The government's renewed push toward fixed-price contracting raises an understandable concern for federal systems integrators: will agencies expect contractors to commit to a firm price for work they cannot yet fully scope?
That question matters when a modernization effort depends on legacy systems, incomplete technical information, or decisions that will be made during implementation. A contractor may understand the outcome the government wants while still needing to investigate conditions that determine the effort required to achieve it.
The 2026 initiative gives the industry good reason to anticipate greater pressure toward fixed-price contracting. Its objectives include cost predictability, stronger performance incentives, and contractor accountability. Those objectives are backed by justification and approval requirements for alternatives.
Hybrid contracts retain an explicit place in that framework. The implementation continues to recognize that portions of a requirement may be suitable for fixed-price treatment even when the entire contract is not. Understanding that distinction requires looking at the history behind the current push.
The Fixed-Price Preference Has a Longer History
On March 4, 2009, the White House issued a memorandum establishing a preference for fixed-price contracts.1 It also limited cost-reimbursement contracting to circumstances in which agencies could not define their requirements sufficiently for fixed-price use. The preference was tied to a practical consideration: whether the government understood the requirement well enough to support that pricing approach.
Two years later, on March 16, 2011, an amendment to the Federal Acquisition Regulation added a paragraph to FAR 16.104 titled "Combining contract types." It instructed contracting officers to consider whether a portion could be established on a firm-fixed-price, or FFP, basis when the entire contract could not.2
That instruction gave agencies a way to expand FFP use within a larger acquisition. A requirement could contain both well-defined work and work whose costs remained difficult to estimate. The presence of uncertainty in one portion did not have to determine the pricing arrangement for everything else.
This is the essential logic behind the historical comparison. The government was encouraging greater use of fixed-price contracting while directing acquisition teams to examine whether different portions warranted different treatment. Those ideas appeared together in the framework fifteen years before the current initiative.
What the 2026 Policy Actually Changes
Executive Order 14402, signed on April 30, 2026, makes fixed-price contracting the default and preferred procurement approach.3 It requires written justification for non-fixed-price contracts and establishes senior approval requirements above specified thresholds, subject to exceptions. For hybrid contracts, the order expressly addresses the value of the non-fixed-price portion.
The FAR Council published its implementation guidance on July 1, 2026, updating the Revolutionary FAR Overhaul text. The package used the model-deviation process, through which agencies adopt changes to their acquisition rules, so the applicable agency implementation remains relevant to an individual procurement.4
The updated Part 16 places two instructions alongside the stronger preference.
At the same time, agencies face a more demanding approval framework for covered alternatives. The practical consequence is that a non-fixed-price approach needs a defensible explanation.
Simply describing a project as complex gives an approving official little basis for understanding why a firm price would be inappropriate.
The documentation provisions call for specific facts and reasoning supporting the contract-type choice, consideration of the government's ability to administer it, and plans to move toward fixed-price approaches where practicable.5
Facts and Reasoning
Ability to Administer
Plan to Transition
Why the Distinction Matters in Systems Integration
A sound firm price depends on a sufficiently clear understanding of the commitment. The parties need enough information to estimate the work and evaluate the risks they are accepting. The FAR recognizes that performance uncertainties can be compatible with FFP when their cost effects can be reasonably estimated and the contractor is willing to accept them.6
Consider an illustrative modernization effort that includes deploying a defined workflow on a familiar platform and connecting it to an older records system.
A Basis for Estimating Exists
- Specified functions
- An understood technical environment
- Agreed acceptance criteria
- Experience with similar work
An Unresolved Question Remains
- Can the existing system expose the required data through a usable interface?
- An investigation might confirm a straightforward connection
- It might instead reveal that additional software must be developed first
A stronger fixed-price preference can encourage the agency and contractor to investigate that question earlier, narrow the initial commitment, or separate the work into stages. In this example, a bounded assessment might establish the information needed to price later implementation. Where the requirements for another contract type are met, the agency could also consider a hybrid structure with different arrangements assigned to distinct line items. The FAR requires the applicable contract type to be identified at the line-item level when those arrangements are combined.7
These choices give the acquisition team ways to address the uncertainty. Applying a fixed price to the entire effort would still require someone to estimate its consequences and accept the associated risk.
As more becomes known, the appropriate approach can change. The FAR has long cautioned against continuing cost-reimbursement or time-and-materials arrangements after experience provides a basis for firmer pricing. A portion that is difficult to price at the beginning may become a strong candidate for FFP in a later phase.
That progression helps explain how greater fixed-price use and continued hybrid contracting can develop together. More of a program can move toward firm pricing as its requirements and technical conditions become better understood.
What Contractors Should Take From It
The history and current policy support an expectation of greater pressure to justify non-fixed-price work, alongside continued room for combinations of contract types. They do not establish how frequently agencies will choose hybrids or how readily a particular acquisition will receive approval.
For systems integrators, a reasonable expectation is that the discussion will become more specific about which portions can support a fixed price. A broad modernization requirement may receive closer examination of its individual deliverables, dependencies, and stages. The basis for pricing one portion may be considerably stronger than the basis for pricing another.
That also makes the boundaries within a hybrid arrangement consequential. These questions follow naturally from dividing a connected technical effort among different pricing arrangements.
Three Boundary Questions Inside a Hybrid Award
- Which work each contract line item covers.
- Which assumptions support the fixed price.
- How a change to one portion affects the rest.
The central takeaway is that hybrid work still has a place under the fixed-price push, and the policy does not require every portion of every contract to use the same approach. Its continued role depends on the circumstances of the acquisition and the case for the arrangement selected.
The government has been pursuing greater cost predictability for years. Systems integration will continue to present situations in which the intended outcome is clear before all the work needed to achieve it is understood. A well-supported hybrid structure allows agencies to commit to fixed prices where the information supports them while addressing the remaining uncertainty through an appropriate, justified alternative.