Last week, two bills were introduced in the Senate that are designed to ease financial burdens experienced by small businesses who contract with the Government. According to Senator McSally (AZ) who introduced these two bills, small businesses comprise more than 99 percent of all businesses and the U.S. economy depends upon their success. However, small business owners have been complaining about the length of time it takes to receive payment; "... they were being forced to shoulder the cost of federal work for up to a month...".
The Accelerated Payments for Small Business Act would require federal agencies contracting with small businesses to pay those businesses within 15 days, instead of the current 30-day standard. There are regulations in place already to expedite payments to small businesses and from our perspective, they are working fairly well but sometimes inconsistently. This Bill would add statutory authority to the practice and presumably, interest on late payments would begin accruing after 15 days which is not the case now.
The Small Business Payment for Performance Act would require federal agencies to make a partial payment of at least 50 percent to contractors when the project requires adjustments that differ from the original scope of work. This applies to construction contracts where, because of changes in the terms or scope of contract performance, contractors are required to submit REAs (Requests for Equitable Adjustment). This Bill, if enacted, would require the Government to prepay 50 percent of the amount of the equitable adjustment while the REA is being negotiated. Not sure that this Bill will progress too far as it represents significant exposure for the Government. Many (perhaps most) REAs are settled as less than contractors' requests. A lot of them are denied completely.
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