The Small Business Jobs and Credit Act of 2010 requires prime contractors to self-report to the contracting officer when the prime contractor makes late or reduced payments to small business subcontractors. In addition, the Act also requires contracting officers to record the identy of contractors with a history of late or reduced payments to small business subcontractors in the Federal Awardee Performance and Integrity Information System (FAPIIS).
These requirements, although becoming effective back in August 2013, never made their way to the Federal Acquisition Regulations and as a result, seemingly very few contractors and government personnel were aware of the requirements.
That is about to change. The FAR Councils have just published an interim rule that revises FAR Part 42 to include in the past performance evaluation, reduced or untimely payments reported to the contracting officer by the prime contractor that are determined by the contracting officer to be unjustified. That's well and good but first, contractors are going to have to self-report late or reduced payments made to small business concerns. It seems unlikely that contractors will have systems in place to track such information. Second, contracting officers are going to have to make a judgment call on whether the late/reduced payments were justified. Quite probably, like most contract compliance issues, contracting officers will accept contractor supplied justifications. Third, contracting officers will need to report the information into FAPIIS. We already know from prior internal Government audits that the compliance rate for FAPIIS reporting is very low (but getting better).
There is no penalty for contractors who fail to self-report except perhaps as part of an accounting system or billing system review where such failure could be considered a deficiency.