Friday, October 19, 2012

Accelerated Payments to Small Business Subcontractors

On July 11, 2012, OMB (Office of Management and Budget) issued a new policy directing 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.

To implement this policy, OMB and the FAR Council developed a new contract clause to insert into all new solicitations and resultant contracts and, to the extent feasible, modify existing solicitations to insert the clause. Most agencies have now implemented the new clause including the big three, Defense, Energy, and NASA. The key part of the clause reads:

Upon receipt of accelerated payments from the Government, the contractor is required to make accelerated payments to small business subcontractors to the maximum extent practicable after receipt of a proper invoice and all proper documentation from the small business subcontractor.

The goal here is to expedite payments from 30 days to 15 days. This is only a goal however and does not confer any new rights under the Prompt Payment Act.

If you are a small business subcontractor and unaware of this new policy, contact your primes to get the program going.

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