 analysis, observed that the proposed rule “would embed the current Administration’s policy priorities– including prohibitions on diversity, equity, and inclusion (DEI) activities– directly into the terms and conditions of federal awards” and “significantly expand agencies’ power to terminate awards mid-stream.”4
The Comment Record is the Primary Leverage Point
The proposed rule is in a public comment period through July 13, 2026. The regulatory record built during that period is the primary mechanism available to affected parties to shape the final rule, preserve legal challenges to its provisions, and document the specific programmatic harms its adoption would cause.
Importantly, Motor Vehicle Manufacturers Association v. State Farm Mutual Automobile Insurance Co., 463 U.S. 29 (1983) establishes an offensive strategy with teeth that ensures states’ efforts to comment are more than just lip service. State Farm established that a federal agency acts arbitrarily and capriciously when it: 1) Relies on factors Congress did not intend for it to consider; 2) Fails to consider an important aspect of the problem; 3) Offers an explanation that runs counter to the evidence before the agency; 4) Is so implausible it cannot be attributed to a difference in view or agency expertise.
An agency that ignores substantial, well-documented comments in its final rule preamble has either failed to consider an important aspect of the problem (#2) or offered an explanation that runs counter to the evidence before it (#3).
Not all comments create equal APA exposure for the agency. Courts distinguish between substantive comments that require a response and general objections that do not. A substantive comment under APA doctrine is one that:
- Identifies a specific provision of the proposed rule
- Explains why that provision is flawed with particularity
- Provides factual or legal support for the objection
- Proposes a narrower alternative that would achieve the same regulatory objective
A comment that says “this rule will harm broadband deployment” is significantly weaker than a comment that says “§ 200.332’s 30-day SAM.gov reporting deadline, applied to a state administering 200 BEAD subgrantees across rural areas with limited administrative capacity, creates the following documented compliance burden [attach labor hours, FTE costs, current reporting timelines] and OMB has provided no analysis of this burden in violation of its own Information Quality Act obligations and Executive Order 12866’s cost-benefit requirements”
SBOs and other parties should treat their comments as if they are evidence in a future court record.
Grants compliance experts have noted that the comments historically most effective at influencing OMB rulemaking are technical ones and those that “document a specific compliance burden, quantify the cost, and propose a narrower alternative that achieves the same policy objective.”
The comment period represents the only window during which states, industry participants, and other stakeholders can document the operational consequences of the proposed rule’s provisions creating a factual foundation in the federal regulatory record for any subsequent legal challenge to the rule’s application to BEAD-specific circumstances.
That window closes July 13, 2026.
- 1 The National Neighborhood Data Archive (NaNDA) provides a landmark study on zip-code-level socioeconomic clustering; see ICPSR Study 38528.
- 2 Renamed from the Program Fraud Civil Remedies Act of 1986 by Section 5203 of the FY2025 National Defense Authorization Act, signed December 23, 2024.
- 3 The $5,000 amount is a statutory base that is subject to inflation adjustment.
- 4 The Institute separately noted that the proposed rule’s interaction with a May 28, 2026 OLC opinion on E-rate’s funding structure puts “the structural insulation argument on less certain footing than it stood on before” creating uncertainty about whether E-rate’s discount-and-reimbursement mechanism insulates it from the proposed rule’s requirements in the way that had previously been assumed.