Procurement

OMB extends rules requiring quick contractor payments

transferring funds

A measure to expedite payment from the federal government to subcontractors was set to expire on July 11, but the Office of Management and Budget has extended it to July 2014.

Memorandum M-12-16, issued in July 2012 by then-acting OMB Director Jeffrey Zients, directs agencies to have a goal of paying their prime contractors within 15 days of invoice receipt, so that subcontractors receive payment more quickly.

Agencies have accelerated their payments and included clauses with prime contractors addressing the timeliness of their payments to subcontractors, according to OMB.

"This extension will allow OMB and agencies to continue to evaluate the impact of accelerated payment on small business subcontractors," the new OMB memo, signed by federal CIO and acting Deputy Director of Management Steven VanRoekel, states. "It will also allow the Federal Acquisition Regulatory Council to solicit public input on strategies that might be used over the longer term to help maintain effective cash flow and prompt payment to small business subcontractors."

The original memo directed agencies to encourage prime contractors to:

• Accelerate payments to their small business subcontractors;

• Consider modifying their existing contracts with small business subcontractors without consideration or fees to include a clause providing that the prime contractor will pay the small business subcontractor along an accelerated timetable to the maximum extent practicable; and

• Insert a similar clause in their future contracts with small businesses subcontractors.

It also mandated reports on the speed of payment to subcontractors. The overall memo was an expansion of the administration's Quick Pay plan, an initiative introduced in September 2011 to speed up payments to small prime contractors.

About the Author

Reid Davenport is an FCW editorial fellow. Connect with him on Twitter: @ReidDavenport.

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