MAXIMIZING PERFORMANCE IN FEDERAL CONTRACTS: Today, President Donald J. Trump signed an Executive Order directing that agencies maximize use of fixed-price and performance-based contracts that drive timely, complete performance.
- The Order provides that, in the procurement process, agencies should maximize the use of fixed-price contracts and contracts that tie contractor profit to performance-based metrics.
- The Order requires notifications to and, in certain circumstances, approval from agency heads for use of other types of contracts, with appropriate exceptions for emergencies and research and development for major systems acquisition.
- The Order directs each agency heads to review and, to the maximum extent practicable, modify, restructure, or renegotiate their largest non-fixed-price contracts to incorporate fixed-price and performance-based concepts.
- The Order requires agency heads to submit semi-annual reports to the Director of the Office of Management and Budget (OMB) regarding use of non-fixed-price contracts.
- The Order directs the Director of OMB and Administrator of the Office of Federal Procurement Policy to issue regulatory changes and guidance to ensure consistent implementation of this Order.
PROMOTING PERFORMANCE, NOT COST INFLATION, IN TAXPAYER-FUNDED CONTRACTS: President Trump recognizes that Federal contracting must be reformed to incentivize performance, rather than driving up costs, to protect taxpayer dollars.
- Federal procurement has for too long tolerated unpredictable costs, bloated overhead, and weak performance incentives that frequently allow overspending.
- Many government contracts operate on a cost-reimbursement model that guarantees reimbursement for incurred costs plus a profit margin, which provides little incentive to control overspending.
- Circumstances in which cost-reimbursement contracting is appropriate, such as research and pre-production development of major systems, should be the exception and require senior-level agency approval.
- In Fiscal Year 2024, approximately $120 billion was obligated on cost-reimbursement consulting contracts.
- The United States Government must adopt the best business practices to protect taxpayer dollars, hold contractors accountable, and achieve demonstrable returns on investment.
- Private-sector contracts frequently focus on driving performance by dictating a fixed cost for a well-defined outcome and by tying contractor payment to performance-based metrics, rewarding work that exceeds expectations and penalizing subpar performance - far too often, federal contracts do not.
PROMOTING COMMON SENSE AND EFFICIENCY IN GOVERNMENT: President Trump is delivering on his commitment to fiscal responsibility, ensuring that the Federal Government uses taxpayer resources wisely and effectively, cutting unnecessary bureaucratic bloat and bad incentives, and redirecting resources to priorities that directly benefit the American people.
- President Trump signed Executive Orders to modernize defense acquisitions, eliminate wasteful spending, and spur innovation in the defense industrial base.
- President Trump signed an Executive Order dramatically simplifying and streamlining the Federal Acquisition Regulation (FAR), which governs Federal procurement, to ensure it contains only provisions required by statute or essential to efficient, secure, and cost-effective procurement.
- President Trump signed an Executive Order to require the Federal Government to utilize the competitive marketplace and the innovations of private enterprise to provide better, more-cost-effective services to the taxpayer.
