in effect
Executive Order 14402, signed April 30, 2026, directs federal agencies to use fixed-price contracts as their default method when buying goods and services, rather than cost-reimbursement contracts that pay vendors back for whatever they spend. It cites approximately $120 billion obligated on cost-reimbursement consulting contracts in fiscal year 2024 as motivation for the change.
Any agency that wants to use a non-fixed-price contract (cost-reimbursement, time-and-materials, or labor-hour) must now have the contracting officer provide a written justification to the agency head. Contracts above certain dollar thresholds also require written approval from the agency head: $10 million for most agencies, $25 million for the Department of Homeland Security, $35 million for NASA, and $100 million for the Department of War. Within 90 days, each agency must review its 10 largest non-fixed-price contracts and attempt to renegotiate them toward fixed prices where possible. Within 45 days, the Office of Management and Budget must issue implementation guidance, and within 120 days, the Federal Acquisition Regulation must be amended and a training program for contracting staff established. Agencies must report semi-annually to OMB on any non-fixed-price contracts they approve. Emergency response contracts and research-and-development or pre-production work for major systems are exempt from the approval and renegotiation requirements.
Federal contracting officers and agency heads face new written-justification and approval requirements before using flexible contract types, and non-career agency officials will oversee waivers above the dollar thresholds. Private companies currently performing work under cost-reimbursement or time-and-materials federal contracts may be asked to renegotiate those agreements to fixed-price terms, shifting cost risk from the government to the contractor.