“Fixed Price Contracts” Will Dominate Government Contracting After New Executive Order Restructures Government Contracting Preferences

By Brett W. Johnson, Sarah E. Delaney, and Cole Craghan

On April 30, 2026, President Trump signed an Executive Order, titled “Promoting Efficiency, Accountability, and Performance in Federal Contracting,” directing all federal agencies to adopt fixed-price contracts as the “default and preferred method of procurement.” The order marks a significant shift away from other contract types, including the cost-reimbursement type under which contractors are guaranteed reimbursement for allowable costs plus profit margins. Government contractors may see a shift as to existing contracts. Regardless, the new Executive Order will have a significant impact on request for proposals strategies, teaming agreements, subcontract pricing and awards, and regulatory compliance that may impact equitable adjustments and future pricing. As such, companies at any tier of government contracting should evaluate the Executive Order’s impact on their pricing models, risk exposure, and contracting strategy.

At bottom, the Executive Order requires agencies to use fixed-price contracts “to the maximum extent consistent with law.” Any use of a non-fixed-price contract (including cost-reimbursement, time-and-materials, and labor-hour contracts) must be justified in writing by the contracting officer to the agency head on a case-by-case basis. For certain high-profile contracts, the agency head must then approve those contracts in writing.

The Executive Order subjects existing contracts to review, requiring each agency to review and seek to modify, restructure, or renegotiate its 10 largest non-fixed-price contracts to incorporate fixed-price and performance-based terms. Agency heads must also report semi-annually to Office of Management and Budget (OMB) on the number, value, and justifications for any approved non-fixed-price contracts.

OMB must issue implementation guidance within 45 days. Within 120 days, the Administrator for Federal Procurement Policy must propose Federal Acquisition Regulations (FAR) amendments and develop a fixed-price contracting training program in coordination with Defense Acquisition University and the Federal Acquisition Institute.

Fixed-price contracting transfers significant cost risk from the government to the contractor, as prices generally are not adjusted based on contractor’s costs. Companies reliant on cost-reimbursement structures should evaluate whether their cost-estimating capabilities, supply chain arrangements, and subcontractor agreements can support fixed-price commitments.

Moreover, contractors holding large non-fixed-price contracts should anticipate agency outreach within the 90-day review window and proactively assess which contracts may be subject to restructuring. Because the Executive Order’s approval thresholds apply to the non-fixed-price portions of hybrid contracts, some contractors should further evaluate whether hybrid approaches may offer a viable path for higher-risk work segments.

Looking forward, companies should consider investing in project management infrastructure, cost tracking, and quality assurance to remain competitive, as fixed-price contracts reward efficient delivery and penalize subpar performance. Relatedly, as the forthcoming FAR amendments and OMB guidance will provide critical implementation details, contractors should monitor these developments and participate in any public comment opportunities as necessary. To the extent there are going to be claims and disputes related to the future FAR amendments, it is important to create an administrative record as to ambiguities or other issues related to the uniqueness of government contracting and the inherent differences from commercial contracts.

The new reporting and approval requirements will increase scrutiny on agencies seeking to use non-fixed-price contracts, which may narrow the contract types available through requests for proposals or task orders. Notably, the Executive Order does not create “any right or benefit, substantive or procedural, enforceable at law or in equity by any party against the United States,” meaning it does not establish a private right of action or basis for bid protests. 

However, to the extent that existing contracts are impacted via change orders, the government contractors may have a right to an equitable adjustment and eventually a claim. The Executive Order follows recent executive actions addressing defense contractor shareholder distributions and DEI-related eligibility requirements, and contractors should consider the cumulative compliance impact of these directives.

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***Opinions expressed are those of the authors and not necessarily the firm’s or their colleagues’.