Federal Register #2026-08900

Federal Executive Order Mandates Fixed-Price, Performance-Based Contracting

This executive order from the Executive Office of the President introduces a new federal contracting policy: - Fixed-price, performance-based contracts are now the default procurement method for executive branch agencies - Agencies must justify in writing any use of non-fixed-price contracts (cost-reimbursement, time-and-material, labor-hour) - Senior-level approval is required for high-value non-fixed-price contracts - Agencies are directed to review and, where feasible, modify their ten largest non-fixed-price contracts to include fixed prices and performance incentives - The Office of Management and Budget (OMB) and the Administrator for Federal Procurement Policy will: - Issue guidance and propose amendments to the Federal Acquisition Regulation - Develop training programs for contracting personnel - Unique requirements: - Shift toward fixed-price, performance-based contracting across all federal agencies - Exceptions allowed for emergency response and research/development contracts - No specific OEMs, vendors, products, or purchase quantities are mentioned

Description

This executive order (EO 14402) issued by the Executive Office of the President aims to promote efficiency, accountability, and performance in federal contracting. It establishes a policy that fixed-price contracts with performance-based considerations should be the default and preferred procurement method to enhance cost predictability, contractor incentives, and streamlined contract administration. The order mandates agencies to justify non-fixed-price contracts in writing and requires senior-level approval for high-value non-fixed-price contracts. It also directs agencies to review and modify their largest non-fixed-price contracts to incorporate fixed prices and performance incentives where practicable.

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