Accelerating Payments to Small Businesses

The Office of Management and Budget (OMB) has just released a memorandum to all executive agencies to accelerate payments to small businesses for goods and services from 30 days to 15 days. This is very good news for small businesses.

According to OMB, "As critical drivers of job creation and economic growth across the country, small businesses must receive, in a timely and efficient manner, the money that the Federal Government owes them for the goods and services that the Government has accepted. All told, the Federal Government pays small businesses nearly  $100 billion each year for goods and services. By taking actions that will enable these payments to be made as promptly as possible, we will improve cash flow for small businesses and provide them with a more predictable stream of resources, thereby preserving and increasing small business participation in Federal contracting."

The Prompt Payment Act (PPA) generally requires an agency to pay its contractors within 30 days of receipt of relevant documents, including a proper invoice for the amount due and confirmation that the goods and services have been received and accepted by the Federal Government. The OMB memorandum outlines the new policy that, to the full extent permitted by law, agencies shall make their payments to small business contractors as soon as practicable, with the goal of making payments within 15 days of such receipt.

The establishment of this accelerated payment policy, and its implementation by Federal agencies, does not change the application of the PPA's late-payment interest penalty provisions.