Government Contractor Liability Reform Act of 1986 - Declares that this Act: (1) applies to all actions filed in Federal or State court; and (2) shall preempt and supersede any State law to the extent it is inconsistent with the provisions of this Act, unless it provides defenses to or limitations on a person's liability in addition to those provided by this Act. Provides that a government contractor shall not be found liable for damages in a contractor product liability action: (1) for any injury unless the contractor was negligent in the design, production, distribution, or sale of such product, or the product was defective, and such defect rendered the product unreasonably dangerous; (2) for any injury related to an unreasonable or unforeseeable use or alteration of the product; (3) for any injury related to the failure to provide an adequate warning or instruction as to any danger associated with the use of the product if such danger would be apparent to a reasonable person, or the danger is a matter of common knowledge; and (4) for any injury related to a design defect, or to a failure to provide such adequate warning or instruction, unless at the time the product was made the ability to discover and to eliminate the defect or danger was available and capable of use according to engineering and manufacturing practices which were reasonably feasible in existing technology. Declares that a contractor may not be found liabile for damages in a contractor service action unless the contractor is found to have been negligent in providing such service. Bars the application of joint and several liability in a contractor product liability or service action, except in those cases where the injury was proximately caused by two or more persons acting in concert. Declares that in actions subject to this Act, non-economic damages may not be awarded in excess of $100,000. Permits the periodic payment of judgments for future economic loss where the award exceeds $100,000. Provides that any award for damages for personal injury or death shall be reduced by the amount of compensation received from certain collateral sources of income for the same injury or death. Establishes a schedule for the size of any contingency fee an attorney may charge under this Act. Directs the Attorney General to provide the Congress, within one year after enactment of this Act, with recommendations to: (1) implement alternative dispute resolution techniques to achieve the efficient, cost-effective, and expeditious disposition of civil disputes; and (2) modify procedural and evidentiary rules to accommodate such techniques.