Note: Single-source report; awaiting corroboration.
President Donald J. Trump signed an Executive Order requiring federal agencies to prioritize fixed-price and performance-based contracts in procurement to improve timely and complete performance.
The order directs agencies to maximize use of fixed-price contracts and those tying contractor profit to performance metrics. It requires notifications and, in some cases, approval from agency heads for other contract types, except in emergencies or major research and development projects.
Agency heads must review and, where practicable, modify or renegotiate their largest non-fixed-price contracts to include fixed-price and performance-based elements. They are also required to submit semi-annual reports on non-fixed-price contract usage to the Office of Management and Budget (OMB) Director.
The order instructs the OMB Director and the Administrator of the Office of Federal Procurement Policy to issue regulatory changes and guidance to ensure consistent implementation across agencies.
This initiative addresses concerns about the federal government’s reliance on cost-reimbursement contracts, which can lead to unpredictable expenses and weak incentives to control overspending. In fiscal year 2024, about $120 billion was obligated for cost-reimbursement consulting contracts.
According to the fact sheet, private-sector contracts often use fixed costs tied to clear outcomes and performance metrics—a practice the federal government aims to emulate to protect taxpayer resources and promote fiscal responsibility.