Friday, April 13, 2012

Reducing Improper Payments through the "Do Not Pay List"

Regular readers of this blog should be familiar with this Government initiative as we've written about it a few times since it was first introduced in November 2009. See for example:

The basic idea behind this initiative is to ensure that "... the right recipient is receiving the right payment for the right reason at the right time". After a year or so into this program, the Government realized that prevention was just as important, or more so, than detection. That's when they came up with the "Do Not Pay" list. The "Do Not Pay" list is a single point of entry through which agencies would access relevant data before determining eligibility for a payment under a contract, grant, or any other source of federal funding.

Evidently, Government agencies were either not making much headway in this endeavor or were not taking it serious because the OMB (Office of Management and Budget) issued an ultimatum on April 12th giving agencies until June 30th to submit their draft plans for using the "Do Not Pay" solution for pre-payment eligibility reviews.

What this means for government contractors

As envisioned, every time you submit a progress payment request, public voucher, or commercial invoice, the Government will check the "Do Not Pay" list to ensure there are no outstanding monies owed. This would presumably include the IRS. Got a tax dispute going on? The Government will just deduct the amount in dispute from your next invoice. Arguing with NASA about a certain cost? DoE will deduct the disputed amount the next time you bill under one of their contracts.

There are still a lot of questions regarding this system. How are mistakes resolved? What happens when the amount in dispute has been covered by deductions from other billings? Is the contractor then removed from the list. What about inter divisional relationships? Will debts of one division be offset by billings from another? What about personal liabilities? Will the databases be sophisticated enough to associate companies with their owners and go after companies for the personal debts of the owners? Can anyone remove a contractor from the list or only the Agency that put them on the list. How responsive are agencies going to be when errors need to be corrected? Your cash-flow is critical to the ongoing financial capability of your company. Disrupt that and you will need to find other means of financing. Those other means will cost you money in interest or imputed interest.

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