White House Pushes Pay-for-Results in Federal Contracts Overhaul
Published Date: 5/5/2026
Presidential Document
Summary
The government is switching to smarter contracts that pay for results, not just costs. This change affects federal agencies and contractors, aiming to save taxpayer money by using fixed-price deals that reward good work and punish poor performance. Starting now, cost-reimbursement contracts will be rare and tightly controlled, making federal spending more predictable and efficient.
Analyzed Economic Effects
4 provisions identified: 1 benefits, 2 costs, 1 mixed.
Default to Fixed-Price Contracts
If you run a business that contracts with the federal government, the Administration made fixed-price contracts the default method of procurement as of April 30, 2026. The order says cost-reimbursement contracts should be rare and tightly controlled and notes about $120 billion was obligated on cost-reimbursement consulting contracts in Fiscal Year 2024.
New Approval Thresholds for Non-Fixed Contracts
If you bid on non-fixed-price federal work, written approval by the agency head is required when the contract (or the non-fixed portion of a hybrid contract) exceeds certain values: $100,000,000 for Department of War contracts; $35,000,000 for NASA; $25,000,000 for Department of Homeland Security; and $10,000,000 for other agencies. Agencies may delegate that approval to appropriate non-career employees.
90-Day Review to Restructure Top Non-Fixed Contracts
Within 90 days of April 30, 2026, each agency head must review and, to the maximum extent practicable, seek to modify or renegotiate its 10 largest non-fixed-price contracts to facilitate fixed prices and performance-based incentives. The requirement excludes contracts for research and development/pre-production development for major systems and contracts supporting emergency response.
Exceptions for Emergencies and R&D Contracts
The order explicitly exempts from the new default rules any contracts that support response to an emergency, major disaster, or contingency operation (see FAR Part 2) and contracts that involve research and development or pre-production development for major systems acquisition (see FAR Parts 34-35).
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Key Dates
Department and Agencies
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