Award Terminations Just Got Easier for Federal Agencies. Here Is How to Plan for It.

Federal agencies now have clarified authority to terminate a discretionary award for any lawful program or policy reason, at any point in the period of performance, not only for cause. Here's how to build a continuity plan that actually holds up, instead of writing one in the middle of a crisis.

What changed, specifically. Previously, agencies could terminate an award for cause, essentially, non-compliance or non-performance, or when continuing the award became inconsistent with program goals under fairly defined circumstances. The clarified authority extends termination grounds to any lawful program or policy reason, similar in structure to the discretionary termination authority long available in federal contracting. The award document itself, not just the regulation, is where you'll find your specific terms; review your termination clause now rather than assuming it matches a general summary.

Here's what a continuity plan that actually works contains, not just the idea that you should have one. A real plan names the specific program, the federal award funding it, and answers three questions concretely: what happens to staff currently charged to that award in the first 30 days, what costs remain reimbursable during a wind-down period under your award terms, and what alternative funding, reserve, bridge grant, reallocated budget, could sustain the program's most essential functions for 60 to 90 days while you pursue a longer-term solution. A plan that says "we would assess the situation and respond" isn't a continuity plan, it's a placeholder. The plan is only useful if someone could execute it without you in the room.

For Local Governments: Start With the Service, Not the Award

For local governments running an essential service on a single federal award, start with the service, not the award. Identify every federally funded program your community would genuinely miss if it stopped, a public health program, a housing initiative, a public safety grant, and build the 30/60/90 day plan for each one specifically. This is program-by-program work, not a single organizational policy; a general statement that "the city has a continuity framework" doesn't tell your finance director what to actually do if a specific award ends in October.

For Nonprofit Primes: Map the Cascade to Your Subrecipients

For nonprofit primes, the cascade to your subrecipients is the piece most organizations miss, so map it explicitly rather than assuming it will sort itself out. If your prime award terminates, what does your subaward agreement actually obligate you to do for each subrecipient, continue funding through a notice period, cover incurred costs only, something else? Pull your subaward agreements now and confirm the answer, because the honest answer for many organizations is that nobody has checked. Build a subrecipient communication plan alongside your own continuity plan: who gets notified, in what order, with what information, so the first week after an actual termination is spent executing a plan rather than drafting one.

For State Agencies: Write the Cascade Into the Agreement

For state agencies, the same cascade question applies at a larger scale, and it belongs in every subaward agreement, not just internal policy. Write the answer into the agreement itself: what obligations continue if the prime federal award terminates, what wind-down period applies, and what the state owes its subrecipients during that period. A subaward agreement silent on this question leaves both the state and the subrecipient guessing at the worst possible moment.

For Nonprofit Subrecipients: Ask the Questions Your Agreement Leaves Open

For nonprofit subrecipients, your job is to read the termination clause in your own agreement and ask the questions it leaves open, before you need the answer. What happens to staff time already committed? What costs are reimbursable through a wind-down period? If your subaward agreement doesn't answer these clearly, ask your pass-through directly. A subrecipient who understands its actual exposure can build a lean, realistic contingency plan. A subrecipient who assumes the funding will simply continue is the one caught flat-footed.

Prepare Now

• Read the termination clause in every award and subaward agreement your organization holds
• Build a specific 30/60/90 day continuity plan for each federally funded service your organization considers essential
• If you administer subawards, confirm what your subaward agreements actually obligate you to do if your prime award terminates, and build a subrecipient communication plan
• If you are a subrecipient, ask your pass-through the questions your own termination clause leaves open

Your first move toward getting ahead of the new compliance requirements. Get the 2026 Uniform Guidance Transition Checklist.