President Trump signed an executive order on April 30, 2026, directing federal agencies to make firm-fixed-price (FFP) contracts the default and preferred method of procurement across the executive branch. The order — "Promoting Efficiency, Accountability, and Performance in Federal Contracting" — establishes tiered agency-head approval requirements for any non-fixed-price contract above specified dollar thresholds, mandates a 90-day review of existing large non-FFP vehicles, and gives the Office of Federal Procurement Policy 120 days to amend the Federal Acquisition Regulation. The shift represents the most direct executive intervention in contract-type selection in recent memory, and it arrives at a moment when cost-reimbursement and time-and-materials vehicles account for a substantial share of federal spending across defense, IT, and professional services.

What the order requires

At its core, the April 30 order establishes that "fixed-price contracts with performance-based considerations should serve as the default and preferred method of procurement." Agencies that want to use cost-reimbursement, time-and-materials, labor-hour, or hybrid arrangements above certain dollar thresholds must obtain written justification and agency-head approval — or approval from a delegated non-career official. The thresholds are tiered by agency: Department of War contracts require agency-head sign-off above $100 million; NASA contracts above $35 million; Department of Homeland Security contracts above $25 million; and all other agencies above $10 million.

Below those thresholds, contracting officers still bear the burden of justifying non-FFP selection in writing — the order elevates this existing FAR requirement from a file-documentation exercise to a more visible accountability mechanism. Contracting officers can no longer treat cost-reimbursement as a convenient default when requirements are uncertain; they must actively document why fixed-price is not practicable for the specific procurement.

The 90-day review and what it means for incumbents

Within 90 days of the order — by approximately July 29, 2026 — each agency head must review the agency's ten largest non-fixed-price contracts by dollar value and "seek to modify, restructure, or renegotiate them to use fixed prices and performance-based incentives" wherever practicable and consistent with law. This provision creates real exposure for incumbent contractors holding large cost-plus vehicles. An agency that brings its top-10 list to the table could open bilateral negotiations on contract type that incumbents may not have anticipated when they priced their current performance.

The order does not compel agencies to unilaterally convert contract types — it requires them to seek modifications. A contractor has standing to decline or negotiate terms of any restructuring. But the process itself will consume contracting officer and legal resources at agencies already managing thin acquisition workforces, and contractors should expect conversations about restructuring to begin in late June and through July across affected agencies.

Analysts at Mayer Brown note that the review provision "could add weeks or months to an acquisition timeline," because senior agency leadership must now be involved in approvals that previously resided entirely at the contracting officer level. A former GSA official quoted in Federal News Network's coverage of the order suggested the mandate "may change who makes the money," potentially disadvantaging established large contractors whose business models depend on cost-reimbursement vehicles and favoring newer entrants less encumbered by cost-accounting infrastructure.

Exemptions

The approval requirements do not apply to contracts supporting emergency responses, major disaster relief, or contingency operations. Research-and-development contracts and pre-production development work for major defense systems are also explicitly exempt. This carve-out is significant: the research and development pipeline — including many DARPA programs, early-phase SBIR/STTR work, and science and technology funding at the service laboratories — is structurally incompatible with fixed-price contracting and will remain outside the mandate. However, the exemptions do not cover all cost-reimbursement spending that could plausibly be characterized as "development." Agencies will need to draw careful lines between R&D and system-development phases of major programs, particularly on advanced IT programs that often blur research and operational deployment.

The FAR amendment timeline

The Office of Federal Procurement Policy must issue implementation guidance within 45 days and coordinate formal FAR amendments within 120 days, in partnership with the Defense Acquisition Regulatory Council and Civilian Agency Acquisition Council. The Federal Acquisition Institute and Defense Acquisition University are directed to develop and distribute training on fixed-price contracting techniques within the same 120-day window. Agency heads must report to OMB on the number, aggregate value, and written justifications for any approved non-fixed-price contracts on a semi-annual basis, with the first report due at the 90-day mark.

The 120-day FAR amendment clock runs to approximately August 28, 2026. Until the FAR is formally amended, the order's requirements exist as executive direction that agencies must implement through internal policy, class deviations, and acquisition instructions — the same mechanism used to implement other executive orders affecting contracting such as the Buy American and domestic preference rules. Contractors should watch for interim FAR cases and agency-specific deviations published in the Federal Register over the summer.

Market context

Fixed-price contracting has long been the stated preference of acquisition policy — FAR 16.103(a) already instructs contracting officers to use the contract type that places "appropriate risk" on the contractor and provides a "reasonable" profit incentive. In practice, agencies have relied heavily on cost-reimbursement, time-and-materials, and indefinite-delivery vehicles with cost-type task orders, particularly for software development, professional services, and advisory work where requirements evolve during performance. The FY2025 Federal Procurement Data System shows that well over $200 billion in annual federal obligations flow through non-fixed-price vehicles across all agencies.

Defense contractors with large legacy cost-plus portfolios — particularly in ship systems, aircraft sustainment, and classified intelligence programs — have the most exposure in the near term. IT services firms that have shifted to agile delivery under time-and-materials or labor-hour vehicles will face pressure to reprice work under FFP or hybrid structures. Professional services firms offering advisory or management consulting support to agencies will likely see the most rapid impact at the sub-$10 million threshold, where contracting officers can no longer easily justify T&M arrangements without written documentation.

What contractors must do now

  • Identify all active non-fixed-price contracts and task orders and flag those that could appear on an agency's top-10 review list — especially any cost-plus vehicles with current values above $25 million.
  • Review pricing strategy for any proposals currently in development: if an agency is shifting to FFP preference, proposal teams should model FFP pricing scenarios even for solicitations that have not yet specified contract type.
  • Assess cost accounting infrastructure — firms that rarely faced cost-accounting or auditing requirements under fixed-price may need to develop or refresh cost accounting systems if they are restructuring larger cost-type vehicles to performance-based fixed-price arrangements.
  • Monitor the Federal Register for agency-specific class deviations implementing the order's requirements, which are expected to begin appearing in May and June 2026.
  • Engage agency program offices early to understand whether specific programs are in scope for the 90-day review and to shape any restructuring discussions before formal negotiations begin.

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