Monday, July 16, 2012

Accelerating Payments to Small Business Subcontractors

Last November, we reported on OMB's initiative to accelerate payments to small businesses from 30 days to 15 days. It was a directive aimed at all executive agencies and aimed at spurring job creation and economic growth. This program has been working fairly well, however it left out a huge subset of small businesses - those who subcontract to large businesses.

To address this oversight, OMB issued guidance last week to expand the program from small businesses to all prime contractors. Specifically, the guidance states that "...agencies should, to the full extent permitted by law, temporarily accelerate payments to all prime contractors, in order to allow them to provide prompt payments to small business subcontractors.

Under the new guidance, agencies shall encourage prime contractors to

  • accelerate payments to their small business subcontractors
  • consider modifying their existing contracts with small business subcontractors without consideration or fees to include a clause providing that the prime contractor will pay the small business subcontractor along an accelerated timetable to the maximum extent practicable and
  • insert a similar clause in their future contracts with small business subcontractors.

If you're a small business subcontractor, you should talk to your primes to ensure you receive expedited payments.

This program is good for one year.

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