Unpriced Military Contracts Reduction Act of 1986

Unpriced Military Contracts Reduction Act of 1986 - Limits during FY 1987 through 1989 the amount of funds available to the Department of Defense for undefinitized contractual actions. Defines "undefinitized contractual action" as a contractual action entered into by the Secretary of Defense or the Secretary of a military department for which the contract terms, specifications, or price are not definite before performance is begun.

Amends Federal procurement law to prohibit the head of an agency from entering into an undefinitized contractual action unless the contracting officer for such contract justifies the use of such an action in a certificate of urgency. Outlines specified information to be included in each such certificate.

Prohibits the head of any agency from making any progress payments for work performed with respect to an undefinitized contractual action until: (1) the date on which 40 percent of such performance is completed; or (2) the end of the 180-day period after the date that performance is begun.