NCLifeSci urges changes to proposed OMB rule the would stifle innovation

NCLifeSci submitted the following comment on the proposed rule, Regulation for Federal Financial Assistance, 2 CFR Part 200, Docket No. OMB-2026-0034, 91 Fed. Reg. 32189 (May 29, 2026) 

Dear Director: 

The North Carolina Life Sciences Organization submits this comment on the proposed revisions to the Uniform Guidance, 2 CFR Part 200, published in the Federal Register on May 29, before the close of the public comment period on July 13, 2026. NCLifeSci represents the companies comprising North Carolina's life sciences sector, from early-stage startups to established manufacturers, and has over 350 dues-paying members. 

We share OMB's goal of responsible stewardship of federal funds. Several provisions of the proposed rule, though, would introduce uncertainty into the early-stage research funding on which North Carolina's life sciences companies depend and would weaken the merit-based review process responsible for the sector's growth. We respectfully urge OMB to reconsider the provisions described below, and we offer North Carolina's record as evidence of what a stable, merit-driven federal funding system produces. 

North Carolina's life sciences ecosystem 

North Carolina is home to more than 860 life sciences companies employing over 75,000 residents. Much of this sector traces back to research funded at the state's universities. Early federal support for biomedical research at institutions such as Duke University, the University of North Carolina at Chapel Hill and North Carolina State University leads to technology transfer, new company formation and, in time, drugs and devices reaching patients. 

At the state's land-grant institutions, North Carolina State University and North Carolina A&T State University, federally funded agricultural, engineering and applied sciences research serves farming and industrial communities across the state. These same programs train the scientists and engineers who staff North Carolina companies and laboratories, supplying a workforce no single employer would fund alone. 

How federal funding builds companies 

Early-stage life sciences companies face a long and costly path from discovery to market. Small Business Innovation Research and Small Business Technology Transfer grants, along with contracts from agencies such as the National Institutes of Health, the Biomedical Advanced Research and Development Authority and the Department of War, supply capital at the earliest and riskiest stages. This federal support reduces technical risk to a point where private investors will commit. 

Between 2022 and 2024, North Carolina small businesses received $470.3 million in SBIR and STTR funds, each award made after rigorous merit review. Since 2006, the state's One North Carolina Small Business Program has matched such awards for more than 540 companies across 41 counties, work associated with more than 2,500 high-paying jobs and more than $8.6 billion in follow-on investment. Six North Carolina companies show the pattern: 

• AskBio develops gene therapies built on adeno-associated virus technology. The company grew out of research at the University of North Carolina at Chapel Hill, where co-founder Jude Samulski directed the Gene Therapy Center for 25 years and drew National Institutes of Health support for the laboratory work behind the platform. He launched AskBio in 2001 with more than $3 million in SBIR grants contributing to early funding. In 2020 Bayer acquired AskBio for $2 billion up front and up to $2 billion more tied to milestones, the third largest acquisition of a homegrown North Carolina bioscience company. The AskBio platform now underpins much of the global gene therapy industry. 

• Humacyte develops engineered blood vessels and tissue constructs. Federal sources, including NIH and the Department of War, provided $11.2 million of the more than $922 million the company has raised, a return of 82 to 1. Humacyte employs 165 people, 130 of them in North Carolina, and trades on the NASDAQ exchange. The 2026 federal defense budget funds the use of Humacyte's engineered blood vessels to treat warfighter injuries, and clinicians are using the product in Ukraine under Emergency Use Authorization. 

• Liquidia, a spin-out of the University of North Carolina at Chapel Hill, developed its core technology from federally supported university research and now manufactures an approved cardiopulmonary therapy. Its proprietary PRINT technology produces inhaled dry-powder drug particles of uniform size and shape, improving deep-lung delivery for patients with pulmonary arterial hypertension and related conditions. Liquidia shows the full pathway the sector depends on: university science, moved through development, reaching patients as a marketed product. 

• Locus Biosciences develops precision bacteriophage therapies against bacterial disease. The company has drawn more than $52 million in federal grants and contracts from NIH and BARDA, including a BARDA award of up to $77 million toward a $144 million precision medicine program. Locus has since raised more than $59 million from private investors and employs over 85 people in North Carolina. 

• NIRvana Sciences, a spin-out of North Carolina State University, develops dyes, probes and contrast agents for life science applications. The company received more than $7.9 million in NIH SBIR and other federal grants and used those funds to raise more than $3.5 million from North Carolina sources and private investors. Waters Biosciences recently acquired the company. 

• TARGAN develops animal vaccination delivery technology. The company began with early SBIR funding and now employs well over 100 people in reclaimed warehouse space. Accurate animal vaccination protects the food supply. TARGAN started with poultry and is expanding to swine, fish and other species, extending the economic effect into rural parts of the state. 

In each case, early federal support did not replace private capital but drew private capital in. 

Provisions of concern 

Termination and suspension authority (revised 2 CFR 200.340) 

The proposed rule would let an agency or pass-through entity terminate any discretionary award, in whole or in part, whenever the agency determines termination serves the agency's interest, including the national interest as defined at the time of termination. A new suspension authority would let agencies halt work by written order. Early-stage companies structure multi-year research plans, hire staff and commit resources in reliance on the award period. Termination or suspension partway through a project would strand work already underway, waste funds already spent and set back research along paths not easily reversed. 

Equally important, the prospect of at-will termination undercuts the certainty private investors require. Federal awards reduce risk precisely because they are predictable. An award subject to cancellation for shifting reasons unrelated to performance loses much of its value, and the private capital drawn to matched federal funding would grow harder to secure. 

Political merit review (2 CFR 200.205) 

The proposed rule would add a layer of review by senior political appointees before an award is issued and would designate scientific peer review as advisory and subordinate to agency discretion. Peer review by qualified scientists has long served as the standard for judging research proposals on scientific merit. A shift toward political review risks overlooking early research on problems appearing narrow at first but proving foundational later. Priorities differ from one administration to the next, and research selected under one set of priorities would face uncertainty about continued funding under another. 

The North Carolina Department of Commerce found nearly 381 of 606 recent SBIR awards to North Carolina businesses, worth $294.4 million, contained terms open to flagging under such review. Those awards support work on Alzheimer's disease and cancer detection, food access, warfighter wound care, body armor for women in uniform and treatment for patients with severe bleeding. 

Foreign collaboration and international research restrictions (2 CFR 200.220 and 200.202(e)) 

New restrictions would bar federal funds for collaboration with covered foreign countries and entities and would set an eligibility standard for research awards with international elements. The eligibility provision does not define how agencies will assess international involvement, leaving companies and institutions without a clear standard against which to plan. Life sciences research is international by nature, drawing on foreign-trained scientists, collaborating institutions and global supply chains. Ambiguous restrictions would slow legitimate research and deter companies from pursuing federal support for projects with any international dimension. 

Cost restrictions and elimination of fixed amount awards 

The proposed rule would eliminate fixed amount awards and subawards and would narrow the costs recipients charge to federal awards. Small companies with limited administrative staff rely on simplified award structures to keep reporting manageable. Added cost-tracking and approval requirements would raise the administrative burden on the smallest recipients, the companies least able to absorb the expense, and would divert scientists and founders from research toward paperwork. 

Certification requirements and legal exposure 

Several provisions would make new policy conditions enforceable terms of an award and would require recipients to certify compliance. A certification later found inaccurate, including where the underlying legal question remains genuinely contested, would create exposure under the False Claims Act, with civil and potentially criminal consequences reaching individuals as well as institutions. For a small company, the risk of such exposure over contested and shifting standards would weigh against pursuing federal funding at all. 

Conversion of guidance to binding regulation 

The proposed rule would delete language stating the Uniform Guidance is guidance rather than regulation, giving OMB's requirements independent regulatory effect. Future amendments would then apply across every federal grantmaking agency at once, without agency-level rulemaking or the notice-and-comment review accompanying the current process. Consolidating this authority would let major changes to cost principles, audit standards and policy conditions take effect government-wide through a single proceeding, reducing the opportunity for affected companies and institutions to respond before changes bind them. 

The stakes for North Carolina 

Beyond individual companies, the proposed rule would place major North Carolina research investments at risk. North Carolina hosts two of the nine active National Science Foundation Regional Innovation Engines, each eligible for up to $160 million over ten years. The NSF Regenerative Medicine Engine in Winston-Salem has drawn $30.16 million to date, helped secure more than $266 million from other stakeholders, trained 1,438 people and generated a nearly $300 million regional economic effect in two years. The NSF Textile Innovation Engine in Morganton has drawn $31.98 million, helped secure $70 million more and trained more than 2,500 students and 200 workers. 

The North Carolina Department of Commerce also serves as prime recipient of a three-year $2.5 million Department of Energy grant helping up to 50 small and mid-sized manufacturers adopt smart-manufacturing technology. Suspension or termination authority applied to awards of this kind would halt ecosystem-building work well before completion. 

Recommendations 

The North Carolina Life Sciences Organization respectfully urges OMB to: 

• Preserve scientific peer review as the primary basis for award decisions and limit political review to confirming legal compliance. 

• Narrow the termination and suspension authority so agencies end awards for performance or compliance reasons, not shifting policy preferences, and protect awards from cancellation once work is underway. 

• Define clear, workable standards for the foreign collaboration and international research provisions. 

• Preserve simplified award structures for small businesses and limit new cost and certification burdens on the smallest recipients. 

• Retain notice-and-comment review for future changes to the Uniform Guidance. 

North Carolina's life sciences sector reflects a productive partnership among federal early-stage funding, state programs, universities and private investors. The companies described here returned federal dollars many times over in jobs, private investment and products serving patients, warfighters and the food supply. We ask OMB to weigh these consequences and to preserve the stability and merit-based review responsible for the sector's success. 

We welcome the chance to serve as a resource and to answer questions as OMB reviews the proposed rule.