A practical breakdown of the April 30, 2026 Executive Order—what changed, who's affected, and what to do before OMB guidance lands.
On April 30, 2026, the White House signed an Executive Order titled "Promoting Efficiency, Accountability, and Performance in Federal Contracting." It makes fixed-price contracts—or contracts that tie profit to performance-based metrics—the default for federal procurement. Cost-reimbursement, time-and-materials, and labor-hour contracts are now the exception, not the norm.
If you run, support, or buy government software, here's your practical breakdown on what changed, who's affected, and what to do before OMB guidance lands.
Key takeaways
- New default: Fixed-price contracts (or contracts tying profit to performance-based metrics) are now the preferred procurement method across all Executive Branch agencies.
- Justification required: Any non-fixed-price contract under FAR Part 16 (including cost-reimbursement, time-and-materials, and labor-hour) requires written justification from the Contracting Officer to the agency head.
- Approval thresholds: Agency head written approval is required when a non-fixed-price contract value (or the non-fixed-price portion of a hybrid) exceeds $100M (DoW), $35M (NASA), $25M (DHS), or $10M (other civilian agencies). Agency heads may delegate to non-career employees.
- Immediate review: Within 90 days, each agency must review and—to the extent practicable—modify, restructure, or renegotiate its 10 largest non-fixed-price contracts, including those entered on behalf of another agency, to use fixed-price and performance-based incentives.
- Carve-outs: The agency head approval requirement and the top-10 contract review do not apply to contracts supporting emergencies, major disasters, or contingency operations (FAR Part 2), or to research and development (R&D) or pre-production development for major systems acquisitions (FAR Parts 34–35). Written justification is still required.
- Timeline: OMB issues implementation guidance within 45 days. The Administrator for Federal Procurement Policy proposes FAR amendments within 120 days. Until those amendments are in place, agencies are directed to use exisiting FAR deviation authority.
What the order actually says
The order makes fixed-price contracting the default "to the maximum extent consistent with law." Under FAR Part 16, fixed-price contracts set a defined price for defined deliverables on a predictable timeline, often with profit tied to contractor performance.
Approval thresholds by agency
A non-fixed-price contract under FAR Part 16 (cost-reimbursement, time-and-materials, labor-hour, or any other type) requires written justification from the Contracting Officer to the agency head. When the contract value (or the non-fixed-price portion of a hybrid contract) exceeds the thresholds below, the agency head must also approve in writing.
Agency heads may delegate this approval to non-career employees within the agency.
Which contracts are exempt
Two carve-outs apply to both the agency head approval requirement and the 90-day review of existing contracts: contracts supporting emergencies, major disasters, or contingency operations (FAR Part 2), and contracts involving R&D or pre-production development for major systems acquisitions (FAR Parts 34–35). Even for these contracts, the Contracting Officer must justify any non-fixed-price decision in writing.
The 90-day review of existing contracts
Within 90 days, each agency head must review its 10 largest non-fixed-price contracts by dollar value (including those entered into for another agency) and try to modify, restructure, or renegotiate them toward fixed prices and performance-based incentives "to the maximum extent practicable." The carve-outs above apply to this review too.
What agencies must report to OMB
Each agency head must report to OMB on the number, value, and written justifications for approved non-fixed-price contracts. The first report is due within 90 days. Semi-annual reports follow. The first report must also identify additional opportunities to shift current non-fixed-price contracts toward fixed-price.
The administration cited roughly $120 billion obligated to cost-reimbursement consulting contracts alone in FY24 as the motivating data point.
Who does the EO affect?
If your program runs on T&M, LH, or CR (where most consulting work and many software services contracts sit today), your next contract action may look different. The pressure lands on:
- Program managers and PEOs/PAEs whose largest non-fixed-price contracts will be reviewed in the 90-day window
- Contracting Officers who now own written justification for any non-fixed-price award
- Industry partners whose pricing models depend on time-and-materials staffing
- Acquisition strategists rethinking sourcing approaches before OMB guidance lands
If your work is in a carve-out category (true R&D, pre-production development for a major systems acquisition, or contingency response), the agency head approval requirement and 10-largest review don't apply. Written justification is still required. For everyone else, the question is what good fixed-price contracting looks like for software.
Where the risk lives: poorly written fixed-price software contracts
We've watched this happen for two decades: a program writes a poorly defined fixed-price software contract against a 200-page requirements document, the requirements turn out to be wrong (because most requirements are assumptions), and the program either burns through change orders, ships the wrong thing, or fails outright.
Fixed-price contracting works when the outcome is well-defined. It struggles when the work is exploratory and the requirements are guesses dressed up as specifications. Software development often sits closer to the second case than the first, which is why so many programs reach for cost-reimbursement.
The EO doesn't fix this. It forces the question: how do you write a software contract that's fixed-price and still produces real mission outcomes?
What good fixed-price software contracts look like
The order opens a door practitioners have been pushing on for years: fixed-price plus performance-based incentives, built around outcomes rather than effort. Three things matter if you want it to work for software.
1. Buy outcomes, not deliverables. Define success in mission terms: a reduced authorization timeline, increased operator throughput, hours returned to a critical workflow. The EO's "performance-based metrics" language is the opening to write outcome-based statements of objective instead of feature-list statements of work.
2. Make the increment small. Long, fixed-price waterfall contracts hide risk. Short, outcome-tied increments expose it while it's still cheap to correct. A 6-month, $2M increment with a defined production outcome is contained risk. A 36-month, $80M lump sum against a feature list is compounding risk. The order favors the former.
3. Tie profit to performance-based metrics. For software, the only metric that proves mission value is working software in operators' hands. If your performance milestone doesn't include that, the contract can pay out in full without anything reaching the mission.
What to do before OMB guidance lands
OMB has until June 14, 45 days from April 30, to publish implementation guidance. FAR deviations specific to this EO are unlikely before then, which makes the next six weeks a window for shaping how your agency interprets the order rather than reacting to it. Three actions will pay off in the meantime—all within current policy and guidance as it continues to evolve.
- Inventory your portfolio. Identify which contracts are non-fixed-price and where they sit relative to your agency's top 10 by value. If you're going to be in the renegotiation pile, get ahead of the conversation.
- Map your work to the carve-outs. If you're doing genuine R&D or pre-production development for a major systems acquisition, document it in those terms. Written justification is still required.
- Start drafting outcome-based contract language. The "to the maximum extent practicable" clause will be doing a lot of work in the OMB guidance. Programs that arrive with outcome-based, performance-tied language already drafted will shape how their agency interprets the order, and Contracting Officers who see those patterns now will carry them into the next award—delivering more mission impact for less money. Programs that wait will get whatever template lands first.
What we expect next
We've said for years that outcomes matter more than outputs and that production is where truth lives. The EO doesn't change that. If anything, it codifies it. Agencies that move first on real outcome-based contracts will set the patterns everyone else copies. The ones that paste old waterfall requirements into fixed-price templates will reproduce the same failures with different paperwork.
If you're working through what fixed-price plus performance-based looks like for your program, we're happy to talk through specifics. We've structured contracts this way across federal agencies, and we've seen what works and what doesn't. You can get in touch here.
Frequently asked questions
What does the new federal contracting Executive Order require?
The April 30, 2026 Executive Order, "Promoting Efficiency, Accountability, and Performance in Federal Contracting," makes fixed-price contracts (or contracts that tie profit to performance-based metrics) the default procurement method across the Executive Branch. Any non-fixed-price contract under FAR Part 16 requires written justification from the Contracting Officer to the agency head. When the contract value (or the non-fixed-price portion of a hybrid contract) exceeds set dollar thresholds, the agency head must also approve in writing.
When does the Executive Order take effect?
The order is effective immediately, but full implementation rolls out in stages. OMB issues implementation guidance within 45 days (by mid-June 2026). The Administrator for Federal Procurement Policy proposes amendments to the Federal Acquisition Regulation within 120 days (by late August 2026). Until those amendments are in place, agencies are directed to use existing FAR deviations to comply. The timeline of issuing FAR deviations and FAR supplements such as DFARS, is to be determined.
What contracts are exempt from the agency head approval requirement?
Two carve-outs apply to the agency head approval requirement (and to the 10-largest non-fixed-price contract review): contracts supporting emergencies, major disasters, or contingency operations (defined in FAR Part 2), and contracts involving research and development or pre-production development for major systems acquisitions (governed by FAR Parts 34–35). The Contracting Officer's written justification requirement still applies, even for contracts in these carve-out categories.
What are the dollar thresholds for agency head approval?
Agency head written approval is required when the value of a non-fixed-price contract, or the non-fixed-price portion of a hybrid contract, exceeds $100M for the Department of War, $35M for NASA, $25M for the Department of Homeland Security, or $10M for any other civilian agency. Agency heads may delegate this approval to non-career employees within their agency. We'll be monitoring the OMB implementation guidance to see whether delegation will be prescribed or if agencies can make independent delegation decisions.
Does the Executive Order affect existing contracts?
Yes. Each agency head must review its 10 largest non-fixed-price contracts by dollar value within 90 days (including non-fixed-price contracts entered into for another agency) and try to modify, restructure, or renegotiate them toward fixed prices and performance-based incentives "to the maximum extent practicable." Agencies must also identify additional opportunities for adjustment as part of their first report to OMB.
Can fixed-price contracts work for software development?
Yes, when written correctly. Fixed-price software contracts fail when they're written against poorly defined requirements that turn out to be wrong. They succeed when they buy outcomes rather than deliverables, use small increments (6 months or less is a useful target), and tie profit to working software in production rather than paperwork milestones.
What should program managers do before OMB guidance is published?
Three actions: inventory your portfolio to identify which contracts are non-fixed-price and where they sit relative to your agency's top 10 by value; document any work that genuinely qualifies for the R&D or major systems acquisition carve-out under FAR Parts 34–35; and start drafting outcome-based, performance-tied contract language now, before agency-wide templates land.
Where can I read the full Executive Order?
The full text is available on the White House website, titled "Promoting Efficiency, Accountability, and Performance in Federal Contracting," signed April 30, 2026.
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