Friday, July 18, 2014

Accelerated Payments to Small Business Subcontractors - Program Extension

The Office of Management and Budget (OMB) announced last week the good news that its program for encouraging accelerated payments to small business subcontractors by Government prime contractors has been extended to December 31, 2016. It was set to expire on July 11, 2014.

Here's the way it works. Agencies, to the full extent permitted by law, will accelerate payments to prime contractors - with a goal of paying them within 15 days of the receipt of a proper invoice. This will allow the prime contractor to provide accelerated payments to their small business subcontractors.

Whether this policy is working effectively is anyone's guess. We have anecdotal evidence that it has not had a marked improvement in reducing the lapsed days for some small business subcontractors to receive payment from their primes. It could be that some prime contractors are sitting on the money until such time as subcontractor billings become due in the normal course of business. We do not know of any Government oversight agencies with programs to review for compliance with the accelerated payment policy. DCMA (Defense Contract Management Agency) might include coverage in a billing review but those reviews are performed very infrequently.

If you are a small-business subcontractor, you should inquire of your prime contractors whether their customers are participating in the program (almost all Agencies are participants, by the way). If so, you should also benefit from the program.

You can read OMB's extension letter here.

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