$100M sign-off line: FAR Council proposes fixed price as the default contract type, with DoD justification rule

The money

What does the $100 million DoD threshold cover?

Proposed FAR 16.104 defines a “covered contract or order” as one that is other than fixed-price, a firm-fixed-price level-of-effort term contract, or a hybrid containing either ^[1]. The justification is required at or above $100 million for DoD, $35 million for NASA, $25 million for the Department of Homeland Security and $10 million for every other agency ^[1]. For hybrids, only the non-fixed-price portion counts toward the threshold ^[1]. A single-award indefinite-delivery contract is covered if the estimated value of its known and forecasted covered orders reaches the line; if the contract allows only covered orders, the ceiling price is used ^[1]. An approved justification lasts for the life of the contract or order ^[1].

The justification must carry the contract-type analysis that proposed 16.103 asks for, including the government’s risks, whether it has the staff to manage the contract type, and “planned actions to minimize the use of other than fixed-price contracts on future acquisitions for the same requirement” ^[1]. Approval can be delegated only to the agency’s chief acquisition officer or another non-career Senior Executive Service official ^[1].

The thresholds come from Executive Order 14402, signed April 30 ^[3]. The order cites “approximately $120 billion obligated on cost-reimbursement consulting contracts alone” across the government in fiscal 2024 ^[3]. The FAR Council’s preamble adds that roughly 45 percent of contract dollars in FY2025 were awarded without competition or with only one offer ^[1].

What R&D and development work is exempt?

The justification does not apply to research and development contracts and orders under Part 35, to pre-production development for a major system acquisition under Part 34, or to emergency, major disaster and contingency operation contracts ^[1]. Multiple-award contracts are exempt, though orders and blanket purchase agreements (BPAs) placed under them are not ^[1]. The executive order describes research and pre-production development as cases where cost-reimbursement “is appropriate” but says cost-type contracting “should be the exception” ^[3].

The programs

How would contractors notice the change on IDIQs and services?

Beyond the justification requirement, the Part 16 rewrite would:

• Allow other contract types. Contract-type selection would move from a restrictive to a permissive framework under 10 U.S.C. 3321, so agencies could use types the FAR does not name if no statute bars them, and a new Alternate I to clause 52.216-1 would let offerors propose a different contract type ^[1].
• Add on-ramps and off-ramps. New procedures would let agencies add contractors to, and remove them from, multiple-award contracts, with two new alternates to the Indefinite Quantity clause covering off-ramp cancellation terms ^[1].
• Permit BPAs under multiple-award contracts, modeled on Federal Supply Schedule practice ^[1].
• Debrief smaller orders. Contractors that lose orders above the simplified acquisition threshold and up to $7.5 million could request a brief explanation, carrying out Section 874 of the FY2020 NDAA; the statute sets $5.5 million, and the Council chose $7.5 million to match the current debriefing line ^[1].
• Cut incurred-cost paperwork. The Allowable Cost and Payment clause, 52.216-7, would drop the payroll-to-IRS Form 941 reconciliation, the detailed time-and-materials labor data and contract fee computations from the indirect cost submission, and subcontract reporting would be limited to subcontracts above the certified cost or pricing data threshold ^[1].

Consumption-based buying gets its own definition. Metered services bought at fixed unit prices, such as cloud capacity, would count as firm-fixed-price, following Section 1825 of the FY2026 NDAA, which gave DoD that authority and told it to write a DFARS category for it ^[1, 4].

What changes for multiyear contracts and options?

Part 17 keeps the statutory multiyear tests for DoD under 10 U.S.C. 3501 and 3531, including the secretary’s certification for DoD multiyear contracts of $500 million or more and notice to the armed services and appropriations committees when a cancellation ceiling tops $200 million ^[1]. What would change is the options clauses. The Option for Increased Quantity clauses could be used for services as well as supplies, so surge prices are set in the original competition rather than in a sole-source modification ^[1]. The renamed Option to Extend clause could extend the ordering period of supply IDIQs by up to six months, which the Council says could bridge a protest-delayed follow-on ^[1]. Both extension clauses would add a provision letting the parties agree to delay an option deadline that falls during a lapse in appropriations, for example to 30 days after operations resume ^[1].

The FAR’s general five-year cap on contract duration, which is not in statute, would go ^[1].

The politics

The administration’s case is in the order. It says federal buying “has tolerated unpredictable costs, bloated overhead, and weak performance incentives” and that cost-reimbursement contracts “frequently allow for poorly defined product or service deliverables” ^[3]. The FAR Council says its overhaul aims at faster awards, lower cost and more competition, and that it counted 401,196 small entities registered in SAM as of January 2026 ^[1].

Contractor counsel describe a shift of risk. In a May analysis of the order, Gibson Dunn wrote that “Fixed-price contracts transfer performance and cost risk to the contractor” and that where requirements are uncertain, contractors “may price that uncertainty into bids, potentially raising Government costs” ^[7]. The firm said the order “could materially affect contractors that perform cost-reimbursement, time-and-materials, or labor-hour contracts” ^[7]. Greenberg Traurig wrote in July that the requirement would add burden for contracting officers seeking non-fixed-price awards, that approvals could delay them, and that some existing contracts would also need justification ^[8].

The rule tracks the order closely but differs in places. The order sets approval for contracts that exceed the dollar lines and allows delegation to “appropriate non-career employees” ^[3]; the proposed rule applies at or above the lines and limits delegation to the chief acquisition officer or a non-career SES official ^[1]. The order also directed each agency to review its 10 largest non-fixed-price contracts within 90 days and report semiannually to OMB on approvals ^[3]. Those steps sit outside the FAR text. Agencies have been working under the policy already: the FAR Council issued revised Part 16 deviation text on July 1 that took effect July 15, according to Greenberg Traurig ^[8].

Congress is working on adjacent pieces rather than the contract-type rule itself. Section 830 of the House-passed H.R. 8800 would extend consumption-based buying to all executive agencies under title 41 and require a FAR update within 180 days of enactment ^[5]. Section 805 of the Senate Armed Services Committee’s S. 4784 would create a pilot of 10 to 30 Senior Commercial Acquisition Executives at DoD, whose duties include advising on “fixed-price contracting” ^[6]. Neither bill writes the $100 million justification into law ^[5, 6]. This site’s September brief on the CAS Board rule covers a separate change to cost-accounting coverage for the same cost-type contractors.

Next milestone

Comments on FAR Case 2026-006 are due Oct. 19, 2026, at regulations.gov docket FAR-2026-0006 ^[1]. The companion rule on Parts 8, 12, 13, 15, 38, 44 and 51, published the same day, carries the same deadline; the Council describes the series as twelve proposed rules that together would rewrite the whole FAR ^[1, 2]. The Council also asks for views on renumbering every FAR clause from 52.2 to a new subpart, possibly 52.4 ^[1]. It has not said when final rules will follow.