Thursday, January 12, 2017

Policy to Expedite Payments to Small Businesses Extended for Another Year

Yesterday, the Office of Management and Budget (OMB) extended the policy to expedite payments to small businesses for another year. See Extension of Policy to Provide Accelerated Payments to Small Businesses and Small Business Subcontractors.

This policy goes back to 2011 when the OMB established it for small business prime contractors. It became readily apparent however that many more small businesses were subcontractors rather than prime contractors so in 2012, OMB extended the policy to prime contractors so that they could, in turn, expedite payments to their small business subcontractors.

The payment goal for the Government under this policy is 15 days after receipt of all required documents. However, prime contractors are not obligated to the 15 day rule but by the terms and conditions of their subcontract documents. In any event, prime contractors should be endeavoring to abide by the intent of the policy. Unfortunately, many small business subcontractors have not benefited from the policy.

Perhaps that will change. The extension carries some reporting requirements that includes, among other things, quarterly reporting on the progress of any other steps that the agency has undertaken to ensure that small business contractors and small business subcontractors are paid in a prompt manner. In order to prepare such a report, agencies will need to engage their prime contractors to see how well they have implemented the accelerated payment policy to their small business subcontracts. The added oversight may help.

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