March 17, 2014

ADMINISTRATION DIRECTS AGENCIES TO SPEED UP PAYMENTS TO CONTRACTORS

By ExchangeMonitor

Contractors at Department of Energy sites are set to soon see more rapid payments under a new Obama Administration policy unveiled yesterday. While federal agencies typically have 30 days to pay prime contractors, DOE and other agencies have been directed to accelerate such payments to within 15 days of receiving proper documentation, with the aim of prime contractors also accelerating payments to their small business subcontractors. “The acceleration of payments to all prime contractors is a one year, temporary, transitional policy that provides for immediate assistance to small businesses, while affording agencies and prime contractors time to insert contract clauses … or take other appropriate steps to ensure that prime contractors provide prompt payment to their small business subcontractors,” says a July 11 memo from the White House Office of Management and Budget.

OMB also plans to ask the Federal Acquisition Regulatory Council to help develop standard wording for a clause to be included in an agency’s contract with a prime contractor to provide for prompt payment from the prime contractor to small business subcontractors, according to the memo. “OMB is encouraging the FAR Council to consider as an example the provision in the [Prompt Payment Act] that, for the purposes of construction contracts awarded by an agency, flows down an accelerated payment schedule to subcontractors for satisfactory contract performance,” the memo says. Federal agencies will be required within six months, and then again within one year, to prepare a report on their progress in making accelerated payments to prime contractors and the progress of their 25 largest prime contractor in incorporating prompt payment clauses in the subcontracts with small businesses. The full OMB memo can be found here.

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