Stephanie M. Harden, Dominique L. Casimir, Elizabeth N. Jochum, and Sara N. Gerber ●
On April 30, 2026, President Trump signed another executive order (“EO”) that may significantly impact how the government buys goods and services. The target: cost-reimbursement contracts, which let contractors bill the government for their “allowable, allocable, and reasonable” costs incurred, plus some pre-established or earnable profit. According to the EO, in Fiscal Year (“FY”) 2024, the government spent roughly $120 billion on cost-reimbursement consulting contracts. The EO seeks to significantly reduce that figure by making fixed-price contracts the default for federal procurement—meaning prices are locked in up front and contractors, not taxpayers, bear the risk of overruns.
What does the executive order require agencies to do?
Agencies that want to use structures other than fixed-price will begin to face real hurdles as agencies implement the EO’s directives. Nearly every exception from the “default” fixed-price model will require the contracting officer to provide written justification not just to someone senior within the contracting authority, but to the head of the relevant agency, and bigger-ticket exceptions—at thresholds of $100 million (Department of Defense (“DoD”)), $35 million (National Aeronautics and Space Administration), $25 million (Department of Homeland Security), and $10 million (everyone else)—need the agency head’s sign-off, not just notification.
Continue reading “Is This the End of Cost-Type Contracting? What Federal Contractors Should Know About a New Executive Order Making Fixed-Price Contracts the “Default””
