NEWS | NSBA Urges OMB to Protect Small Businesses from Political Uncertainty in Federal Grants, SBIR/STTR

NSBA's comments underscore a fundamental principle of federal policymaking: accountability should not come at the expense of predictability for the small businesses that depend on stable federal partnerships, as exemplified with recent developments related to the SBIR/STTR programs.

JULY 15, 2026 | This week, NSBA submitted comments to the Office of Management and Budget (OMB) urging policymakers to preserve stability and predictability for small businesses as the Administration considers sweeping revisions to the federal government's grantmaking regulations.

The comments, submitted in response to OMB's proposed rewrite of the Uniform Guidance for Federal Financial Assistance (2 CFR Part 200), focus specifically on how the proposed rule could affect small businesses that rely on federal grants and cooperative agreements, not only as direct recipients, but also as subcontractors, research partners, and participants in innovation programs like SBIR and STTR.

While much of the public discussion surrounding the proposal has centered on universities and research institutions, NSBA's comments emphasize that small businesses often have far fewer resources to absorb disruptions in federal funding.

Unlike larger organizations with dedicated compliance and grants management staff, most small businesses rely on owners or a small team of employees to manage federal awards while simultaneously running day-to-day operations. Funding interruptions can quickly translate into delayed research, canceled subcontracts, employee layoffs, or stalled commercialization efforts.

NSBA points to the recent lapse in authorization for the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs as a real-world example of how vulnerable small businesses already are to policy uncertainty.

Following the expiration of program authorization on September 30, 2025, participating federal agencies were unable to issue new SBIR and STTR awards for more than six months, even though funding had already been appropriated. The interruption left thousands of innovative small businesses waiting on awards, forcing some companies to delay hiring, pause research and development, or draw down financial reserves while Congress debated reauthorization.

NSBA argues that this episode demonstrates just how disruptive uncertainty can be for small firms and cautions against adopting regulations that could create additional instability.

NSBA's comments highlight two provisions that could significantly increase uncertainty for grant recipients.

First, the proposed rule would require senior political appointees to conduct a pre-award review of discretionary grants, with awards expected to demonstrably advance the President's policy priorities.

Second, the proposal would allow agencies broad authority to suspend or terminate active awards "for convenience" if leadership determines a project no longer aligns with current priorities, even in the absence of compliance violations or a formal appeals process.

According to NSBA, these provisions could make long-term business planning substantially more difficult for small companies that hire employees, sign leases, purchase equipment, or enter subcontracting agreements based on multi-year federal awards.

Importantly, NSBA notes that its concerns are not directed at any particular administration or policy agenda. Rather, the organization argues that any authority created through this rulemaking would remain available to future administrations with different priorities, increasing the likelihood of regulatory and funding "whiplash" over time.

Among the recommendations are:

• A minimum notice-and-cure period before awards are suspended or terminated for convenience.

• A phased implementation timeline to give small businesses adequate time to adapt to new requirements.

• Targeted relief from additional reporting and paperwork requirements for smaller grant recipients with limited administrative capacity.

Federal grants and cooperative agreements help drive research, innovation, workforce development, manufacturing, and commercialization across the small business community. Whether participating directly through programs like SBIR and STTR or supporting larger federal projects as subcontractors, small businesses depend on a stable and predictable federal partnership.

NSBA will continue advocating for policies that strengthen accountability while ensuring America's small businesses can invest, innovate, and grow with confidence.

Read the full comments here.