President Donald Trump has signed an executive order directing federal agencies to make fixed‑price, performance‑based contracts the default for U.S. Government procurement.

The order argues too many federal contracts reimburse allowable costs with limited incentives to control spending, citing about US$120 billion in fiscal year 2024 for cost‑reimbursement consulting alone. It says fixed‑price arrangements—with clearly defined deliverables, predictable timelines and profit tied to performance—should be preferred “to advance cost predictability and budget discipline.”

Under the directive:

• Agencies must use fixed‑price contracts to the maximum extent allowed by law. Any non‑fixed‑price contract (including cost‑reimbursement, time‑and‑materials, or labor‑hour) must be justified in writing by the contracting officer to the agency head.
• If the value of a non‑fixed‑price contract—or the non‑fixed‑price portion of a hybrid contract—exceeds specified thresholds, the agency head must approve it in writing: US$100 million for Department of War contracts, US$35 million for NASA, US$25 million for the Department of Homeland Security, and US$10 million for other agencies. That approval can be delegated to appropriate non‑career employees.
• Exceptions apply to contracts supporting emergencies, major disasters or contingency operations, and to research and pre‑production development for major systems.

Agencies are directed, within 90 days, to review and seek to modify, restructure or renegotiate their 10 largest non‑fixed‑price contracts (excluding the R&D and emergency exceptions) to move them toward fixed prices and performance‑based incentives. Agencies must also report to the Office of Management and Budget every six months on the number, value and justifications for any non‑fixed‑price contracts they approve, with the first report due in 90 days and including additional opportunities to shift current contracts.

Implementation steps include OMB guidance within 45 days; proposed amendments to the Federal Acquisition Regulation within 120 days; and a training programme—developed with Defense Acquisition University and the Federal Acquisition Institute—for program and contracting staff on forming, negotiating and managing fixed‑price deals. Agencies may use deviations from the FAR in the interim to meet the order’s requirements.

For contractors, the shift places more delivery and cost risk on industry while tying profit more tightly to outcomes. Consulting, IT services and systems‑integration work that often ran on cost‑type models are likely to see changes in solicitation and contract structure. Firms outside the United States that sell into U.S. federal agencies—including New Zealand‑linked suppliers—should expect more fixed‑price solicitations and stricter performance metrics on U.S.‑funded work.

The order was signed at the White House on April 30, 2026.