Trump EO Mandates Fixed-Price Contracting as Federal Default, OMB Guidance Due June 14

President Trump signed the executive order "Promoting Efficiency, Accountability, and Performance in Federal Contracting" on April 30, 2026, directing federal agencies to use fixed-price contracts as the default contract type across civilian and defense procurement. According to a Holland & Knight client alert analyzing the order, the Office of Management and Budget has 45 days from the signing date to issue implementation guidance — a deadline that falls on June 14, 2026. The Federal Acquisition Regulation Council must propose corresponding FAR amendments within 120 days of the order.

What the Order Requires

In a fixed-price contract, the contractor agrees to deliver goods or services for a set amount. The contractor absorbs cost overruns; the government pays no more than the contract ceiling regardless of how much it costs the contractor to perform. This structure contrasts with cost-reimbursement contracts, under which the government reimburses allowable costs up to a ceiling and often pays a fee on top, and with time-and-materials and labor-hour contracts, which compensate the contractor for hours worked at negotiated rates plus material costs.

The executive order does not prohibit non-fixed-price contract types outright, but it imposes escalating approval requirements based on contract dollar value. For the Department of War (formerly the Department of Defense), a written justification signed by the agency head is required for any cost-reimbursement, time-and-materials, or labor-hour contract valued above $100 million. The equivalent threshold is $35 million for NASA, $25 million for the Department of Homeland Security, and $10 million for all other civilian agencies. Below those thresholds the order directs agencies to use fixed-price contracts as the default, though existing FAR provisions allowing contracting officers to justify other types remain in effect pending FAR Council action.

Every agency must also conduct a review of its 10 largest non-fixed-price contracts within 90 days of the signing date and seek to modify, restructure, or renegotiate those contracts. Three contract types are explicitly exempt from the order's requirements: research and development contracts, pre-production development contracts for major systems acquisition, and emergency response and contingency operations contracts.

Implementation Timeline

Three near-term dates govern how quickly the order takes effect. First, OMB's June 14, 2026 guidance deadline is the earliest structural milestone; that guidance is expected to clarify how agencies must document justifications and what internal review processes they must establish. Second, the 90-day contract review clock runs through approximately July 29, 2026, which is also the date agencies must submit their first OMB compliance report. Third, the FAR Council's 120-day window for proposing rule changes runs through approximately August 28, 2026; that rulemaking will go through notice-and-comment before any amendments become binding.

Until FAR amendments are finalized, existing FAR Part 16 provisions on contract type selection remain in place. Contracting officers are already required to justify the use of cost-reimbursement or time-and-materials contracts when fixed-price is practicable, so the immediate operational impact is likely felt most acutely at the senior leadership level, where agency-head sign-offs on high-dollar non-fixed-price actions will create new approval bottlenecks.

Concurrent FAR Threshold Changes

Separately from the executive order, a set of FAR threshold adjustments is scheduled to take effect June 30, 2026. These changes are not part of the April 30 order but are contemporaneous. The Truth in Negotiations Act (TINA) threshold for certified cost or pricing data rises from $2 million to $10 million. The Cost Accounting Standards (CAS) full-coverage threshold increases from $50 million to $100 million per contract. The per-contract CAS trigger — the value at which a contract first becomes subject to CAS — rises from $2.5 million to $35 million.

The June 30 threshold increases reduce administrative burden for smaller and mid-tier contractors: fewer awards will require certified cost or pricing data submissions, and fewer contractors will face CAS disclosure statement and compliance requirements. According to an advisory from Arnold & Porter, however, the fixed-price mandate reallocates financial risk to contractors on larger awards — particularly for complex, long-duration programs where actual costs are difficult to predict at the time of award.

What It Means for Contractors

Price your bids more conservatively. On solicitations where the government now defaults to fixed-price, contractors assume cost growth risk. Proposals must account for inflation, supply chain uncertainty, and technical risk without the backstop of cost reimbursement. Padding to cover risk is now more defensible than underbidding to win an award.
Expect agency-head justification delays on large awards. Contracting actions above the applicable threshold — $100M for DoD, $35M for NASA, $25M for DHS, $10M for civilian agencies — require written agency-head approval before a non-fixed-price contract can be awarded. Factor potential approval lag into proposal timelines and pre-award planning.
Anticipate restructuring requests on existing large contracts. Agencies must review their 10 largest cost-reimbursement, time-and-materials, and labor-hour contracts and seek to modify or renegotiate them before approximately July 29, 2026. Contractors holding those vehicles should expect outreach from contracting officers and should begin analyzing what conversion to a fixed-price structure — including ceiling-priced task orders or firm-fixed-price increments — would mean for their cost exposure.
R&D, major-systems pre-production, and emergency contracts are not affected. The exemptions for research and development, pre-production development for major systems acquisition, and emergency response and contingency operations contracting are explicit. Contractors working primarily on those vehicles face no immediate compliance actions under the order.
TINA and CAS relief starts June 30. The FAR threshold increases take effect June 30, 2026 regardless of the executive order rulemaking. Contractors near the old $2M TINA threshold or the old $2.5M CAS trigger may find upcoming awards exempt from those requirements under the new ceilings — reducing proposal preparation costs and post-award compliance obligations.
Monitor the OMB guidance on June 14. The implementation guidance will define exactly what justification documents agencies must prepare and how the agency-head approval process will work. Contractors and their counsel should review that guidance as soon as it publishes and assess its effect on pending solicitations.
Watch the FAR rulemaking. Proposed FAR amendments from the Council are due by late August 2026. The comment period will be the primary opportunity for industry to shape how the order is codified in the permanent regulatory framework. Associations and individual contractors with significant cost-reimbursement portfolios should engage that process.