The Office of Management and Budget released a 30-day status report on agency implementation of the executive order directing federal departments to maximize the use of fixed-price contract types, with OMB's 30-day implementation report showing uneven progress across civilian and defense agencies and flagging several procurement categories where agencies have sought and received formal waivers from the fixed-price preference. The report, transmitted to agency acquisition executives and posted on OMB's website, represents the first public accounting of how thoroughly the executive order's mandate has been absorbed into day-to-day procurement decision-making across the federal enterprise since the order took effect earlier this spring.
The executive order directed agencies to use firm-fixed-price contract types as the default for all new contract awards where requirements are sufficiently defined to permit reasonable price competition. It required agency heads to personally approve any cost-reimbursement contract valued above $10 million, creating a senior leadership accountability mechanism that previous administrations had discussed but not formally implemented. The policy rationale was explicit: fixed-price contracts transfer performance risk to the contractor, create powerful incentives for cost efficiency, give the government predictable financial exposure, and eliminate the open-ended government liability that has characterized major defense program cost overruns for decades. Cost-reimbursement contracts, by contrast, allow the government to absorb all allowable costs the contractor incurs, regardless of efficiency, creating what critics describe as a structural bias toward cost growth in programs where the fee structure is not sufficiently incentivized to counteract it.
The 30-day report reflects data submitted by 24 major federal departments and independent agencies covering all contract actions taken since the executive order's effective date. The picture that emerges is genuinely mixed. Several civilian agencies — including the General Services Administration, the Department of Veterans Affairs, and the Department of Homeland Security — report that more than 80 percent of their new contract actions by dollar value already use fixed-price contract types, largely because their procurement portfolios are dominated by commercial services, information technology, and construction work that is inherently amenable to fixed-price competition. Defense agencies present a substantially more complicated picture, with the military services reporting significant use of the new waiver process for research and development programs, advanced technology development efforts, and complex system modification programs where requirements cannot be fully defined in advance of performance.
Contract Scope and Background
The fundamental tension embedded in the fixed-price mandate is that not all government requirements are amenable to fixed-price contracting regardless of policy preference or political will. The FAR itself acknowledges this reality in its contract type selection guidance at Part 16, establishing a spectrum of contract types from firm-fixed-price through various incentive structures to cost-plus-fixed-fee and cost-plus-award-fee, with explicit guidance that contract type selection should reflect the degree of technical and cost risk in the specific requirement. Firm-fixed-price contracts are appropriate and economically efficient when specifications are sufficiently defined, the commercial or defense market can price the work accurately based on known methods and costs, and the contractor can reasonably control its own cost performance. Research and development work — by definition — involves uncertainty about whether technical objectives are achievable at all, let alone at what cost. Requiring fixed-price contracts for early-stage R&D effectively asks contractors to price risk they cannot quantify, which historically produces either astronomical contingency-laden prices or unrealistically low bids followed by claims, disputes, and terminations.
The executive order acknowledges this constraint by including a formal waiver process, but the OMB report indicates that the waiver review mechanism is already creating measurable delays at several major acquisition organizations. At Army, Navy, and Air Force program offices, the requirement for senior-level approval of cost-reimbursement waivers above the $10 million threshold has extended acquisition timelines by an average of three to six weeks on affected programs compared to baseline pre-order timelines. OMB's report characterizes this friction as an intended feature of the policy rather than an implementation problem, noting that deliberate senior leadership engagement with contract type decisions before award is precisely what the executive order was designed to achieve. Program offices managing urgent acquisition timelines, however, have documented specific cases where the delay affected operational readiness and scheduled capability delivery dates, and have requested expedited waiver review procedures for programs with externally imposed schedule constraints.
The report also identifies a category of acquisitions that presents particular implementation and counting challenges: hybrid contracts that combine fixed-price line items for well-defined deliverables with cost-reimbursement line items for engineering change support, data rights deliveries, or other services where scope cannot be fully bounded in advance. Several agencies have requested OMB guidance on how to characterize hybrid contracts for compliance reporting and senior review threshold purposes, and OMB has committed to issuing supplemental implementation guidance on hybrid structures before the 90-day implementation review milestone.
What It Means for Contractors
For contractors whose revenue base depends significantly on cost-reimbursement work — particularly the large defense prime contractors with substantial cost-plus engineering, development, and systems integration programs — the executive order represents a genuine structural challenge to existing business models if implemented consistently over time. Cost-reimbursement contracts allow recovery of all allowable costs plus a negotiated fee, which reduces financial risk on technically complex programs where outcomes are uncertain. Fixed-price contracts require contractors to absorb cost overruns that result from their own performance challenges, subcontractor difficulties, or scope ambiguities not clearly captured in the contract's performance work statement. As agencies shift toward fixed-price for categories where requirements are genuinely uncertain, contractors will face pressure to price risk more aggressively, likely increasing proposal prices substantially as firms build contingency reserves to protect themselves from overrun exposure — potentially triggering a countervailing concern from agencies about rising procurement costs that may complicate the policy's implementation over the longer term.
For smaller contractors that already operate primarily on fixed-price vehicles — commercial item contracts, simplified acquisitions, General Services Administration schedule task orders, and similar instruments are overwhelmingly fixed-price — the executive order represents a significant competitive opportunity. As agencies seek fixed-price alternatives for work previously awarded on cost-reimbursement vehicles to large prime contractors, some of that work may become accessible to smaller, more agile firms that can offer commercially-derived services on a firm-fixed-price basis without the overhead structures and government-unique accounting systems that characterize large prime cost-reimbursement operations. Companies positioned to offer software development, professional services, IT managed services, and technical advisory support at firm-fixed prices should actively market that contracting flexibility to agency acquisition offices navigating the implementation requirements, framing fixed-price capability not as a constraint they accept but as a genuine competitive differentiator that serves both the company's and the government's interests.
