The White House recently released Executive Order 14402 titled Promoting Efficiency, Accountability, and Performance in Federal Contracting (EO 14402). EO 14402 was released on April 30, 2026. This EO requires agencies to use fixed-price contracts over cost-reimbursement wherever possible. Because of its potential impact on federal contractors, let’s walk through the highlights in this post.
EO 14402 seeks to solve the problem that “Federal procurement has tolerated unpredictable costs, bloated overhead, and weak performance incentives.” In order to solve that, the federal “Government must adopt the best business practices to protect taxpayer dollars, hold contractors accountable, and achieve demonstrable returns on investment.”
In particular, the EO contrasts fixed-price contracts with “cost-reimbursement” contracts. Fixed-price contracts “tie profit to the contractors’ performance”; reward “work that exceeds expectations and penalizing subpar performance”; and “encourage[] contractors to control costs.” The concern with cost-reimbursement contracts is that they “frequently allow for poorly defined product or service deliverables and increase the Government’s exposure to overspending by providing little incentive to control costs.”
The EO notes that about $120 billion in FY 2024 went to cost-reimbursement consulting contracts.
So, the goal of the EO is to make federal contracting more efficient and reduce cost-reimbursement contracts. Certainly a laudable goal and one that many administrations have worked on. But how will this EO change the calculus?
EO 14402 seeks to make fixed-price contracts “the default and preferred method of procurement in order to advance cost predictability and budget discipline.”
The EO requires the following:
- Agencies must, to the maximum extent allowed, “utilize fixed-price contracts, which for purposes of this order shall mean fixed-price contracts as defined in Part 16 of the [FAR], or contracts that tie profit to performance-based metrics when appropriate.”
- “Use of any non-fixed-price contract, including a cost-reimbursement contract, a time-and-material contract, a labor-hour contract, or any other non-fixed-price type of contract . . . must be justified in writing by the contracting officer to the agency head.”
- If a non-fixed-price contract or portion of contract exceeds certain dollar amounts, “the agency head must approve the contract in writing.” The minimums are: DoW $100 million, NASA $35M, DHS $25M, All other agencies $10M.
The dollar thresholds will require approval by agency head at some pretty low amounts. $10 million for a civilian agency is not that large of a contract. Does the approval apply to each order, or just the baseline contract? I assume it applies to each order since that has the dollar amount attached.
The EO does allow the the approval to be delegated to “appropriate non‑career employees.” Plus, there are some exceptions for “emergency, major disaster, or contingency operation” contracts and for “research and development or pre‑production development for major systems acquisition.”
90-day Timeline. Agency heads have 90 days to “seek to modify, restructure, or renegotiate its 10 largest non-fixed-price contracts by dollar value (including non-fixed-price contracts entered into on behalf of another agency) to facilitate use of fixed prices and performance-based incentives.” Agency heads must submit the number and value of non-fixed-price contracts to OMB within 90 days of the EO and then twice a year. In addition, the OMB shall issue guidance to all agencies within 45 days to implement these rules.
FAR clauses have promoted fixed-price contracts already. For instance, RFO 16.301-2 states, that a “contracting officer shall use cost-reimbursement contracts only when” “[c]ircumstances do not allow the agency to define its requirements sufficiently to allow for a fixed-price type contract” and “2) U”[u]ncertainties involved in contract performance do not permit costs to be estimated with sufficient accuracy to use any type of fixed-price contract.” In addition, the “contracting officer shall document the rationale for selecting the contract type in the written acquisition plan and ensure that the plan is approved and signed at least one level above the contracting officer (see 7.103(j) and 7.105).
However, the EO puts the use of fixed-price contract at the forefront and requires reporting on efforts from all federal agencies. It also makes approving larger contracts the subject matter of the agency head, rather than individual contracting officers. The net effect should be an increase in fixed-price contracts and a reduction in cost-reimbursement contracts. However, it’s not clear if agencies will simply continue to approve cost-reimbursement contracts.
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