Note: Single-source report; awaiting corroboration.
A new executive order directs federal agencies to prioritize fixed-price contracts in procurement, aiming to improve integrity, efficiency, and transparency in government operations. Fixed-price contracts specify clear outcomes and fixed costs, encouraging contractors to deliver on schedule and within budget for potential profit incentives.
Under this order, cost-reimbursement contracts—which reimburse contractors for allowable expenses and may include profit margins—are considered suitable only in limited situations, such as research or early development phases. These contracts often have less defined deliverables and can increase the risk of overspending.
The review cited in the order found that approximately $120 billion was obligated on cost-reimbursement consulting contracts in Fiscal Year 2024. The order states that fixed-price contracts with performance-based considerations should become the default procurement approach to enhance cost control, accountability, and streamlined administration.