President Trump’s administration has brought, and continues to bring, sweeping changes to the government contracting landscape. From the Revolutionary FAR Overhaul to promoting commercial purchasing and use of non-traditional contracting vehicles such as Other Transaction Agreements and Commercial Solutions Openings, contractors have been required to rapidly make changes and adjust to a significantly changing environment. This week brought additional change—though it is not “revolutionary.”

In an April 30, 2026 executive order (EO) titled “Promoting Efficiency, Accountability, and Performance in Federal Contracting,” President Trump directs federal agencies to adopt fixed-price contracts as the default for federal procurement. The administration’s stated goal is to resolve “unpredictable costs, bloated overhead, and weak performance incentives” that the administration associates with cost-reimbursement contracts.

If President Trump’s effort to return to more fixed-price contracting seems familiar, it is. Section 829 of the FY2017 National Defense Authorization Act (NDAA), which was enacted at the end of President Obama’s administration, included a nearly identical mandate. Pursuant to the FY2017 NDAA, the Department of Defense (DoD) implemented a fixed-priced contract preference with special approval required for high-value cost-type contracts. However, in 2022, DoD reversed course and issued a rule under Section 817 of the FY2022 NDAA that loosened that requirement after Congress found that although “the preference for fixed-price contracts was originally established as an effort to control cost growth on large acquisition programs,” Congress recognized “that the fixed-price contract type may not be suitable for all acquisitions.”[1]

The recent EO again returns government procurement to a default position favoring fixed-price-contracting. Under the EO, the contracting officer must justify in writing to the agency head use of any non-fixed-price contract, including cost-reimbursement, time-and-materials, labor-hour, or any other non-fixed-price type under Part 16 of the Federal Acquisition Regulation (FAR). When the value of a non-fixed-price contract (or, in the case of a hybrid contract, the value of the non-fixed-price portion) exceeds certain thresholds, the agency head must approve the contract in writing. Those thresholds are as follows:

  • $100 million for Department of War contracts;
  • $35 million for National Aeronautics and Space Administration contracts;
  • $25 million for Department of Homeland Security contracts; or
  • $10 million for contracts involving any other agency.

Importantly, although the EO makes clear that the agency head responsible for approving such contracts is permitted to delegate approval authority under the thresholds set forth above, such approvals may only be made by “appropriate non-career employees within the agency.” Procurement award decisions are generally made by high-level career officials and experts to, among other things, remove—or at least minimize—the potential for politics or other improper motivations materially affecting procurement decisions. Even if giving ultimate approval authority to all procurements over certain sizes is permissible and assuming the administration’s political officials will scrupulously comply with government ethics rules, the EO’s mandate that political officials must have final say over large procurement awards is contrary to the longstanding practices of previous administrations.

The EO does recognize that cost-reimbursement contracting remains appropriate in certain limited circumstances, such as research and the pre-production developmental phase of major systems acquisition. Additional carveouts include contracts that support responses to emergencies or major disasters.

Mandatory Review of Existing Contracts

The executive order does not stop at new procurements. Each agency head must review and, to the maximum extent practicable and consistent with law, seek to modify, restructure, or renegotiate the agency’s ten largest non-fixed-price contracts by dollar value — including those entered into on behalf of another agency — to facilitate the use of fixed prices. This signals that the administration will attempt to extend its revived preference for fixed-price contracting beyond future solicitations and into existing, large contractual relationships that were developed on a very different, presumably cost basis. In other words, the government will attempt to convince large contractors (which generally are the parties to the ten largest non-fixed-price contracts at many agencies) to accept more risk after more than one year of other federal procurement changes. It will be interesting to watch how this plays out.

What This Means for Contractors

FAR Part 16 fixed-price contracts, particularly firm-fixed-price (FFP) contracts, place “maximum risk and full responsibility for all costs and resulting profit or loss” on contractors by establishing a set price not subject to adjustment based on performance costs.[2] If actual performance costs exceed the contractor’s estimates—which are generally made before post-award requirements creep and other factors affect performance and profitability—the contractor must absorb the loss, and generally no adjustment is permitted.

Given this heightened risk environment, contractors should take practical steps to protect their interests when considering a new contract opportunity. First, it is more important than ever to carefully scrutinize proposal requirements and pricing assumptions before proposal submission. Second, contractors should closely review solicitations for clauses that may provide relief in unpredictable circumstances, such as an economic price adjustment clause. Third, contractors should do everything possible to clarify the contract’s scope in the event of any confusion or ambiguity. Because the financial risk of ambiguity now falls squarely on the contractor under a fixed-price structure, contractors must pay close attention to the scope of each solicitation and proactively use available mechanisms, including Q&A periods and pre-award protests, to resolve ambiguous terms before the opportunity to do so is lost.

[1] S. Rept. No. 117-39, at 203 (2021).

[2] See FAR 16.202-1 (“A firm-fixed-price contract provides for a price that is not subject to any adjustment on the basis of the contractor’s cost experience in performing the contract. This contract type places upon the contractor maximum risk and full responsibility for all costs and resulting profit or loss. It provides maximum incentive for the contractor to control costs and perform effectively and imposes a minimum administrative burden upon the contracting parties.”).