President Trump signed an executive order on April 30 making fixed-price contracts the default procurement method across the federal government, a significant shift away from the cost-reimbursement model that has long dominated federal contracting.
The order cites approximately $120 billion obligated on cost-reimbursement consulting contracts in FY2024 alone, arguing that such contracts provide little incentive for contractors to control costs. Any use of a non-fixed-price contract must now be justified in writing by the contracting officer to the agency head. Contracts exceeding certain dollar thresholds — $10 million for most agencies, $25 million for DHS, $35 million for NASA, and $100 million for the Department of War — require agency head approval.
Within 90 days, agency heads must review and seek to renegotiate their 10 largest non-fixed-price contracts. Exceptions are carved out for R&D, major systems pre-production, and emergency response contracts. OMB must issue implementation guidance within 45 days, and FAR amendments are to be proposed within 120 days.