EO

(a) To the maximum extent consistent with law, and except as provided in subsection (b) of this section, executive branch departments and agencies (agencies) shall, in procurement, utilize fixed-price contracts, which for purposes of this order shall mean fixed-price contracts as defined in Part 16 of the Federal Acquisition Regulation, codified at title 48, Code of Federal Regulations, or contracts that tie profit to performance-based metrics when appropriate.

(b)(i)  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 under Part 16 of the Federal Acquisition Regulation, must be justified in writing by the contracting officer to the agency head. 

(ii)   If the value of a non-fixed-price contract...exceeds [$XMM], then the agency head must approve the contract in writing:

(iii)  Agency heads may delegate approval under subsection (b)(ii) of this section to appropriate non‑career employees within the agency.

(iv)  Subsection (b)(ii) of this section shall not apply to contracts that [support disaster, contingency, R&D, major systems, FAR 34, FAR 35.]

What is the steel man argument here? What is the strongest case for why this EO is a good idea?

Am I not understanding something - does this imply "justified in writing" but not approved under threshold? If so, what does this mean?

Ah, the fixed-price mania. Again.

Well, if you've been in contracting long enough you've been through this before. I remember going through it at least twice, and the people in the business before me had been through it at least once.

The fixed-price mania has led to some noteworthy catastrophes in weapons development.

The issue now is services. The popularity of the T&M contract, the worst of all, is likely due to poor requirements analysis and specification. The cost-reimbursement contract is not quite as bad.

I believe more emphasis needs place on use of fixed price but not to the extreme in the EO with the designated levels of justification for non use. Each type has their appropriate place.

6 minutes ago, Vern Edwards said:

The popularity of the T&M contract, the worst of all, is likely due to poor requirements analysis and specification. The cost-reimbursement contract is not quite as bad.

This is so true.

It’s really important for the government to clearly articulate the required outcome to industry and provide comprehensive information behind the requirement before proposals are due. A common theme expressed back in the days of performance based acquisition is the more industry knows what the government wants, the better the proposals. So provide the data to industry to reduce fixed price performance risk.

I’ve done a lot of reviews of contracts and associated files across the government. The most frequent justification for use of T&M/LH is the program office can’t sufficiently specify needs in sufficient detail for fixed price. In most cases, it’s pretty clear that the program office just wants the flexibility to assign work to the contractor as if they were government employees. That’s easy to do when the contractor gets paid by the unit of time worked and the government just issues orders for what needs done. With a little thought on what was required by the contractor and specified, it could easily be fixed price.

19 hours ago, General.Zhukov said:

What is the strongest case for why this EO is a good idea?

Alignment with the RFO push to commercial product or service?

Seems like the EO also continues the RFO chaos! Why?

I have not quite worked out the effect of the EO on the current RFO but it seems that the EO creates one of the first needs to reword the RFO at Part 1 and 16.

RFO 1.506 Signatory Authority - It says when a D&F is required, the appropriate official according to agency regulations must sign it. Seems like there is going to be a RFO change per the EO that requires agency head signature?

And then at RFO 16.601-3 requires that a time-and-materials contract or order may be used only if-

"(a) The contracting officer prepares a determination and findings that no other contract type is suitable. The determination and findings must be-

(1) Signed by the contracting officer prior to the execution of the base period or any option periods of the contracts; and

(2) Approved by the head of the contracting activity" but now we have "agency head" per the RFO.

18 hours ago, formerfed said:

It’s really important for the government to clearly articulate the required outcome to industry and provide comprehensive information behind the requirement before proposals are due. A common theme expressed back in the days of performance based acquisition is the more industry knows what the government wants, the better the proposals. So provide the data to industry to reduce fixed price performance risk.

I’ve done a lot of reviews of contracts and associated files across the government. The most frequent justification for use of T&M/LH is the program office can’t sufficiently specify needs in sufficient detail for fixed price. In most cases, it’s pretty clear that the program office just wants the flexibility to assign work to the contractor as if they were government employees. That’s easy to do when the contractor gets paid by the unit of time worked and the government just issues orders for what needs done. With a little thought on what was required by the contractor and specified, it could easily be fixed price.

If we're talking about the $120 billion spent on consulting contracts (which I interpret as Advisory and Assistance Services), I think ex ante specification of results is somewhat of a fool's errand. In my experience, the Government needs staff and work specification is more ad hoc--not because of poor planning, but because of the nature of the work.

I think these contracts are best described as staffing contracts. As such, the Government should research what types of compensation arrangements are typically used in that industry and adapt to the market.

@Don Mansfield I don’t disagree. Researching the marketplace to identify typical compensation structures is sound advice. But what I found with many T&M/LH contracts is the government had historical data, including prior contracts, to reasonably forecast workload. Examples include facility operations, help desk support, responding to public inquires, and processing applications. These cases experience workload variations for a variety of reasons, but are largely predictable.

I saw an instance where an auditor questioned the use of LH staffing for contract specialist support. The auditor showed the HCO from the offices own reporting data that the workload was steady over the prior three years. There were expected major increase in the 4th quarter and a minor increase in the 1st quarter. The office agreed to provide industry that data with the next recompute and award a fixed price contract.

@formerfed @Don Mansfield

Congress and executive branch procurement policy-makers have never been good at rigorously thinking things through. Their ideas (which are mostly just notions) about competition, contract, contract type and price date back to the 19th century, are not grounded in present realities, are half-baked, or are fundamentally unsound .

Consider, for example, their notions about the effect of "full and open competition' and "contract type" on what the government ultimately pays under contracts that are complex and dynamic relations rather than simple transactions. When contracting for complex and dynamic requirements there can be no such thing as a "firm-fixed" price, and "full and open" competition produces only useless busy-work, needless delay, and costly litigation.

Congress, the policy-makers, and much of the workforce are remarkably incurious and unwilling to question and reconsider their most cherished and deeply-held beliefs, and thus again and again prescribe and carry out policies and procedures that are poorly suited to the needs and objectives of the present day.

There is no near-term solution to that problem, if any. It is inherent in the politics, structure, and operation of our federal government.

On 5/5/2026 at 1:13 PM, formerfed said:

Examples include facility operations, help desk support, responding to public inquires, and processing applications. These cases experience workload variations for a variety of reasons, but are largely predictable.

I saw an instance where an auditor questioned the use of LH staffing for contract specialist support. The auditor showed the HCO from the offices own reporting data that the workload was steady over the prior three years. There were expected major increase in the 4th quarter and a minor increase in the 1st quarter. The office agreed to provide industry that data with the next recompute and award a fixed price contract.

In these cases, as in most cases of LH usage I've observed, the agency is typically using LH not because it cannot accurately estimate the extent or duration of work, but for purposes of billing accuracy. Right or wrong, many requirements offices and 1102s believe it's easier to get an accurate invoice for support services when the contractor charges by the hour. In fact, some think there's nothing the government can do under a FFP support contract if the contractor shorts the Government on hours in a given month.

Putting aside whether this use of LH is proper under regulation (it's not), I see little cost risk where the agency dictates the number of hours it wants and then allows the contractor to work up to that ceiling. There is, however, performance risk in having the contractor work on a best-effort basis. But most in government are either unaware of this risk or ignore it, as they've been operating this way without issue for years.

1 hour ago, FrankJon said:

In these cases, as in most cases of LH usage I've observed, the agency is typically using LH not because it cannot accurately estimate the extent or duration of work, but for purposes of billing accuracy. Right or wrong, many requirements offices and 1102s believe it's easier to get an accurate invoice for support services when the contractor charges by the hour. In fact, some think there's nothing the government can do under a FFP support contract if the contractor shorts the Government on hours in a given month.

So is this a fixed-price level of effort contract type being treated as if it’s a labor hour type for billing purposes?

1 hour ago, formerfed said:

So is this a fixed-price level of effort contract type being treated as if it’s a labor hour type for billing purposes?

Similar idea, except that with FP-LOE the contractor would be paid upon performing the requisite number of hours and the agency accepting the deliverable, whereas with LH the contractor would simply be paid for hours worked regardless of whether it’s met the monthly target. If any FTEs aren’t working out, the agency instructs the contractor to remove or replace them. For this reason there are rarely lingering quality concerns.

On a related note, I’ve been told that the military services commonly use CPFF Term contracts for their support services, including for services that would typically be considered commercial. In those situations the contractor is paid a monthly fee upon performing a requisite number of hours.

"Support services" tasks in a lot of territory. The term describes a wide variety of requirements, including both constant and occasional. It includes blue collar and white collar work. I'd be careful about generalizations.

4 hours ago, Vern Edwards said:

"Support services" tasks in a lot of territory. The term describes a wide variety of requirements, including both constant and occasional. It includes blue collar and white collar work. I'd be careful about generalizations.

Thank you, Vern. I’m referring to professional and administrative, severable contracts here.

The other use of LH I see often is for optional “surge” work. Here, though, the agency is often tightly controlling the number of hours the contractor may work. The Government is very often seeking hours of effort, not an identifiable objective.

Bottom line: I’d be willing to bet that the overuse of LH contracts this EO refers to carries much lower cost risk than implied. In practice, LH has evolved into something far different than what regulation intended.

On 5/4/2026 at 9:25 AM, General.Zhukov said:

What is the strongest case for why this EO is a good idea?

As I follow the discussion I had this additional thought.

Maybe it is a good idea in the eyes of the ivory tower folks due to the shrinking Federal workforce and staffing for contract administration for other than FFP contracts. Adequate acquisition workforce staffing for contract administration specifically. Along with adequate staffing of the "other assigned duties" of program folks to perform as contracting officer representatives.

I suggest this without any data but would offer the failure in contract administration has a direct relation to additional cost for other than fixed price contracts. I would also suggest that the dire straits of the acquisition workforce will have direct negative cost impact on any type of contract in the contract administration phase..

23 hours ago, FrankJon said:

I see little cost risk where the agency dictates the number of hours it wants and then allows the contractor to work up to that ceiling. There is, however, performance risk

Agree with FrankJon generally here from my view down in the trenches.

Anecdote:

I just had a talk this week with an office the has a LH technical support desk contract that will be soon converted to FP (this conversion pre-dates the EO). Their two initial concerns were that they couldn't estimate accurately enough the workload of the help desk to convert to FP, and that FP just means more expensive in exchange for nothing. I think they would argue that the performance risk is the government's and can't be transferred- customers don't know and don't care about the employer of the help desk rep. They see their cost risk as lower under LH, since their expressed cost risk was having to spend more money on their help desk. FP means either price is too high - they spend more for the same thing - or the price is too low, contractor will cut corners to save money and that will reflect poorly on their office, not the contractor and that will also lead to higher prices later on. So either way they will lose.

For what it's worth, I think they are wrong on all accounts, but that's what I heard.

Also - "Government in Fiscal Year 2024 identified approximately $120 billion obligated on cost-reimbursement consulting contracts alone. " I looked this up with FPDS, and I don't see how this number is possible. Non-FP contracts for all services - not just cost and not just consulting - is $189 billion. I see no way to slice the data to get to their result from public data using standard definitions.

I am an old mossback who has been involved with this stuff since the 1970s. This reminds me of the ASPR days when we had to write D&Fs for a lot if things. Back then you had to use what was known as formal advertising (sealed bidding today). For DoD, there were 17 exceptions to the use of formal advertising. To use one of those exceptions you had to write a D&F citing the exception and why it applied. In addition, if you wanted to use a cost reimbursement contract, you had to write another D&F. If you wanted t write a facilities contract (which no longer exists) you had to write another D&F. Some of these D&F's required secretarial approval. I don't remember which required such approval, but do remember, not having problems getting them approved fairly quickly. Thus, while a pain in the neck, to me, the key is going to be who gets delegated authority to grant these approvals. It may be a deputy assistant assistant deputy secretary who get the joy of doing so and does nothing but grant approvals. My question is who s behind this and why? This nonsense was done away with by statute 40 years ago.

The E.O. is what I call "political performative reform". It will produce nothing but wasted time and paper.

That is not to say it isn't a reaction to a real problem. It says only that it will not solve the problem.

Most acquisition reform, like the RFO, has been performative reform.

The last great era of performative reform was the Clinton-Gore "Reinventing Government" campaign of the 1990s. It gave us "performance-based contracting" among other things. Some of you may have been around long enough to remember it.

On 5/8/2026 at 12:07 PM, Retreadfed said:

My question is who s behind this and why?

RFO :This update [to FAR Part 16] represents a deliberate shift from a restrictive to a permissive framework, empowering contracting officers to use novel and innovative contract structures ..."

Seven months later...

EO: Use of any non-fixed-price contract...must be justified in writing by the contracting officer to the agency head.

Who - well, probably not the RFO team. and also probably not someone familiar with how governments actually work, unlike these two:

Jennifer Pahlka, whose work I admire: The response to every failure is a new layer of oversight and approval.
James Q Wilson, whom everyone should admire: The response to any scandal or failure is to add another layer of oversight.

On 5/11/2026 at 5:28 PM, General.Zhukov said:

RFO :This update [to FAR Part 16] represents a deliberate shift from a restrictive to a permissive framework, empowering contracting officers to use novel and innovative contract structures ..."

Seven months later...

EO: Use of any non-fixed-price contract...must be justified in writing by the contracting officer to the agency head.

Who - well, probably not the RFO team. and also probably not someone familiar with how governments actually work, unlike these two:

Jennifer Pahlka, whose work I admire: The response to every failure is a new layer of oversight and approval.
James Q Wilson, whom everyone should admire: The response to any scandal or failure is to add another layer of oversight.

I understand your point, but note that RFO part 16 and the EO are not diametrically opposed. The RFO indeed moved from a restrictive framework ("Contract types not described in this regulation shall not be used") to a permissive framework ("contract types...not described in this regulation, are permitted").

To your point, I imagine on balance the policies will result in a loss of efficiency, but there are still flexibilities to be found in the RFO that weren't there before.