We previously have written about the trending preference toward fixed-price contracts, and away from cost reimbursement contracts, in defense procurements. The Defense Department’s supplement to the FAR (known as DFARS), in fact, already includes restrictions on using cost-reimbursement or time and materials contracts.
Now the President has come out in favor of fixed-price defense contracting. In a Time Magazine article published today, President Trump signaled strong support for the fixed-price contracting preference, going so far as to “talk of his plans to renegotiate any future military contracts to make sure they have fixed prices.”
The article, called “Donald Trump After Hours,” is wide-ranging and does not delve into specifics as to how President Trump might reshape defense contracting. But in language a bit too salty for this blog, he makes clear that time and materials contracts aren’t his favorite method of contracting.
It’s unclear what the practical effect of President Trump’s preference for fixed-price contracts might be. Will the President push for more specific laws or regulations mandating his contract preferences? Will Secretary Mattis or other Trump appointees issue additional internal guidance? We don’t know, but will continue to follow this issue.