New Self-Reporting Rule for Contractors

The FAR councils are proposing to amend the Federal Acquisition Regulation to implement a provision of the Small Business Jobs Act of 2010. That statute requires contractors to self-report to the contracting officer in writing if the contractor pays a reduced price to a small business subcontractor or if a payments to a small business subcontractor is more than 90 days past due. The proposed modification also requires contracting officers to record the identity of contractors with a history of late or reduce payments to small business subcontractors in the Federal Awardee Performance and Integrity Information System (FAPIIS). This provision applies to all contracts, even commercial items.

This new rule is intended to help (i) create greater cash flow certainty which is critical for small business subcontractors and (ii) reduce a potential barrier to their participation in federal contracting.

The proposed regulation provides two new definitions:

Reduced payment means a payment that is for less than the amount agreed upon in a subcontract in accordance with its terms and conditions, for supplies and services for which the Government has paid the prime contractor.
Untimely payment means a payment to a subcontractor that is more than 90 days past due under the terms and conditions of a subcontract, for supplies and services for which the Government has paid the prime contractor.

Presumably, under these definitions, if the Government hasn't paid the prime, this provision does not apply.

The FAPIIS reporting requirement kicks in when the contracting officer has determined that reduced and untiely payments are unjustified to small business subcontractors, based on an evaluation of a contractor's written explanation for a reduced or an untimely payment when determining whether the reduced or untimely payment is justified. A history of unjustified reduced or untimely payments occurs when it happens three or more times in a 12-month period.

The proposed regulation does not address the consequences for non-reporting.

You can read the full text of the proposed regulation here.