When a federal agency terminates a grant award, the consequences can be severe for the recipient. Whether you’re a nonprofit, research institution, public entity, or otherwise, a sudden termination can disrupt operations, staff retention, and mission-critical projects. Fortunately, grant recipients do have legal recourse options when facing termination — provided they act quickly and understand their rights.
Understanding Federal Grant Termination
Federal grants are governed by a combination of statutory provisions, agency-specific regulations, and the terms of the grant agreement itself. Under the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) — codified at 2 C.F.R. Part 200 — federal awarding agencies may terminate awards in three main scenarios:
- For Cause – Due to the recipient’s material failure to comply with the terms and conditions of the award.
- With Consent – Mutually agreed upon by both the federal agency and the recipient.
- For Convenience – Unilaterally by the federal agency, typically for policy or funding reasons.
Each type of termination may afford different remedies and procedural protections for the grantee.
Step 1: Review the Terms of the Award
The first step is to review the Notice of Award (NOA) and any referenced regulations. These documents often specify what constitutes a breach, notice requirements for termination, and any rights to appeal or dispute the termination. Also, review the agency’s specific grant regulations (e.g., NIH, DOE, or NSF guidelines), which may add additional procedures.
Step 2: Understand Your Appeal Rights
If your grant is terminated for cause, you generally have the right to:
- Receive written notice explaining the reasons for the termination.
- Respond or submit a corrective action plan.
- Request a hearing or appeal under the agency’s dispute resolution procedures.
Different agencies have different appeal mechanisms, so it is important to review and understand the relevant agency’s rules and regulations.
Step 3: Consider Contractual and Equitable Remedies
Although grants are not traditional contracts, courts may apply some contract principles when interpreting grant disputes. For example:
- If a grant is terminated in violation of the terms of the award or applicable regulations, the recipient may have a claim for breach of implied covenant of good faith and fair dealing.
- Some suits under the Tucker Act have been permitted in the U.S. Court of Federal Claims when the government allegedly breaches a funding obligation.
- Equitable estoppel or reliance-based claims may be possible if the recipient made significant investments based on assurances from the agency.
However, federal sovereign immunity and grant-specific doctrines may limit the availability of monetary relief.
Step 4: File an Administrative or Judicial Challenge (If Available)
If administrative appeals fail or are unavailable, the recipient may consider legal action. Options might include:
- Agency-Specific Boards or ALJs – Some agencies permit formal administrative litigation before an administrative law judge.
- Federal Court – In some cases, a recipient may be able to challenge termination in U.S. District Court, particularly if alleging violations of the Administrative Procedures Act or constitutional violations (e.g., due process or equal protection).
- Court of Federal Claims – For certain claims seeking monetary damages, the U.S. Court of Federal Claims may have jurisdiction.
Step 5: Preserve Your Rights
To maintain eligibility for future funding and preserve legal claims:
- Document everything, including communications with the agency and any harm suffered.
- Continue compliance with closeout requirements, including final reports and record retention.
- Consult counsel early in the process to assess your legal options and preserve appeal deadlines.
Conclusion
Termination of a federal grant is a serious matter, but not necessarily the end of the road. Federal grant recipients have a range of procedural and substantive rights that can provide a path to appeal or challenge a termination decision. As always, early legal advice and thorough documentation are key to protecting your organization’s interests.
If you have any questions about the foregoing, please do not hesitate to contact Aron Beezley or Nathaniel Greeson.