OMB: Agencies to speed pay to small contractors

Thursday - 9/15/2011, 8:48am EDT

By Jack Moore
Federal News Radio

The Office of Management and Budget has issued new guidance to agencies that accelerates payments to small- business contractors.

A Sept. 14 memo from OMB Director Jacob Lew directs agencies to cut the time it takes to process payments for small-business contractors — from the customary 30 days after receiving an invoice — to 15.

Small businesses are "critical drivers of job creation and economic growth," Lew wrote in the memo, and they receive nearly $100 billion from the government each year for goods and services.

Speeding payments to smaller contractors would improve their cash flow and "provide them with a more predictable stream of resources," Lew added.

The Prompt Payment Act, which governs payments to vendors, generally requires the government to pay contractors within 30 days of receiving an invoice. However, under the law, agencies are allowed to shorten payment deadlines if they deem it "necessary."

Agencies should begin making accelerated payments to small businesses "as soon as practicable," the memo states. By Nov. 1, agencies are required to notify OMB when it will begin making accelerated payments along with an explanation "for why an earlier date is not practicable."

The idea of accelerated payments to small-business contractors was briefly mentioned last week in President Barack Obama's speech laying out his jobs plan before a joint session of Congress.

Faster payment to small business is an area the administration can tackle on its own, he said.

"If you're a small business owner who has a contract with the federal government, we're going to make sure you get paid a lot faster than you do right now," Obama said last week.

Tags: Jack Moore