New FAR rule would permanently require prompt payments to small subs

Thursday - 12/20/2012, 2:16pm EST

Large contractors would have to pay their small-business subcontractors more quickly under a proposed rule issued by the Federal Acquisition Regulations Council.

The council issued the Federal Register notice Wednesday to implement the July memo from the Office of Management and Budget.

Acting OMB Director Jeff Zients told agency heads to take several steps to accelerate payments to small-business prime and subcontractors. Among the areas he asked agencies to address was ensuring prime contractors promptly paid their subcontractors.

The notice would extend the OMB memo beyond its self-imposed July 2013 sunset.

The proposed rule requires the prompt-payment clause to be inserted into all new solicitations issued after the effective date of the final rule and resultant contracts, including solicitations and contracts for the acquisition of commercial items.

"This proposed rule does not provide any new rights under the Prompt Payment Act and does not affect the application of the Prompt Payment Act late payment interest provisions," the proposal stated.

The proposal doesn't define what an "accelerated payment" timetable is, which may cause some small businesses concern as a large business could claim that 59 days is accelerated compared to 60 days, for example.

Comments on the proposed rule are due by Feb. 19.

Deadline approaching

The FAR Council's suggested change is one of several deliverables due under Zients' memo.

In January, agencies must submit a report describing the progress they are making in accelerating payments to prime contractors, the progress of the agency's largest 25 vendors in incorporating prompt payment clauses in their subcontracts and any other initiatives to improve payments to small firms.

OMB also has taken other several steps over the last year to improve small businesses chances of winning federal contracts. In December 2011, the administration called on agencies to take steps to award more contracts to small firms at the micro-purchase threshold of $3,000.

In June, the Office of Federal Procurement Policy and the Small Business Administration co-signed a memo requiring agencies to take steps to address three long-standing issues around small business contracting, including proper consideration for procurements under $150,000, the Simplified Acquisition Threshold (SAT).

Agencies continue to miss the governmentwide goal of awarding at least 23 percent of all contracts to small businesses. Whether agencies meet the goal in 2012 and beyond will show just how much impact these memos are having and how much attention OFPP is paying to these issues.

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