The Office of Management and Budget (OMB) recently released Memorandum M-26-12, on Increasing the Acquisition of Commercial Products and Services. The memo further implements Executive Order 14271 that directed all federal agencies to dramatically increase their acquisition of commercially available products and services.

The memo is a direct response to OMB’s finding that more than two-thirds of total FY 2024 federal contract spending reported by agencies in the Federal Procurement Data System (FPDS) was for non-commercial products and services, including more than $130B of non-commercial contracting for common services, “such as professional support services, information technology and telecom services, and operation of facilities, much of which was acquired using cost-reimbursement contracts that often allow undefined deliverables that increase the government's exposure to loss.”

Agency Reporting Requirements

By May 4, 2026, OMB is requiring agency senior procurement executives (SPEs) to report to OMB on the following three things:

• What non-commercial contracts were awarded since the April 15, 2025 EO was issued, with details and justifications for any over $10M
• What non-commercial acquisitions are still in process, again with details and justifications for any over $10M
• What internal procedures have been put in place to ensure the SPE review of future non-commercial awards

Agency Competition Advocate

Agencies must also submit the name and contact information of their designated “competition advocate” – which must be a policy official at a level of the head of contracting activity, SPE or deputy SPE – whose role is to ensure sufficient agency leadership attention is being given to maximizing acquisition of commercial products and services and support the successful implementation of the EO.

Contractor Implications of OMB's Push Toward Commercial Offerings 

OMB’s latest implementation directives are likely to have both direct and indirect contractor impacts, some of which may include:

• Increased scrutiny of existing custom/non-commercial contracts. Companies currently holding custom-developed service contracts or cost-reimbursement contracts that often allow undefined deliverables – particularly in IT, professional services, and facilities support – face heightened risk that those contracts will be reviewed, restructured, or not renewed. Agency senior procurement executives (SPEs) are required to assess at contract-option points whether a commercial alternative exists and must explain in writing if a shift to a commercial solution is not planned at the next contract option, referencing market research and price analysis that support the conclusion to remain with the non-commercial solution.
• Faster awards for commercial solution providers. The policy strongly favors commercially available products and services, including those that can be modified to fill agencies' needs. IT vendors and service providers with commercial offerings, catalog-based pricing, or GSA schedule vehicles are well-positioned to benefit as agencies shift their spending away from customized solutions.
• Greater barriers for new non-commercial solicitations. Any agency seeking to procure a non-commercial product or service must now obtain SPE review and approval before issuing a solicitation or making a purchase. SPEs may seek input from OMB and the Office of Federal Procurement Policy (OFPP) on the proposed procurement, but they must first obtain the concurrence of the agency senior non-career acquisition official, which typically is the Chief Acquisition Officer (CAO). This substantially raises the internal approval burden and will likely reduce the volume of new non-commercial solicitations.
• Increased scrutiny of subcontractor commerciality determinations. The memo specifically calls for improving how the government reviews the prime contractor’s evaluation of its subcontractors’ commerciality determinations. The increased scrutiny may require large primes and integrators that rely on supply chains of non-commercial components may need to re-evaluate their teaming and subcontracting strategies.
• Pressure on cost-reimbursement contract vehicles. The memo explicitly singles out cost-reimbursement contracts that “often allow undefined deliverables” that increase the government’s exposure to loss. IT service providers and professional services firms operating primarily on time-and-materials or cost-plus vehicles should anticipate pressure to shift toward firm-fixed-price, commercially-priced arrangements. The memo further directs agencies to work on guarding against the unnecessary use of cost-reimbursement contracts that preclude the application of FAR Part 12 commercial buying policies.
• Potential opportunities for new commercial entrants and small businesses. The agency’s designated competition advocate is specifically tasked with coordinating with the agency’s small business director on opportunities to lower barriers to entry for commercial providers and encourage the participation of new entrants offering commercial solutions, such as by improving the quality, timeliness, and access to agency forecast information from a centralized access point. This creates a potential opening for smaller commercial IT vendors that may have struggled with gaining a foothold in this market historically.

OMB Continues its Drive for Cost-Savings and Transparency

This latest memo comes on the heels of a March 31, 2026 memo aimed at reinforcing transparency, accountability and oversight of federal technology purchases. That memo includes additional agency reporting on their IT contracting activities, but more importantly, it directs agencies to begin gathering vendor utilization and pricing information and sharing this with OMB and the General Services Administration (GSA).

All these efforts (with more to come?) will continue to press for cost efficiencies in federal contracts and will keep the pressure on contractors and agencies alike.