On April 30, 2026, President Trump issued Executive Order “Promoting Efficiency, Accountability, and Performance in Federal Contracting.” The order makes fixed-price contracts with performance-based considerations the default and preferred method of federal government procurement.
This is a major shift in government contracting with implications for agencies and contractors alike. However, this change aligns with the Administration’s efforts to streamline federal procurement and its intent to improve costs and enhance accountability.
Exceptions from the Fixed-Price Contract Requirements
While Agencies are still permitted to use contracting vehicles other than fixed-price, such uses are to be justified in writing and approved at higher levels of an agency.
Accordingly, cost-reimbursement or other flexible contract types may continue to be used for the following:
- Research and development efforts, where requirements are uncertain or evolving
- National security and emergency procurements, where speed and flexibility are critical
- Complex, high-risk programs lacking clearly definable outcomes at the outset
- Other circumstances where agencies determine that fixed pricing is not practicable or would pose undue risk to mission execution
Additionally, contracts exceeding agency-specific thresholds must be approved in writing by the agency head. These thresholds are:
- $100 million – Department of War
- $35 million – NASA
- $25 million – Department of Homeland Security
- $10 million – All other Agencies
Agency Timelines, Reporting and Regulatory Changes
Within 90 days of the Order, agency heads must review, modify, restructure or renegotiate their 10 largest non-fixed-price contracts by dollar value to begin to facilitate use of fixed-price contracts to the maximum practicable and consistent with the law.
Agency heads must also report every six months to the Office of Management and Budget (OMB) Director the number of, value of, and written justifications for all non-fixed-price contracts.
Implications for Government and Defense Contractors
Since agency heads and the OMB director have been ordered to act expeditiously, government and defense contractors should brace for impact. We recommend contractors:
- Review current federal contracts for potential exposure or exemption status
- Assess readiness for fixed-price and performance-based contracting
- Evaluate pipeline opportunities against the new approval thresholds
- Monitor forthcoming agency guidance and FAR updates
Warner’s Aerospace, Defense and Government Services Team will continue to monitor and bring updates as these changes unfold. Meanwhile, should you have questions, please contact our team:
