Overview
- The executive order, signed Thursday, makes fixed-price deals that tie profit to performance the preferred way the government buys goods and services.
- Fixed-price contracts set a firm cost for defined results, while cost-reimbursement deals pay allowable expenses and profit, and a White House review found about $120 billion went to the latter in fiscal 2024 consulting work.
- Any non-fixed-price award now requires a written justification to the agency head, with approvals required above set values such as $35 million at NASA, $25 million at DHS, $100 million at the Department of War, and $10 million at most other agencies.
- Agency leaders must within 90 days review their 10 largest non-fixed-price contracts for possible restructuring, OMB must issue guidance in 45 days, and procurement officials must propose FAR updates and training within 120 days, with semiannual reporting to OMB on approvals.
- Limited exceptions cover emergency response and research or pre-production development for major systems, and the shift is expected to move more cost risk to contractors and change how program offices negotiate and manage work.