Agencies told to ensure subcontractors get prompt payments

Agencies have to pay their prime contractors promptly and, in turn, try to get the primes to make faster payments to their small-business subcontractors, and the Office of Management and Budget wants to see their progress.

OMB is requiring two reports—one in six months and the second report a year from now—to assess agencies’ work to get money into the hands of subcontractors faster, according to a memo released July 11.

The reports have three aspects:

First, OMB wants to know about agencies’ progress on accelerating prompt payments to all prime contractors. Since September, the administration has had the government working to pay prime contractors in 15 days, instead of 30 days. Officials hope to push the quicker cash flow down further into the business chain. They want the new policy to help out small subcontractors by having prime contractors pay them faster.

Agencies will also have to report on how their 25 largest prime contractors have incorporated the prompt subcontractor payment policy into their contracts with small businesses.

Finally, OMB wants to know of any other policies agencies have put in place to carry out the intent of the initiative.

Government officials want to help small businesses caught in the tough economic situation. In September 2011, President Barack Obama set up the initial Quick Pay plan. The point was to pay small prime contractors sooner. Karen Mills, administrator of the Small Business Administration, said July 11 the Quick Pay plan has helped small companies with cash flow and getting enough resources to begin new projects.

Now, the Obama administration expanded the Quick Pay policy with a focus on subcontractors. With that in mind, administration officials are seeking to help out the next tier of small businesses.

“This policy will have a real impact on small businesses across the country to do business with the federal government. It will get money into their hands faster,” Jeffrey Zients, acting OMB director, said July 11.

About the Author

Matthew Weigelt is a freelance journalist who writes about acquisition and procurement.

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