Proposed Changes to Progress Payment Rate - Public Meetings Rescheduled

Last August, the Defense Department proposed significant changes in the way that progress payment rates are established. Currently, FAR 52.232-16 sets customary progress payment rates of 80 and 85 percent for large and small businesses while the Defense Department bumps the small business progress payment rate to 90 percent. The change proposed back in August leaves the small business progress payment rate alone but drops the rate for non-small businesses from 80 percent to 50 percent with provisions to increase the base amount to 90 percent by meeting certain incentives (see Proposed Changes to Progress Payment Rate).

The idea behind these changes were to increase the effectiveness and efficiency of certain areas including (i) on-time deliveries, (ii) contractor quality, (iii) contractor business systems, (iv) increasing subcontracting opportunities for small businesses, and (v) improved estimating systems. The objective, while addressing valid DoD concerns, met with a lot of opposition. Initially DoD scheduled a public meeting in the DC area to obtain views of interest parties (see Proposed Changes to Progress Payment Rate - Public Meeting). Later on (in October 2018), the entire proposal was withdrawn and the public meeting was cancelled (see Proposed Changes to Progress Payment Rate - Withdrawn).

Withdrawn perhaps, but not forgotten. DoD withdrew the proposal to give it time to conduct additional outreach with industry regarding contract financing methods. but since the proposed rule is predicated upon a provision in the 2017 NDAA (National Defense Authorization Act), there will need to ultimately be some kind of change to contract financing reform.

The Defense Department has now rescheduled its public meetings (two in January and one in February) to obtain views of experts and interested parties regarding revising policies and procedures for contract financing, performance incentives, and associated regulations for DoD contracts. The fact that the Department is scheduling three meetings instead of one previously, gives some indication of the level of interest in this matter.

Pre-registration is required so hurry over to these registration instructions if interested in attending.