Overview
On July 8, 2026, the US National Science Foundation (NSF) issued a Dear Colleague Letter, titled "Prohibition on Collaborations with Restricted Entities," which announces a new policy that prohibits the use of NSF funds for "research in collaboration with" organizations identified on certain US government restricted-party lists. NSF states that this policy is necessary to protect national security and foreign policy interests, because current policies are, in its view, insufficient to address the risks posed by collaborations with such restricted entities. Given the potential for False Claims Act liability and other noncompliance consequences, all NSF recipients should review their partnerships, affiliations, outside activities of senior/key personnel, and other relationships to prepare for the new certification and compliance requirements expected to take effect in Fiscal Year 2027, which begins on October 1, 2026. Although the full scope of the policy has yet to be detailed, organizations should additionally review their grants and cooperative agreements as well as other non-financial assistance agreements, such as procurement contracts, because NSF intends for the policy to apply broadly to all types of NSF research agreements.
New Policy Requirements
Under the new policy, NSF-funded organizations and covered personnel, defined below, are subject to the following restrictions:
- NSF-appropriated funds shall not be used for grants, contracts, other transactions or other assistance to an organization if the purpose of the grant or contract is to conduct research in collaboration with restricted entities. This funding prohibition also applies if the research will be conducted in collaboration with employees of such restricted entities.
- Senior/key personnel are prohibited from holding an appointment or position with, or receiving research support from, a restricted entity. Further, senior/key personnel are prohibited from collaborating with a restricted entity, or an employee thereof, on research funded by their NSF award. Although the final policy may take a different position, senior/key personnel extend beyond a principal investigator and co-principal investigator and are generally either identified in an approved NSF proposal or have their resumes submitted in a proposal.
The policy provides that Authorized Organizational Representatives and senior/key personnel must provide certifications at the time of proposal submission to affirm compliance with the restricted-entity prohibitions. NSF defines an "Authorized Organizational Representative" as "an administrative official who on behalf of the proposing organization or institution is empowered to make certifications and assurances, to commit the organization to the conduct of a project that NSF is being asked to support, and to guide adherence to various federal and agency policies and grant requirements." All certifications will be included in the initial proposal submission package.
The Dear Colleague Letter does not provide an effective date for the new policy and instead indicates that "NSF intends to implement this prohibition in Fiscal Year 2027" (i.e., on or after October 1, 2026). It is not clear whether NSF will require that the policy apply to existing funding agreements. However, new requirements are often only implemented for new proposals and, in some circumstances, funding continuations. NSF may ultimately only require certifications at the time of proposal submission, but it could also require periodic affirmations of compliance or ask for certifications in connection with payment requests or draw-downs.
Restricted Entities Lists
The Dear Colleague Letter identifies several federal agency restricted-party lists in Appendix A, including lists maintained by the Departments of War, Commerce, Treasury, State, and Homeland Security, as well as the Federal Communications Commission and U.S. Customs and Border Protection. Notable inclusions on these lists include several prominent Chinese universities, research institutes, technology companies, telecommunications firms and defense contractors. This broad scope of restricted entities will likely impact a large number of universities, research institutions, and private-sector organizations.
False Claims Act and Other Compliance Risks
The new certification requirements raise significant compliance concerns for recipients of NSF funding agreements, because failure to comply with such requirements may result in a wide range of consequences. The policy itself does not identify specific sanctions, but federal agencies have historically employed a variety of enforcement mechanisms including loss or termination of award, proposal disqualification, administrative actions, or loss of eligibility to participate in future federal funding programs.
Additionally, noncompliance may lead to False Claims Act (FCA) liability. Organizations that knowingly (which under the FCA, includes recklessly) submit false certifications or that seek or retain NSF funding while failing to comply with applicable restrictions may face government investigations, whistleblower allegations, and penalties and damages under the FCA.
Next Steps
All current and prospective NSF-funded entities, including institutions of higher education, should take proactive steps to assess potential exposure and strengthen compliance processes before implementation in Fiscal Year 2027, including:
- Reviewing international collaborations, affiliations, and outside activities of senior/key personnel, as well as other potentially affected relationships.
- The Dear Colleague Letter provides limited guidance regarding the scope of a prohibited "research collaboration." Since the term remains undefined, organizations should carefully evaluate a broad range of activities that may fall within the scope of the policy, including joint publications, visiting scholar arrangements, data-sharing activities, and participation in multi-institution research projects. Given the policy’s lack of clarity as to whether it applies to funding agreements already in place and currently in operation, recipients should consider a review of those agreements.
- Also, although potentially not covered, NSF’s reference to contracts could extend the policy to purchases of standard research tools or services from listed entities. Therefore, funding recipients should continue to evaluate the extent to which transactions fall within NSF’s understanding of research collaboration.
- Screening collaborators against applicable restricted-party lists.
- Since the restricted-party lists are maintained by different federal agencies, organizations may not be aware that certain collaborators, subrecipients, affiliated institutions, visiting scholars, or other research partners are now associated with a restricted entity. Entities should implement enhanced screening and diligence procedures to identify potentially prohibited relationships before submitting proposals or making compliance certifications.
- Updating proposal review processes.
- Entities seeking NSF funding should update current policies to incorporate compliance measures for the new requirements prior to proposal submission. Such organizations should establish mechanisms to identify potential restricted-entity involvement early in the proposal development process, including collaborations involving subrecipients, consultants, visiting researchers, and senior/key personnel.
- Implementing certification, documentation, and internal controls.
- Organizations should revise existing compliance procedures to address the new policy and related certification requirements. Such measures may include written policies, periodic disclosures regarding outside appointments and research support, training programs, centralized recordkeeping, and internal review processes designed to identify, document, and address potential compliance concerns. Comprehensive documentation and additional oversight procedures help to mitigate enforcement risks and demonstrate good-faith compliance efforts in the event of agency inquiries, audits, or FCA investigations.
To the extent that institutions of higher education have not already done so in response to the heightened scrutiny the current Administration has placed on research funding compliance, they should move away from decentralized NSF grant application processes that provide faculty members with autonomy to prepare grant applications. This system should be replaced with a centralized review process that involves input from and surveillance by staff with expertise in NSF policies and practices. That centralized team should undertake an assessment of potentially affected relationships now, since the new requirements may require substantial updates to existing research compliance programs.
Steptoe continues to monitor updates from NSF and will provide additional guidance following further information from the agency. The firm is available to assist organizations that currently participate in NSF programs as well as organizations that intend to pursue such programs, in identifying vulnerabilities and implementing compliance measures to address the new certification requirements.
