Federal agencies would favor fixed-price contracts and justify exceptions

Executive agencies must use fixed-price contracts, or contracts that link profit to performance, as much as the law allows. The direction covers federal procurement, including contracts made for another agency. Contracting officers must explain in writing to the agency head why a non-fixed-price contract is needed. Agency-head approval is required above set thresholds: $100 million for Department of War contracts, $35 million for NASA contracts, $25 million for Department of Homeland Security contracts, and $10 million for most other agencies. Agency heads may delegate approval to appropriate non-career employees. The approval thresholds do not apply to emergency, major-disaster, or contingency-operation contracts, or to research and pre-production development for major systems acquisition. The order gives no end date for this contracting direction.

Agency heads must review their 10 largest non-fixed-price contracts and seek changes toward fixed prices and performance-based incentives when practical. The review covers each agency’s 10 largest non-fixed-price contracts by dollar value, including contracts made for another agency. The review does not cover major-systems research or pre-production contracts, or contracts supporting an emergency, major disaster, or contingency operation. Agency heads must report the number, value, and written reasons for approved non-fixed-price contracts to OMB twice a year. The first report must also identify other current contracts that could move toward fixed pricing. The first contract review must occur within 90 days of April 30, 2026. The first report is due within 90 days, followed by reports every six months.

OMB must issue guidance, while the federal procurement policy administrator must propose procurement-rule changes and create training on fixed-price contracts. The guidance and training cover agency program and contracting employees and aim to reduce exceptions to the fixed-price default. The proposed procurement-rule changes are not themselves final regulatory changes. Implementation must follow existing law, agency authority, and available appropriations. The order creates no enforceable legal right or benefit for contractors or other parties. OMB guidance is due within 45 days of April 30, 2026. Proposed procurement-rule changes and the training program are due within 120 days.