Monday, March 21, 2016

Government Policy on Accelerating Payments to Small Businesses Still Exists

Back in 2011, the Office of Management and Budget (OMB) began requiring agencies, to the fullest extent permitted by law, to accelerate payments to small business contractors with the goal of making payments within 15 days (instead of 30 days). This requirement was conditional upon contractors submitting all of the proper documentation, including invoices.

In 2012, realizing that there were a lot more small business subcontractors than there were small business prime contractors, the OMB required agencies to temporarily ensure that all prime contractors are able to pay their small business subcontractors in a prompt fashion. This temporary policy has been extended a few times and is now good until the end of 2016. More than likely, it will be extended again before this year ends.

So, how's it working? Are small businesses getting paid more quickly now than they were a few years ago? We don't know. And OMB doesn't know either. Anecdotal evidence suggests a mixed bag. We've talked with small business contractors that are surprised with the quickness they're receiving payment. We've talked with others that tell us that it's still taking close to 30 days. We've talked to still others who tell us the time for payment uexplainedly fluctuates between 15 and 30 days. That's for the prime Government contractors. For small business subcontractors its a different story. From what we can discern, accelerated payments are not significantly affecting them. Sometimes its because of subcontract terms such as "payments to subs will be made after the Government pays the prime".

OMB is planning to gather some data on how well the programs are working. It's asking each agency to provide quarterly reports on its progress in making accelerated payments to prime contractors and the progress of the agency's twenty-five largest prime contractors are making in accelerating payments to small business subcontractors. It will be interesting to see those reports. If you are a top twenty-five contractor for any Governmental agency, you can expect to be pinged by those agencies for data necessary to prepare these mandated reports.

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