The Administration’s New Procurement Default and a Contractor’s Playbook

On April 30, 2026, President Donald Trump signed Promoting Efficiency, Accountability, and Performance in Federal Contracting, an executive order (EO) that rewires the default of federal procurement. Going forward, fixed-price contracting is the default. Cost-reimbursement, time-and-material (T&M), and labor-hour vehicles still exist, but contracting officers must justify them in writing, and agency-head approval kicks in at dollar thresholds that bite hardest outside the Department of War.

The political framing is familiar: “bloated overhead” and runaway consulting spend (the EO pegs FY 2024 cost-reimbursement consulting obligations at roughly $120 billion). The legal architecture is more interesting than the rhetoric. For contractors carrying significant cost-type, T&M, or labor-hour backlog, the day-one impact is real and asymmetric.

The New Default in One Paragraph

Section 2(a) directs agencies, “to the maximum extent consistent with law,” to use fixed-price contracts as defined in FAR Part 16, or contracts tying profit to performance-based metrics. Any non-fixed-price type must be justified in writing by the contracting officer. If the non-fixed-price value (or the non-fixed-price portion of a hybrid) crosses the agency threshold, agency-head approval is required: $100 million at the Department of War, $35 million at the National Aeronautics and Space Administration (NASA), $25 million at the Department of Homeland Security (DHS), and $10 million everywhere else. Agency may delegate approval authority, but only to noncareer employees (an important nuance with sharp political teeth).

Three Clocks Are Running

• June 14 (45 days). The Office of Management and Budget (OMB) must issue implementation guidance.
• July 29 (90 days). Each agency must review its 10 largest non-fixed-price contracts and “seek to modify, restructure, or renegotiate” them toward fixed-price or performance-based structures, “to the maximum extent practicable and consistent with law.” On the same date, agency heads must file the first semiannual report to OMB listing approvals under section 2(b), with written justifications and additional conversion candidates.
• August 28 (120 days). The Administrator for Federal Procurement Policy must propose FAR amendments through the FAR Council and launch a fixed-price training program with the Defense Acquisition University and the Federal Acquisition Institute.

Section 2(f) authorizes interim FAR class deviations, so agencies can tighten the screws on non-fixed-price justifications before formal rulemaking concludes.

Where the Devil Meets the Details

First, “fixed-price” is broader than FFP. Section 2(a) reaches contracts that “tie profit to performance-based metrics when appropriate.” Read against FAR Part 16’s fixed-price family, the order preserves room for incentive-fee, award-fee, and economic-price-adjustment variants, not just bare-bones firm-fixed-price.

Second, the carve-outs are not narrow. Sections 2(b)(iv) and 2(c)(ii) exempt contracts supporting an “emergency, major disaster, or contingency operation” (per FAR Part 2 definitions) and contracts involving “research and development or pre-production development for major systems acquisition” (FAR Parts 34–35). The exemption reaches both the agency-head approval threshold and the top-10 renegotiation review. R&D and major-system preproduction are largely insulated, and contingency-driven cost-reimbursement work is similarly protected. That matters across the Department of War, DHS, the Federal Emergency Management Agency (FEMA), and other contingency-heavy agencies.

Third, the savings and nonjusticiability clauses do real work. Section 5(a) preserves existing statutory authorities, including the competition-in-contracting framework, source-selection rules, and the Bayh-Dole regime for federally funded R&D. Section 5(c) is the standard “no private right of action” disclaimer. Contractors cannot sue directly to enforce or block the EO, but it is not toothless. Implementation will run through FAR class deviations, source-selection criteria, J&As, and contract modifications, each producing its own forum (the Government Accountability Office (GAO), the Court of Federal Claims, the Boards) for challenge on Christian Doctrine, mutuality, consideration, or Contract Disputes Act (CDA) grounds.

What the EO Does Not Do

The order does not unilaterally convert existing cost-type, T&M, or labor-hour contracts to fixed-price vehicles. It directs agencies to “seek to modify, restructure, or renegotiate,” which requires bilateral consent for material changes outside the Changes clause. It does not override statutory mandates favoring non-fixed-price vehicles, displace the FAR’s best-value trade-off framework, or relieve contracting officers of their responsibility-determination duties. Those guardrails are the contractor’s principal defensive tools when an agency pushes too hard, too fast.

A Practical Playbook: Ten Moves for Contractors

1. Map your exposure. For every significant non-fixed-price contract your company holds, prepare a one-page “why this stays non-fixed-price” internal memo organized around scope volatility, undefined requirements, R&D content, and statutory basis. Have a counteroffer ready if the government pushes to re-price the contract: an incentive-fee, award-fee, or economic-price-adjustment structure that the EO arguably welcomes, rather than a bare conversion to firm-fixed-price.
2. Maintain a documented pricing assumption log. Every fixed-price proposal, restructured contract, and modification should rest – as applicable – on a written assumption set covering quantities, schedule, government-furnished information, design maturity, and integration interfaces. Contemporaneous documentation is the spine of any later request for equitable adjustment or changes claim.
3. Drive the requirements document. Fixed-price contracting works only when the SOW or PWS is unambiguous, measurable, and testable. Use industry-day comments, draft-RFP responses, and pre-proposal questions to push the agency to define interfaces, acceptance criteria, and government-furnished property in writing.
4. Stand up a deviation and guidance tracker. Catalog the OMB June 14 guidance the moment it issues, then track FAR class deviations agency by agency through the FAR Council’s 120-day rulemaking proposal and beyond. Different agencies will move at different speeds, and inconsistent obligations across a portfolio can be the difference between a profitable bid and a default risk.
5. Engineer hybrids deliberately. Approval thresholds apply only to the non-fixed-price portion of a hybrid contract. A CPFF tail restructured into a smaller, better-bounded cost line can keep an entire contract below the agency-head approval line, while legitimately allocating undefined or volatile scope to the appropriate pricing structure rather than burying it in fixed-price contingency.
6. Get on the carve-outs early. If your work plausibly fits FAR Parts 34–35 (R&D and major-system pre-production) or the FAR Part 2 contingency definitions, build the documentary record now in justifications and approvals (J&As), coordination memoranda, and modification packages. Agencies will read these carve-outs narrowly without contractor advocacy, and a clean record at award is far easier to maintain than to retrofit during a dispute.
7. Re-paper your subcontract base. Audit flowdown clauses, indemnities, schedule pass-throughs, key-personnel commitments, and consequential-damages waivers, and confirm that subcontract pricing models actually match the prime’s risk allocation. Disputes surface quickly when a fixed-price prime sits atop cost-type or T&M subcontracts without alignment, and unrecovered subcontractor cost growth is the single most common path to fixed-price margin loss.
8. Calibrate schedule, incentives, and liquidated damages. Negotiate realistic schedules backed by float, push for incentive arrangements that reward early or on-time completion, and resist liquidated-damages provisions that cap upside without bounding downside.
9. Prepare termination posture in advance. Fixed-price contracts terminate differently from cost-type arrangements. A termination for convenience compensates costs incurred and reasonable profit on work performed, but not anticipatory profit on the unperformed portion, and a loss-contract adjustment can reduce the settlement further. Termination-for-default risk is meaningfully higher under aggressive fixed-price schedules, and the prime’s exposure to excess reprocurement costs is real. Keep contemporaneous files that would support both a T4C settlement claim and a T4D defense, including cure notices, show-cause responses, and excusable-delay documentation.
10. Build the dispute and protest file from day one. Contemporaneous emails, meeting minutes, RFIs, government direction memos, and constructive-change records are often the backbone of successful REAs, claims, and protests. Remember the CDA’s six-year claim window and the protest clocks at GAO and the Court of Federal Claims. Where an agency improperly converts a previously cost-type buy to fixed-price, or where a solicitation favors fixed-price offerors in a technically inappropriate way, do not hesitate to assert your rights.