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On April 30, 2026, President Trump issued an executive order (EO) titled Promoting Efficiency, Accountability, and Performance in Federal Contracting, requiring agencies to “default” to fixed-price contracting to “protect taxpayer dollars, hold contractors accountable, and achieve demonstrable returns on investment.” The EO directs new approval processes for contract awards going forward, modification of certain existing contracts, and amendments to the Federal Acquisition Regulation (FAR).
Default to Fixed-Price or Performance-Based Contracting
For new contracts, the EO requires contracting officers use fixed-price contracts, or “contracts that tie profit to performance-based metrics,” as a default. The EO requires contracting officers to justify the use of other-than-fixed-price contract types in writing to the agency head and, for such contracts over agency-specific thresholds, obtain approval from the relevant agency head. (The thresholds for agency head approval are, for the U.S. Department of War, $100 million; for the National Aeronautics and Space Administration, $35 million; for the U.S. Department of Homeland Security, $25 million; and for all other agencies, $10 million.)
The EO requires agencies to modify certain existing contracts. The EO directs agencies to identify their top 10 highest-dollar-value contracts issued on an other-than-fixed-price basis and “to the maximum extent practicable and consistent with law, seek to modify, restructure, or renegotiate” those contracts within 90 days, i.e.,by July 29, 2026. The renegotiated contracts should “facilitate use of fixed prices and performance-based incentives for contract deliverables to the maximum extent practicable.”
Exceptions and Agency Reporting Requirements
Contracts that support responding to emergencies, major disasters, or contingency operations, and contracts that involve research and development or pre-production development of “major systems” under FAR Parts 34 and 35, are exempt from the EO’s requirements.
The EO requires agencies to report to the Office of Management and Budget semi-annually on justifications for the use of other-than-fixed-price contracting, with the first report within 90 days. The initial report must identify opportunities “for adjusting current non-fixed-price contracts toward fixed-price contracts” beyond the 10 highest-value contracts of which the EO seeks more immediate modification.
FAR Amendments
The EO calls for maximum use of FAR class deviations and requires the Office of Federal Procurement Policy (OFPP) to issue “guidance” implementing the EO within 45 days. But, in a change from prior contracting-focused EOs, the EO also calls for OFPP to amend the FAR within 120 days.
Next Steps for Contractors
Contractors with contracts awarded on an other-than-fixed-price basis should expect to receive inquiries from their contracting officers or other agency personnel. In the event that contracting officers seek to modify such contracts to fixed price, contractors will want to understand their rights and obligations under current contract terms and carefully review and negotiate any proposed modifications.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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