We knew this was coming—it was only a matter of time. On April 30, 2026, the President signed an Executive Order, Promoting Efficiency, Accountability, and Performance in Federal Contracting, aimed at developing and applying best practices, partnering with industry, improving acquisition planning, and strengthening stewardship of mission execution in support of citizens and the industrial base. In practical terms, the shift will reshape the federal contracting landscape across departments and agencies, prime contractors, and subcontractors (many of them small businesses). Even with the EO’s stated intent, renegotiating contracts mid-performance in a market where costs have materially increased will make the expected cost savings difficult to achieve. Businesses will be asked to return to the negotiating table to reduce costs, and they should come prepared with data and documentation.

Impact on Industry

The Executive Order’s strong preference for fixed-price contracting is intended to improve cost predictability and accountability for agencies, but it also reallocates cost and performance risk to industry. In practice, this will increase pressure on agencies to define stable, well-estimated requirements up front—and on contractors to price, perform, and manage change with greater discipline.

What We Should Expect to See From Federal Agencies

  • Greater emphasis on budget discipline, cost predictability, and measurable outcomes, including performance-based incentives where appropriate.
  • More front-end investment in planning and market research, with heightened scrutiny of requirements quality, and independent cost estimates.
  • A push toward clearer, stable requirements that can withstand changing market conditions (and fewer “moving target” statements of work).
  • More frequent use of smaller, modular buys that can evolve with technology and requirements, rather than large, monolithic efforts covering every potential need.
  • Increased efforts to streamline contract administration.

What it Means for Contractors

  • Risk shifts to industry: fixed-price structures place more cost, schedule, and performance risk on the contractor, increasing costs and limiting flexibilities.
  • Greater dependence on requirements quality and no ambiguities: contractors must assess whether agency requirements are well defined, supporting fixed pricing.
  • Margin uncertainty (or opportunity?): profitability will be more directly tied to cost control, schedule management, and avoiding unpriced scope growth.
  • “Letter of the contract” matters more: disciplined scope definition, scope management, and documentation ensure success and avoid unanticipated costs.
  • Communications: contractors must regularly inform the government, confirm expectations in writing, foster long-term relations, and protect contractual rights.

Practical Mitigations (Business + Legal)

  • Bound risk in pricing and terms: where appropriate, consider tools such as economic price adjustment clauses, well-defined assumptions, and clear deliverable acceptance criteria.
  • Write and negotiate for schedule and delivery clarity: ensure contracts clearly define milestones, dependencies, government-furnished inputs, and delay remedies.
  • Minimize ambiguity early: treat open questions as proposal/contract risks; resolve through Q&A, clarifications, and documented understandings, not assumptions.
  • Change control discipline: when the government requests a “change,” confirm if it is different or additional work; assess schedule/cost impacts; and do not implement changes without a written contractual agreement.
  • Be cautious with internal reserves: avoid using profit or “management reserve” to absorb scope growth that should be handled via contract mechanisms.
  • Consider hybrid structures: where requirements are partly clear and partly uncertain, a hybrid approach may allow fixed-price for defined work while appropriately handling undefined or evolving requirements.
  • Communicate early and often: proactive status, risk, and issue communications reduce surprises and support faster, cleaner resolutions.

In the near term, directing every agency to renegotiate its top 10 non-fixed-price contracts—at a time of materially higher costs and inflation—gives the federal government limited leverage to achieve immediate savings. Shifting from time-and-materials or cost-reimbursement vehicles to fixed-price structures may be appropriate, but it will also prompt contractors to negotiate risk allocation and price realism against today’s economic conditions. The most likely outcome is higher prices, not lower.

Over the longer term, the challenge is complicated and systemic: fixed-price contracting only delivers value when requirements are stable, measurable, and sufficiently defined to support firm pricing. Today, agencies often lack the time and capacity, and increasingly, the experienced acquisition workforce—to develop definitive requirements, evaluate proposals, and administer fixed-price performance at the scale this Executive Order demands. Absent that foundation, contractors will rationally price in uncertainty through larger contingencies and more conservative terms, again driving costs upward.

For contractors, dealing with this uncertainty or government renegotiations of existing contracts can be difficult. Fluet’s Government Contracts team is experienced in negotiating with the government and navigating these difficult issues and is prepared to help.