# DOW Allows Fixed-Price Contractors to Retain Gains

The Department of War says contractors may retain efficiency-related financial gains under fixed-price contracts, fixed-price incentive arrangements, and other transaction agreements when pricing is fair and reasonable. DOW also signals possible tiered profit-sharing for long-term sole-source production and updated profit-policy guidance, while fraud, defective-pricing, and audit safeguards remain in force.

- Contractors should document productivity improvements, cost savings, and private investment to support their claims to efficiency-related gains.
- Procurement teams should assess whether proposed pricing remains fair and reasonable and account for existing fraud, defective-pricing, and audit safeguards.
- The possible tiered profit-sharing approach and updated guidance may affect planning for long-term sole-source production; contractors should distinguish these prospective developments from the current conditions described by DOW.

**Jurisdictions:** federal
**Industries:** Defense & Military
**Published:** October 30, 2026

### Government Entities
- Department of War (DOW)
- Defense Contract Audit Agency (DCAA)
- Defense Pricing, Contracting and Acquisition Policy (DPCAP)

### Sources
- [DOW Backs Contractor Efficiency Gains on Fixed-Price Awards](https://www.executivegov.com/articles/dow-memo-fixed-price-contractor-efficiency-gains) - ExecutiveGov