Fixed-Price Is Now the Default: The FAR Overhaul Deadlines That Hit This Week
As of July 15, agencies must treat fixed-price contracts as the preferred way to buy. Comments on the latest FAR rewrite rules close July 23. Here's the plain-English version for small contractors.
What happened
The government’s rulebook for buying things — the Federal Acquisition Regulation (FAR) — is being rewritten top to bottom under the “Revolutionary FAR Overhaul.” Two deadlines in that effort just became real for contractors:
July 15: fixed-price became the default. Implementing Executive Order 14402, agencies had to adopt updated rules (FAR Part 16, “Types of Contracts”) that make fixed-price contracts the default and preferred method of procurement. If an agency wants to award anything else — cost-reimbursement, time-and-materials, and similar flexible pricing — above certain dollar thresholds, it now needs a justification approved at the agency-head level. The thresholds: $100M for the Pentagon, $35M for NASA, $25M for DHS, and just $10M for every other agency. Existing contracts with 18+ months of performance left will need justifications too (by July 2027).
July 23: comment window closes. The latest batch of proposed rewrite rules (FAR Parts 1, 2, 4, 33, 39, 40, and 53 — including how protests and IT buying work) is open for public comment at regulations.gov until July 23. Roughly 1,600 comments shaped the previous batch, about 80% of them from industry.
Why it matters to you
Fixed-price means you carry the cost risk, not the government. When the scope is well-defined, that’s fine — small businesses often prefer firm-fixed-price because it’s simple and pays on delivery. The problem is when agencies, pressured by the new default, push loosely defined or genuinely uncertain work into fixed-price contracts. Underpricing a vague fixed-price job is one of the fastest ways for a small contractor to lose money.
Expect to see:
- More firm-fixed-price solicitations, including for work that used to be T&M or cost-plus (services, R&D-adjacent work, staff augmentation).
- Scope definition becoming your #1 pricing issue. Vague performance work statements + fixed price = your risk.
- Fewer “level of effort” style vehicles at civilian agencies, where the $10M justification threshold bites hardest.
What to do about it
- Read solicitations for contract type first. If a job you’d normally bid T&M shows up as FFP, re-underwrite it: what’s your true cost range if the scope stretches 20–30%?
- Price risk explicitly. Build contingency into fixed-price bids on loosely scoped work, and ask sharp questions during Q&A to tighten the scope on the record.
- Comment by July 23 if the current batch of proposed rules touches how you do business — protests (Part 33) and IT acquisition (Part 39) are in this round. Industry comments demonstrably changed earlier drafts.
- Watch your existing flexible-pricing contracts. If you hold a cost-type or T&M contract with 18+ months left, your agency will be deciding over the next year whether to justify keeping it — or restructure it.