Over the past few months, significant administrative shifts have begun reshaping the federal funding ecosystem — with particularly profound implications for those pursuing health, defense, and energy innovation. At Fedsprout, we believe preparation is the key to staying resilient and competitive. Here’s what you need to know.

Structural Reorganization and Budget Pressures

The newly announced Administration for a Healthy America (AHA) aims to consolidate several agencies, including the Office of the Assistant Secretary for Health (OASH), Health Resources and Services Administration (HRSA), Substance Abuse and Mental Health Services Administration (SAMHSA), Agency for Toxic Substances and Disease Registry (ATSDR), and others. This consolidation is part of a broader effort to streamline operations and reduce redundancies within the Department of Health and Human Services (HHS).

A leaked memo from the Office of Management and Budget (OMB) suggests a proposed reduction in the National Institutes of Health (NIH) budget from $47 billion to approximately $27.3 billion — a dramatic 42% cut. The proposal also includes a consolidation of NIH’s 27 institutes into just 8. These are preliminary proposals that would require congressional approval, but they signal a strong directional shift.

ARPA-H & Agency Strategy Shifts

The Advanced Research Projects Agency for Health (ARPA-H) has maintained its funding at $1.5 billion for FY 2025, consistent with prior years. While no formal budget reductions have been announced, ARPA-H continues to prioritize transformational, high-impact health research — with an increasing emphasis on measurable milestones and operational rigor.

Success Hinges on Strategy, Relationships, and Redundancy

Whether pursuing NIH or DoD opportunities, proximity to the end user and cultivation of internal agency champions are essential. For example, navigating the DoD which spends $14 billion annually on administration — requires embedded, trusted relationships and a nuanced understanding of agency culture.

Implications for Global Talent and DEI-Linked Grants

Recent trends show increased scrutiny of key personnel located outside the U.S., even when federal funds aren’t spent internationally. In parallel, grants and contracts with DEI-linked commitments are facing heightened review. These shifts reflect evolving political priorities and require proactive risk management.

Compliance and Operational Considerations

The Payment Management System (PMS) has recently updated its requirements. Contractors must now submit invoices with enhanced detail, including contractor identity, invoice dates, contract numbers, and line-item service descriptions. Adhering to these requirements is critical to avoid payment delays and ensure ongoing compliance.

Action Steps for Innovators and Grant Seekers

To thrive in this evolving landscape, Fedsprout recommends the following 5 actions:

1. Diversify Funding Sources: Look beyond federal programs. Consider state-level grants, non-profits, and international funders.

2. Submit More, Higher-Quality Proposals: Competition is intensifying. Invest in strategic reviews, narrative clarity, and precision.

3. Explore Equity and Blended Financing: Combine non-dilutive funding with other sources.

4. Deepen Your Network: Success depends on relationships and persistence – especially for first-time applicants.

5. Stay Alert to Compliance Changes – Document rigorously, review updates in PMS, and monitor evolving agency expectations.