Trump Order Shifts Federal Contracts to Fixed-Price as Default
A new executive order requires fixed-price contracts as the norm in federal procurement.
Why it matters: Legal and compliance teams advising federal contractors must move quickly to update playbooks, as fixed-price deals will dominate spending. The order triggers documentation, approval, and review requirements that alter risk exposure and bidding strategies.
- Executive Order signed April 30, 2026, mandates fixed-price as default for federal contracts.
- Agencies must justify non-fixed-price deals in writing; top 10 by value require agency head sign-off and review.
- $120B in FY2024 cost-reimbursement consulting contracts now under stricter oversight.
- Guidance from the Office of Management and Budget due in 45 days; new Federal Acquisition Regulation process to begin within 120 days.
President Donald Trump’s April 30, 2026 Executive Order directs agencies to use fixed-price contracts as standard—unless a clear, written case can be made for alternatives. This covers most agency spending, particularly with major departments like Defense, Homeland Security, and Health and Human Services, all significant users of flexible contracts.
- Fixed-price contracts pay a set amount for specific deliverables, transferring risk of overruns to contractors. Alternatives like cost-reimbursement contracts, where agencies cover allowable expenses plus a fee, were often used for research or projects with unpredictable costs.
- Now, agencies must justify all new non-fixed-price awards with formal documentation. The ten most expensive existing contracts in each agency using non-fixed-price terms must undergo review and, if feasible, be modified to include fixed-price and measurable results clauses within 90 days.
- The White House reports $120 billion spent on cost-reimbursement consulting in FY2024, with fixed-price now set to dominate.
- The Office of Management and Budget (OMB) will issue implementation guidance within 45 days; the Federal Acquisition Regulatory (FAR) Council will begin formal rulemaking in the following 120 days.
Practical steps for legal teams:
- Update model contract templates to prioritize fixed-price and performance-based structures.
- Develop stronger justifications and risk assessments for non-fixed-price bids, anticipating agency scrutiny and need for clear documentation.
- Coordinate with program teams to review current top-value cost-reimbursement contracts for possible conversion and re-negotiation within the 90-day window.
Jennifer Schaus, a Washington-based government contracts consultant, noted, “While the goal is cost control, legal teams will need to devote time to analyzing which projects simply can’t be forecast to a fixed price, and build a record for exceptions. The legal bar for documentation is now much higher.”
Some industry analysts warn that fixed-price structures may not fit unpredictable, high-tech or R&D initiatives—potentially limiting innovation or creating new risks for small business vendors.
By the numbers:
- $120B — cost-reimbursement consulting contract obligations by federal agencies in FY2024
- 10 — number of largest non-fixed-price contracts per agency subject to rapid review and potential modification
Yes, but: Fixed-price deals don't always suit complex or high-risk projects, and could increase compliance burdens for some small businesses.
What's next: OMB guidance is due by mid-June 2026; FAR Council rulemaking is set to kick off by late August 2026.