White House pushes fixed-price contracts as default in new federal procurement order

The White House has issued a new procurement order that makes fixed-price and performance-based contracting the default for federal agencies.

According to the fact sheet and executive order published on April 30, agencies must provide written justification for non-fixed-price contracts and get agency-head approval above certain dollar thresholds. The order also creates exceptions for emergencies and some research and development work.

The policy goes further than just changing future buying habits. It directs agencies to review their largest existing non-fixed-price contracts and, where practical, restructure or renegotiate them. It also requires semi-annual reporting to OMB on those contracts.

The administration says the goal is to improve efficiency, accountability and performance in federal contracting. In practice, the order could push agencies toward simpler contract structures and make it harder to rely on cost-reimbursement or other open-ended arrangements.

The immediate next step will be implementation guidance from OMB and the procurement offices, followed by agency reviews of current contracting portfolios.

The broader question is how quickly federal buyers can shift their habits and how much resistance the new approval requirements face from agencies and contractors.