Fact Sheet: President Donald J. Trump Promotes Efficiency, Accountability, and Performance in Federal Contracting

President Donald J. Trump has signed an Executive Order aimed at fundamentally reforming federal procurement by mandating fixed-price and performance-based contracts as the new government standard. The initiative is designed to protect taxpayer dollars by shifting the risk of cost overruns from the government to private contractors.The administration identified that in Fiscal Year 2024, approximately $120 billion was spent on "cost-reimbursement" consulting contracts. Under this traditional model, contractors are guaranteed reimbursement for all costs plus a profit margin, which the administration argues provides "little incentive to control overspending."By defaulting to fixed-price contracts, the government will now pay a set amount for a specific outcome, rewarding contractors who exceed expectations and penalizing those who deliver subpar performance.Performance as the Default: Agencies must maximize the use of contracts that tie profit to performance metrics and fixed deliverables.Strict Oversight: Non-fixed-price contracts (like "cost-plus" models) will now require specific justification and senior-level approval from agency heads. Exceptions are limited primarily to emergency responses and early-stage research and development for major systems.Renegotiating the Status Quo: The order directs agency heads to review their largest existing non-fixed-price contracts and, where possible, renegotiate or restructure them to incorporate fixed-price concepts.Semi-Annual Reporting: To ensure accountability, agencies must submit reports to the Office of Management and Budget (OMB) every six months detailing their use of non-fixed-price contracts and the justifications for them.This reform is part of a series of actions by President Trump to modernize the "Department of War" and other federal agencies:Modernizing Defense: The administration has previously signed orders to streamline defense acquisitions and eliminate wasteful spending in the industrial base.Cutting "Red Tape": The President has moved to dramatically simplify the Federal Acquisition Regulation (FAR), ensuring it contains only essential provisions.Private Enterprise Focus: The administration continues to emphasize utilizing the competitive marketplace and private innovation to provide cost-effective services.The administration frames this move as the adoption of "best business practices" from the private sector. By eliminating "bloated overhead" and "bad incentives," the order aims to redirect billions of dollars toward national priorities that directly benefit the American people while ensuring contractors are held fully accountable for their results.Ending "Cost-Plus" WasteKey Components of the Executive Order:Part of a Broader Efficiency AgendaThe Objective