Impact of Federal Budget Sequestration on Sponsored Projects

The federal budget sequestration process was included in the Budget Control Act of 2011, which increased the debt limit, cut $1 trillion in discretionary appropriations through lower annual spending caps over nine years, and directed a committee to identify an additional $1.2 trillion in cuts to federal programs over fiscal years 2013–2021. This committee failed to reach an agreement, triggering sequestration to carry out the additional $1.2 trillion in cuts. The budget sequestration, set to begin in January 2013, was delayed until March 1, 2013 by Congressional passage of the American Taxpayer Relief Act of 2012.

Guidance issued by federal agencies related to the potential impact of sequestration on grants and contracts is linked below. If you have any questions regarding specific awards, please contact your SPO Contract and Grant Officer.

National Institutes of Health

The National Institutes of Health published NIH Operation Plan in the Event of a Sequestration (NOT-OD-13-043) on February 21, 2013. This notice states the following.

“The NIH continues to operate under a Continuing Resolution as described in NOT-OD-13-002, and therefore all non-competing continuation awards are currently being funded at a level below that indicated on the most recent Notice of Award (generally up to 90% of the previously committed level). Final levels of FY 2013 funding may be reduced by a sequestration. Despite the potential for reduced funding, the NIH remains committed to our mission to seek fundamental knowledge about the nature and behavior of living systems and the application of that knowledge to enhance health, lengthen life, and reduce the burdens of illness and disability.

Should a sequestration occur, NIH likely will reduce the final FY 2013 funding levels of non-competing continuation grants and expects to make fewer competing awards to allow the agency to meet the available budget allocation. Although each NIH Institute and Center (IC) will assess allocations within their portfolio to maximize the scientific impact, non-competing continuation awards that have already been made may be restored above the current level as described in NOT-OD-13-002 but likely will not reach the full FY 2013 commitment level described in the Notice of Award. Finally, in the event of a sequestration, NIH ICs will announce their respective approaches to meeting the new budget level.”

NIH Resources

NIH Operation Plan in the Event of a Sequestration (NOT-OD-13-043) (February 21, 2013)
NIH Operations Under the Sequester NIH OER Rock Talk (March 4, 2013)
NIH Fiscal Policy for Grant Awards – FY 2013 (NOT-OD-13-064) (May 8, 2013)
Funding Operations for FY2013 NIH OER Rock Talk (May 8, 2013)
Fact sheet: Impact of Sequestration on the National Institutes of Health (June 3, 2013)
NIH Extramural Financial Operations: 2013 Sequestration Resources

National Science Foundation

The National Science Foundation issued Important Notice No. 133: Impact of FY 2013 Sequestration Order on NSF Awards on February 27, 2013.

On July 17, 2013, NSF issued an Update to Important Notice No. 133 that includes the following:

NSF will fully fund all existing continuing grant increments in FY 2013;
NSF directorates have now received full-year funding allocations, which will allow funding decisions to be made prior to the end of the fiscal year on September 30th;
NSF expects to make fewer new awards in FY 2013;
NSF will fully fund all FY 2013 major research equipment and facilities construction projects;
Competitions for some programs and solicitations may not be conducted in FY 2013; and
NSF staff will not be furloughed, allowing for no interruptions to the NSF proposal review and award decision making processes.

Other Agencies

U.S. Agency for International Development (USAID)

Dear Recipient Letter (March 12, 2013)

U.S. Department of Commerce, National Oceanic and Atmospheric Administration (NOAA)

Dear Grantee Letter (NOAA) (March 5, 2013)

“At this time, the U.S. Department of Commerce is planning for the possibility of sequestration and has identified your award as one that may be affected as a result of the automatic spending reductions. In this event, the Department may decide not to issue you a continuation award, including not awarding incremental funds on multi-year awards, and may require negotiation of a reduction in the scope of your award. If, as a result of the automatic spending cuts, your award is impacted, you will be contacted by the appropriate Grants Officer with additional details.”

U.S. Department of Energy

Letter to Contractors and Financial Assistance Recipients (March 4, 2013)

“For procurement contracts, the Department of Energy may decide not to exercise an option or may need to negotiate lower prices or other terms via a bilateral modification to meet the constraints imposed by sequestration. The Department may also determine it necessary to stop or suspend work, reduce the scope of work, or partially or completely terminate your contract for convenience. Additionally, planned contract actions for new work may be re-scoped, delayed, or canceled depending on the nature of the work and the degree to which it directly supports the agency’s mission goals.

For financial assistance agreements, the Department may decide not to issue a continuation award- including not awarding incremental funds on multi-year awards - and may require negotiation of a reduction in the scope of your award.

To the extent that your contract or financial assistance agreement is affected due to these budget cuts, you will be contacted by the appropriate Contracting Officer with additional details.”

U.S. Department of Health and Human Services (DHHS)

DHHS Administration for Children and Families (ACF)

Dear Colleague Letter (March 5, 2013)

DHHS Health Resources and Services Administration (HRSA)

Dear Grantee Letter (HRSA) (March 4, 2013)

U.S. Department of Homeland Security, Federal Emergency Management Agency (FEMA)

Letter to Grantees (March 4, 2013)

“At this time, NASA is taking every step to mitigate the effects of these cuts, but based on our initial analysis, it is possible that your contract, grant, cooperative agreement, or Space Act agreement may be affected. In addition, planned actions for new and existing work may be re-scoped, delayed, or canceled depending on the nature of the work and the degree to which it directly supports the Agency’s mission goals.

To the extent that your contract, grant, cooperative agreement, or Space Act agreement is affected due to these budget cuts, you will be contacted by your Contracting, Agreement or Grant Officer with additional details.”

National Endowment for the Humanities (NEH)

Sequestration: A Public Notice (February 28, 2013)

“With sequestration and the possibility of other funding reductions, NEH must assume a need to continue to constrain our use of program funds. The agency will be obligated to make fewer new awards at lower award amounts. We may also have to delay the timing of future grant commitments until overall federal budgeting decisions are clarified in whatever approach is adopted when the current continuing resolution elapses March 27. All prior grant acceptances and all upcoming application deadlines, however, will stand.”