At the end of April, the president signed the executive order titled "Promoting Efficiency, Accountability, and Performance in Federal Contracting". This directive reorients the federal acquisition enterprise around a principle many of us have advocated for more than a decade: the government should pay for outcomes, not effort.
The order establishes fixed-price contracts with performance-based considerations as the default procurement method across the executive branch. It sets aggressive timelines of 45 days for OMB guidance, 90 days for agency reviews of their ten largest non-fixed-price contracts, and 120 days for FAR amendments. It also places personal, written accountability on agency heads for every significant exception.
For agency C-suites, the question is no longer whether to adopt fixed-price, performance-based contracting. The question is how to do so in a way that actually improves mission outcomes rather than simply relabeling the same work under a different contract type. That distinction between compliance and transformation will determine whether this order delivers the cost predictability and accountability it promises, or whether it creates a new category of risk: fixed-price contracts that fail to deliver because neither the government nor its partners were prepared to execute them.
This article is written for the executives who now own that question.
Read carefully, the order does three things simultaneously, and each has different implications for how an agency should respond.
First, it shifts the default
Fixed-price contracts, or contracts that tie profit to performance-based metrics, become the presumptive vehicle for federal procurement. Cost-reimbursement, TM, and labor-hour arrangements are not prohibited, but they now require written justification, and above specific dollar thresholds ($10M for most civilian agencies, $25M at DHS, $35M at NASA, $100M at the Department of War), they require written approval from the agency head.
Second, it forces a look-back
Within 90 days, every agency must review its 10 largest non-fixed-price contracts and, where practicable, modify, restructure, or renegotiate them toward fixed-price with performance-based incentives. This is not a forward-looking policy alone; it reaches into the existing portfolio.
Third, it creates a reporting and training regime
Semi-annual reports to OMB, new FAR amendments within 120 days, and a joint Defense Acquisition University (DAU)/Federal Acquisition Institute (FAI) training program mean that the cultural and workforce dimensions of this transition are being addressed in parallel with the policy itself.
The order is also notably pragmatic about what it does not try to change. Research and development, pre-production development for major systems, and emergency or contingency response are explicitly carved out. The drafters understood that cost-reimbursement contracting exists for reasons, reasons that remain valid in genuinely exploratory work, and preserved it where it belongs.
The focus is the vast middle of the federal portfolio: the consulting engagements, the IT modernization programs, the operations and sustainment work, and the professional services contracts where outcomes can be defined, deliverables can be structured, and the government has too often paid for hours instead of results. The order cites approximately $120 billion in FY2024 cost-reimbursement consulting obligations alone. That is the universe being reshaped.
In the days following the order's publication, a predictable debate has begun: Can fixed-price contracting work for complex, evolving, technology-intensive programs? The framing is wrong, and agency leaders should not accept it.
The right question is: Under what conditions does fixed-price contracting produce better outcomes than cost-reimbursement, and how do we establish those conditions?
A fixed-price contract is not a rigid contract. A fixed-price contract awarded against a 400-page statement of work that presumes the solution is known at award is a rigid contract, and it will fail in modern IT, digital services, and transformation work, regardless of its pricing structure. But a fixed-price contract structured around a statement of objectives, with fixed time and investment, a defined delivery cadence, and scope that emerges through disciplined collaboration between the agency and the contractor, is an agile contract. It is, in fact, more agile than most cost-reimbursement arrangements, because it forces both parties to make explicit decisions about value, priority, and trade-offs at every iteration.
We have written extensively on this point over the past several years, and our operational experience confirms it. Delivering against fixed-price, performance-based constructs at scale in programs like HUD's Performance-Based Contract Administration, where CGI services roughly one-quarter of the national Section 8 portfolio, has validated the approach repeatedly. Fixed time, fixed cost, variable scope, and built-in quality is not a compromise between agile and fixed-price. It is the synthesis of the two.
The executives who will succeed under this order are those who recognize that the order is not asking them to choose between discipline and adaptability. It is asking them to build acquisition constructs that deliver both.
For C-suite leaders now responsible for translating the order into acquisition strategy, we offer five principles drawn from what works and what fails in real programs.
1. Define outcomes, not activities
The single most consequential decision in any performance-based contract is how the outcome is specified. If the government specifies activities (hours delivered, tickets closed, artifacts produced), it has written a cost-reimbursement contract in fixed-price clothing, and it will get the cost-reimbursement contracts that produce these behaviors. If the government specifies outcomes (system availability, transaction throughput, case resolution rates, user satisfaction, mission capability delivered), the economics of the contract align with the mission.
This requires a statement of objectives discipline that many program offices have lost. It also requires the courage to leave solution design to the contractor, and to hold the contractor accountable for the solution's results rather than its methodology.
2. Fix time and investment; let scope emerge
For work that is iterative by nature, including software development, digital transformation, data modernization, and service redesign, the most effective fixed-price structures fix the engagement duration and total investment, then define scope through a prioritized, continuously-refined backlog negotiated between the government product owner and the delivery team. This is fully consistent with FAR Part 16 fixed-price contracting. It requires only that the statement of objectives be written at the right altitude and that contract administration be designed for iterative governance rather than milestone acceptance of pre-specified deliverables.
3. Use hybrid and modular structures deliberately
Not every program fits a single contract type. The order explicitly permits hybrid contracts, and sophisticated acquisition strategies will use them: a fixed-price core for the stable majority of the work, with a smaller task-order envelope (structured under a BPA or IDIQ) for genuinely uncertain components, each task order itself fixed-price with a not-to-exceed ceiling and a short period of performance.
The Small Business Innovation Research (SBIR) program offers a useful precedent. Its phased structure (concept, prototype, and commercialization) functions as a modular contracting approach. Each increment is funded only after demonstrated progress. This approach gives the government a clear decision point to continue, pivot, or stop before committing additional resources.
Additionally, Cooperative Research and Development Agreements (CRADAs) extend the same logic to collaborative innovation, allowing agencies to co-develop capabilities with industry partners under shared-investment terms that keep scope emergent and risk proportional to demonstrated value.
Both instruments take on renewed importance in the age of AI and rapidly evolving technology, where capability curves outpace traditional acquisition cycles and the government's ability to learn alongside industry. Modular contracting, which decomposes large programs into smaller, independently deliverable units, is another essential tool. It reduces the risk of any single failure, allows the government to stop funding work that is not performing, and produces earlier delivery of usable capability. The administrative overhead is real and must be resourced, but the risk-adjusted return is substantially better than a single large award. In sum, funded increments rather than multi-year monolithic awards are a strategic advantage for federal agencies.
4. Design the incentive structure before the contract, not during it
Performance-based contracting only works when the metrics are meaningful, measurable, and tied to real economic consequences for the contractor. "Shared pain, shared gain" provisions, where both parties benefit from early or under-budget delivery and both absorb some costs when plans slip, are more effective than one-sided penalty regimes because they align the contractor's interests with the mission rather than with defensive contract management.
Agencies should design these incentive structures as part of acquisition planning, not as an afterthought in contract negotiation. They should also stress-test them: If the contractor optimizes perfectly for these metrics, do we get the mission outcome we want? If the answer is no, the metrics are wrong.
5. Invest in contract management, not just contract formation
This is the principle most often neglected and most consequential to success. A well-designed fixed-price, performance-based contract will fail if the government does not staff and empower the product owners, technical representatives, and contracting officers' representatives who must engage with the contractor weekly, not quarterly, through the life of the work. Frequent demonstrations, transparent metrics, joint backlog refinement, and empowered decision-making on the government side are not optional features. They are the operating system on which the contract runs.
The order direction that DAU and FAI develop joint training for the federal acquisition workforce is a recognition of this reality. Agencies should not wait for that training to arrive. They should begin now to identify and develop the product owners and CORs who will run these contracts.
Within 90 days of the order signing, by late July 2026, every agency must have reviewed its ten largest non-fixed-price contracts and identified opportunities to restructure them. This is a short window, and the temptation will be to treat it as a paperwork exercise: a memo justifying why each existing contract should remain as-is, or a superficial conversion that changes the pricing structure without changing the underlying acquisition logic.
We would counsel the government leaders and executives against both approaches. The 90-day review is an opportunity, perhaps the most significant opportunity in a generation, to examine whether an agency's largest professional services and technology engagements are actually structured to deliver mission value, and to reshape those that are not.
A disciplined 90-day approach should answer, for each contract under review:
If the answer requires more than two sentences, the contract almost certainly needs restructuring regardless of its pricing type.
The stable portion belongs under the fixed price. The exploratory portion may belong under a structured task-order mechanism with fixed-price task orders, or, if it meets the order's R&D exception, may legitimately remain cost-reimbursement with senior accountability.
If not, what is the plan to build it?
Not every contract can or should convert immediately. But every contract should have a direction of travel.
Agencies that approach the 90-day review as a genuine strategic exercise will emerge with a portfolio plan that positions them for the next several years. Agencies that approach it as a compliance exercise will be back at the same table in 2027 and 2028, explaining to OMB why their results have not improved.
The order reshapes the economics of federal contracting for industry as much as for government. Contractors whose business models depend on cost-reimbursement consulting engagements will feel pressure immediately. Contractors who have invested in delivery discipline, outcome accountability, and fixed-price execution capability will find the market moving toward them.
Agency executives should expect, and should welcome, a period of differentiation in their vendor base. Not every incumbent will be equipped, operationally, culturally, or financially, to deliver under the new model. The vendors who can will be those who have already built the delivery frameworks, the estimation discipline, the agile-at-scale practices, and the risk management capacity that fixed-price performance-based work requires.
From our own experience building and operating these constructs across housing, consular operations, financial management, and health and human services, we have found the patterns of success to be consistent. The contractors who thrive under fixed-price performance-based arrangements are those who:
One delivery construct that maps unusually well to this new operating logic is the software factory approach: a capacity-based model in which the government contracts for a standing, cross-functional delivery capability rather than a fixed list of requirements or statement of work. The agency and the contractor collaborate to define and prioritize the backlog; the delivery organization owns engineering execution through an automated build-test-deploy pipeline CICD, with a standing allocation reserved for modernization, technical debt reduction, and experimentation. The economics are precisely what the order rewards: fixed time, fixed investment, and emergent scope. The governance model is inherently outcome-oriented: throughput, cycle time, defect escape rate, and mission KPIs are visible in near real time rather than reconstructed quarterly from status decks. Pairing the software factory with a lightweight value management office function, a small team whose sole job is translating mission objectives into measurable outcomes and reporting them through unified delivery, financial, and operational dashboards, closes the loop the order implicitly demands. It gives the contracting officer, the program manager, and the agency CFO a shared, defensible answer to the only question that now matters: what mission value did this dollar buy, and how quickly did it arrive?
Agency leaders and executives evaluating industry partners under the new regime should ask for evidence of these capabilities, not assertions. Ask to see the delivery metrics from comparable fixed-price engagements. Ask how the contractor handles scope emergence without change orders. Ask what the contractor's own economic exposure looks like when performance slips. The answers will tell you quickly which vendors have built for this moment and which are still adapting to it.
It would be a mistake to read this executive order narrowly, as a procurement reform measure. It is that, but it is also something larger.
For the past two decades, the federal enterprise has struggled with a structural mismatch between how it buys technology and professional services and how the work actually gets done. Agile software development, human-centered service design, data-driven operations, and continuous delivery have become standard in the private sector and in leading-edge pockets of government. But the acquisition apparatus surrounding them has too often remained rooted in a waterfall-era assumption that requirements can be fully specified in advance, that solutions can be priced against those specifications, and that variance from the plan is a failure to be managed rather than a learning to be absorbed.
The result, in too many programs, has been the worst of both worlds: contracts that presume predictability the work does not have, executed in cost-reimbursement structures that provide no incentive for the contractor to reduce that unpredictability. Costs rise, schedules slip, and the mission outcome, the thing that actually matters, recedes.
The acquisition strategy itself becomes a design choice rather than a template. The natural procurement-side companion to capacity-based delivery is modular contracting, which is structuring great efforts as a sequence of tightly scoped increments in which the learning from each increment shapes the next, rather than as monolithic multi-year awards that must forecast the world correctly on day one. Paired with a well-expressed statement of objectives that defines what the mission needs to achieve while leaving the how to the delivery team, modular contracting gives the government genuine optionality: the ability to continue, pivot, expand, or stop at each increment boundary based on observed outcomes. One of the more common drafting failures documented in federal agile practice is writing a statement of objectives as though it were a statement of work and specifying solution, sequence, and staffing rather than outcomes and constraints. Agencies operating under the new order will need acquisition shops capable of distinguishing, because the contract document is where the order's principles either take hold or quietly revert to the old pattern under a new name.
The executive order, read generously, is an attempt to break that pattern. By making fixed-price performance-based contracting the default, it forces both government and industry to confront the hard questions earlier: What outcome are we actually trying to produce? How will we know if we are producing it? What are we willing to pay for it? Who bears the risk if we are wrong? These are the right questions. Cost-reimbursement contracting too often lets both parties defer them indefinitely.
Agencies that use this moment to build genuine outcome discipline, not just new contract clauses but new habits of acquisition planning, program management, and vendor partnership, will find that the order unlocks performance improvements that extend well beyond cost predictability. Mission outcomes improve. Delivery accelerates. Workforce capability deepens. Vendor relationships mature. The compliance requirement becomes a strategic advantage.
The federal acquisition system has received many reform directives over the decades. Some have produced durable change; many have produced paperwork. In our experience, the difference has rarely been the quality of the policy. It has been whether senior leadership in the affected agencies treated the reform as a genuine opportunity to rebuild how the work gets done, or as a compliance exercise to be managed around.
This order has sharper teeth than most. The written-justification requirements, the agency-head approval thresholds, the semi-annual OMB reporting, and the 90-day look-back together make it difficult to treat as a paperwork exercise. But the depth of the change it produces will still depend on choices made at the top of each agency over the next several months.
The agencies that will lead will be those whose executives take three actions in the near term:
The American people, as the order observes, expect their government to operate with integrity, efficiency, and transparency. This order is one instrument toward that expectation. The more consequential instruments are the decisions agency leaders will make in the weeks and months ahead about how seriously to take it.
