On April 30, 2026, President Trump signed a new executive order, Promoting Efficiency, Accountability, and Performance in Federal Contracting, that makes fixed-price contracts — and in particular firm-fixed-price (FFP) contracts under FAR Subpart 16.2 — the default and preferred contract type across the executive branch.

Cost-reimbursement, time-and-materials, labor-hour, and other non-fixed-price contracts now require a written justification from the contracting officer to the agency head, and any non-fixed-price contract (or non-fixed-price portion of a hybrid contract) over a specified dollar threshold requires written approval by the agency head personally. Agencies must review their 10 largest non-fixed-price contracts within 90 days and seek to convert them to fixed-price.

For ANC, Tribal, and NHO federal contractors, this could lead to a fundamental change in risk allocation. Existing federal contracting opportunities based on cost-reimbursement contracts will face headwinds; future awards will trend FFP; and managing the operational risks of FFP performance through advocating for economic price adjustment clauses, proper change-order administration, and timely claim notices could be the difference between a profitable contract and a loss-making one.

What the Executive Order Does

The EO is short, but its operational reach is broad. Its core directive is in Section 2: “to the maximum extent consistent with law,” agencies shall use fixed-price contracts (as defined in FAR Part 16) or contracts that tie profit to performance-based metrics.

Any non-fixed-price contract — including cost-reimbursement, T&M, labor-hour, or any other non-FFP type under FAR Part 16 — must be justified in writing by the contracting officer to the agency head.

Above specified dollar thresholds, the agency head — not the contracting officer, not the head of contracting activity, not a senior procurement executive at the program level — must personally approve the contract in writing. Agency heads may delegate approval only to non-career employees within the agency, a notable change: career SES procurement officials cannot exercise the delegated approval authority; only political appointees can. The thresholds are summarized below.

Approval Levels for Cost-Reimbursement and Other Non-Fixed-Price Contracts

Note: Two categories of contracts are exempted from the agency-head approval requirement at any value: (i) contracts supporting response to an emergency, major disaster, or contingency operation as defined in FAR Part 2; and (ii) contracts involving research and development or pre-production development for major systems acquisition under FAR Parts 34–35. The same two categories are also exempt from the 90-day top 10 conversion review described below.

Hybrid Contracts and Task-Order Vehicles

The EO expressly applies its dollar thresholds to the non-fixed-price portion of a hybrid contract. For contractors holding hybrid IDIQ vehicles or BPAs that issue some FFP and some cost-reimbursement or time-and-materials task orders, the analysis will turn on the size of the reimbursement or time-and-materials ceiling, not the total ceiling. The EO also expressly states that the requirements apply, to the maximum extent practicable, whether an agency is contracting on its own behalf or on behalf of another agency.  This means acquisition vehicles operated by GSA and similar shared service contracting offices are also covered.

90-Day Top 10 Conversion Review

Within 90 days of the EO, each agency head must review and “to the maximum extent practicable and consistent with law, seek to modify, restructure, or renegotiate” the agency’s 10 largest non-fixed-price contracts by dollar value to convert them to fixed-price with performance-based incentives. The R&D/major-systems and emergency/contingency exemptions apply here as well. Contractors holding any of an agency’s top 10 non-FFP contracts should expect agency contracting officers to initiate conversion discussions during the next 60–90 days.

Semi-Annual Reporting to OMB

Each agency must report semi-annually to OMB the number, value, and written justifications for any non-FFP contracts approved under the EO’s Section 2(b). The first report is due 90 days after the EO and must also identify opportunities beyond the top 10 contracts to convert existing non-FFP contracts to fixed-price contracts. This reporting cadence is significant: agency heads now have a recurring, transparent, OMB-visible record of every CR contract they approve. That bureaucratic friction will, in practice, push contracting officers toward FFP even at values below the formal approval thresholds.

Timeline of Required Actions Under the Executive Order

The following table summarizes the deadlines and required actions specified in the EO. Approximate calendar dates are calculated from the April 30, 2026, effective date.

Two Practical Observations on the Timeline

First, until the FAR amendments are in place (expected on or after the August 28, 2026, proposal deadline, with notice-and-comment likely extending the effective date well into 2027), the EO directs agencies to use FAR-deviation authority to comply. Expect a wave of class deviations from individual agencies rather than a single uniform rule.

Second, the 90-day conversion review and the semi-annual OMB reports will begin generating a public dataset of non-FFP awards. Contractors should expect that data to be used in subsequent rulemaking, GAO and IG reviews, and potentially qui tam and Congressional oversight inquiries.

Why This Matters for ANCs, Tribes, and NHOs

The 8(a) program, the SBA mentor-protégé program, and the federal small business set-aside framework do not distinguish between FFP and non-FFP contract types. Nothing in this EO modifies the SBA 8(a) sole-source authority, the ANC/Tribal/NHO sole-source thresholds, or the non-protestability of sole-source awards under the 8(a) program. But there may be a few concrete implications:

• Pipeline impact. Cost-reimbursement, lean-solicitation contracts may face more friction at award. Some opportunities may shift to FFP; others may be delayed while contracting officers prepare written justifications and agency heads work through approval queues.
• Existing contracts and option exercise. Agencies are directed to seek conversion of their top 10 non-FFP contracts. Even outside the top 10, contracting officers may use option-year exercises, modifications, and recompetes to push cost-reimbursement vehicles toward FFP. Contractors may wish to review their top revenue-generating cost-reimbursement contracts now and develop a position on the pricing assumptions and risk allocation that would need to change for an FFP conversion to be viable.
• Bid/no-bid discipline. FFP places, in the words of FAR 16.202-1, “maximum risk and full responsibility for all costs and resulting profit or loss” on the contractor. Contractors that have performed well on cost reimbursement work because their indirect rates and direct labor costs were reimbursed will face a different risk profile under FFP. A disciplined bid/no-bid process, with realistic price-to-win analysis, indirect rate forecasting, and a defensible contingency for inflation and scope risk, will be important.
• Subcontracting flow-down. Where an entity is a subcontractor on a prime FFP contract, the prime will commonly seek to flow down FFP terms to the subcontractor. Subcontracts on an FFP prime are not automatically FFP, and subcontractors may resist uncritical flow-down of fixed pricing where the underlying scope or duration genuinely warrants a cost reimbursement or time and material structure for level-of-effort components.
• 8(a) and joint venture pricing strategy. 8(a) Sole-source awards under FAR 19.8 and SBA mentor-protégé joint venture proposals will increasingly be structured as FFP. Joint venture agreements may consider expressly addressing how the JV will price FFP work, allocating cost overrun and underrunning risk between the protege and the mentor, and assigning responsibility for change-order administration.

Firm-Fixed-Price Contracts: Benefits and Risks

FFP is described in FAR 16.202-1 as a contract that “provides for a price that is not subject to any adjustment on the basis of the contractor’s cost experience in performing the contract.” That single sentence captures both the appeal and the danger of FFP work.

The Benefits

On the upside, FFP work offers contractors three real advantages.

Margin upside. The FAR expressly recognizes that FFP “provides maximum incentive for the contractor to control costs and perform effectively.” A contractor that performs efficiently keeps the difference between the contract price and its actual cost, the inverse of cost-reimbursement work, where efficient performance reduces the contractor’s revenue.

Reduced administrative burden. FFP “imposes a minimum administrative burden upon the contracting parties” (FAR 16.202-1). FFP contractors avoid the indirect-rate negotiations, incurred-cost submissions, DCAA audit exposure, and Allowable Cost and Payment clause administration that come with cost-reimbursement work.

Faster award and easier performance reporting. FFP awards typically move faster through source selection because the price evaluation is simpler, and CPARS reporting is generally more straightforward when deliverables are well-defined.

The Risks

The risks, however, are the mirror image of those benefits and are concentrated on the contractor.

Cost, risk, and inflation. In an FFP contract without an economic price adjustment (EPA) clause, the contractor likely bears 100% of the risk of unexpected cost increases, including general inflation, labor rate escalations, supply chain disruptions, and material price volatility. There is no contractual mechanism to recover those increases. The only adjustments to an FFP contract price come, as FAR 16.201(a) puts it, “by operation of contract clauses providing for equitable adjustment or other revision of the contract price under stated circumstances” — i.e., the Changes clause, the Differing Site Conditions clause, the Suspension of Work clause, the Government Delay of Work clause, and similar mechanisms tied to specific Government action. Inflation alone is generally not a basis for recovery under any of those clauses.

Performance and schedule risk. FFP “places upon the contractor maximum risk and full responsibility for all costs and resulting profit or loss” (FAR 16.202-1). Schedule slips, scope creep that the contractor fails to document as a constructive change, and underestimated labor hours all flow directly to the contractor’s profit and loss. On a multi-year FFP services contract, those exposures compound.

Default termination and reprocurement liability. On an FFP contract, a default termination under FAR 52.249-8 or 52.249-9 exposes the contractor to reprocurement costs — the difference between the FFP contract price and what the Government pays the reprocurement contractor to finish the work. That exposure does not exist in the same way under a cost-reimbursement contract, where the Government has been paying actual costs as incurred.

Economic Price Adjustment Clauses (FAR 16.203)

FAR 16.203 authorizes a category of fixed-price contracts that provide for upward and downward revision of the stated contract price upon the occurrence of specified contingencies — known as fixed-price contracts with economic price adjustment (“EPA”). FAR 16.203-1 recognizes three types of EPA clauses:

• EPA based on established prices (FAR 52.216-2 / 52.216-3) — adjustments tied to increases or decreases from an agreed-upon level in published or otherwise established prices of specific items or contract end items.
• EPA based on actual cost of labor or material (FAR 52.216-4) — adjustments tied to the contractor’s actual experienced changes in specified labor rates or material prices, with the contracting officer required to describe in detail in the contract Schedule the labor and material categories subject to adjustment, the labor rates and unit prices that may be adjusted, and the quantities allocable to each unit.
• EPA based on cost indexes of labor or material — a non-standard, agency-prescribed clause appropriate when contract performance extends well beyond one year, the dollar amount subject to adjustment is substantial, and the labor and material economics are too unstable to permit a reasonable risk division between the Government and the contractor.

Under FAR 16.203-3, an EPA contract “shall not be used unless the contracting officer determines that it is necessary either to protect the contractor and the Government against significant fluctuations in labor or material costs or to provide for contract price adjustment in the event of changes in the contractor’s established prices.” In other words, the EPA clause is not automatic; it requires an affirmative determination by the contracting officer at the proposal/award stage.

As such, if a solicitation contemplates an FFP award and the period of performance extends meaningfully beyond a year — or if there is a real prospect of labor or material cost volatility — contractors should consider affirmatively requesting inclusion of an EPA clause in their proposals, citing FAR 16.203-2 and the conditions that justify its use. Contracting officers will not always volunteer it. Without an EPA clause, an FFP contractor may have no contractual mechanism to recover inflation; even substantial, well-documented cost increases driven by general economic conditions are simply absorbed by the contractor, reducing profit dollar-for-dollar. The standard EPA clauses also cap aggregate price increases at 10 percent unless the contracting office’s chief approves a higher cap, so even with an EPA clause, the contractor retains some inflation tail risk; that cap should be evaluated and, where appropriate, negotiated upward at the award stage.

Note that EPA is one of several mid-spectrum fixed-price tools available under FAR Subpart 16.2. Where the parties cannot establish a fair and reasonable firm fixed price for the entire performance period at the outset, but can establish one for an initial period, FAR 16.205 (fixed-price with prospective price redetermination) provides for a firm fixed price for an initial period and prospective redetermination at stated future times. For research and development at or below the simplified acquisition threshold, FAR 16.206 (fixed-ceiling price with retroactive price redetermination) is available. Under FAR 16.207, a firm-fixed-price level-of-effort term contract is available for narrow R&D study work in which the deliverable is a level of effort rather than a defined product. Each of these is technically a “fixed-price” contract type for purposes of the EO and may be a more appropriate vehicle than a pure FFP for work whose costs are difficult to estimate at award.

Change Orders, Constructive Changes, and the Discipline of Timely Notice

Even with a well-drafted EPA clause in place, the FFP contractor’s primary vehicle for capturing changes in the scope of work, and the additional cost and time they cause, is the Changes clause and the constructive-change doctrine, administered through timely written notices and properly documented requests for equitable adjustment (REAs) and certified claims under the Contract Disputes Act.

The Changes Clause Mechanism

Most FFP contracts incorporate a Changes clause from FAR 52.243 — typically FAR 52.243-1 (Changes — Fixed-Price) for supply contracts, FAR 52.243-4 (Changes) for construction, or one of the FAR 52.243-1 Alternates I–V for services. These clauses authorize the contracting officer to make unilateral written changes within the general scope of the contract, and they obligate the contractor to give the Government written notice of any claim for adjustment within 30 days of the change order — or, for constructive changes, within 30 days of the date the contractor learns of the act or failure giving rise to the claim. Late notice can be fatal: the Government will routinely invoke the notice provision as an affirmative defense to a contractor claim, and while boards and the Court of Federal Claims have at times excused late notice where the Government suffered no prejudice, that is not a defense any contractor wants to be litigating.

Constructive Changes

In practice, the most consequential changes to FFP work are not formal written change orders. They are constructive changes — informal direction from a CO, COR, or technical lead that effectively expands the scope of work, accelerates a schedule, or imposes a more burdensome performance method than the contract requires. Constructive changes give rise to the same right to an equitable adjustment as a formal change order, but only if the contractor (a) recognizes the directive as a change rather than treating it as cooperative scope clarification, (b) gives prompt written notice that the contractor regards the directive as a constructive change, (c) tracks the additional costs and time impacts contemporaneously, and (d) submits an REA before the door closes — typically by contract closeout, but practically much sooner.

REAs and CDA Claims

An REA is the contractor’s opening position on a change. Where the REA is denied or ignored, the contractor preserves its rights by converting the REA into a certified claim under the Contract Disputes Act (41 U.S.C. §§ 7101–7109; FAR Subpart 33.2). For claims over $100,000, the contractor must submit a written certification that the claim is made in good faith, the supporting data are accurate and complete to the best of the contractor’s knowledge and belief, the amount accurately reflects the adjustment for which the contractor believes the Government is liable, and the certifier is duly authorized. A defective certification can be corrected, but a missing certification is jurisdictional. The CDA also imposes a six-year statute of limitations running from the date the claim accrues.

Practical Steps

With an increase in FFP contracts, contractors should consider:

• Read every modification carefully. Treat every contract modification — including no-cost modifications and administrative changes — as a potential change-order trigger and analyze its scope and cost impact before signing or accepting performance.
• Issue a written notice within 30 days. On any directive that arguably expands scope, accelerates schedule, or imposes a more burdensome performance method, issue a written notice to the CO promptly and while expressly invoking the Changes clause and reserving the right to seek an equitable adjustment.
• Capture cost and time contemporaneously. Track the additional labor hours, material costs, subcontractor costs, and schedule impact in real time, with charge-code segregation where possible. Reconstructing a change-impact cost months after the fact is far less defensible and far less likely to be paid than contemporaneous documentation.
• Submit REAs while the project team is still in place. Do not let REAs accumulate to close out. Personnel turnover, document loss, and memory decay all favor the Government in late-submitted claims.
• Convert to certified claims when REAs stall. If an REA is denied or sits without action for an extended period, consider converting it to a certified CDA claim and obtaining a contracting officer’s final decision.
• Train employees on constructive changes. Many opportunities for constructive change are lost at the project-management level by personnel who treat informal government direction as cooperative problem-solving. Periodic training on the constructive change doctrine, anchored in specific real-world examples, can be helpful.

Looking Ahead

This EO sits alongside Executive Order 14271 (Ensuring Commercial, Cost-Effective Solutions in Federal Contracts), the DAF acquisition memo implementing EO 14271, EO 14173, and EO 14398 on contractor DEI compliance, and the Revolutionary FAR Overhaul. Taken together, these directives are reshaping the federal acquisition system on three axes simultaneously: contract type (FFP default), contract vehicle (existing-vehicle preference and category management consolidation), and contractor compliance (DEI, FCA, and certification scrutiny). ANC, tribal, and NHO federal contractors can succeed under all three, but only if the operational disciplines that fixed-price work demands — pricing accuracy, EPA-clause requests, change-order administration, and timely claim notices — are built into the way the company runs federal work, not just the way it competes for it.

This article summarizes aspects of the law and opinions that are solely those of the authors. This article does not constitute legal advice. For legal advice regarding your situation, you should contact an attorney.