General
Agencies must aim to pay small businesses and qualifying prime contractors within 15 days of a proper invoice, promoting faster cash flow without altering Prompt Payment Act rights.
Overview
FAR 32.009-1 establishes requirements for federal agencies to provide accelerated payments to small business contractors and to prime contractors that subcontract with small businesses. The regulation sets a goal for agencies to make payments within 15 days of receiving a proper invoice and all required documentation, unless a specific payment date is set by contract. This applies to both civilian agencies (under 31 U.S.C. 3903(a)) and the Department of Defense (under 10 U.S.C. 3801(b)). For prime contractors to benefit, they must agree to pay their small business subcontractors within 15 days of receiving the accelerated payment, without charging fees or requiring additional consideration. The regulation clarifies that this acceleration does not create new rights under the Prompt Payment Act or affect late payment interest provisions. Agencies are also encouraged to use the Governmentwide commercial purchase card to facilitate these payments and reduce processing costs.
Key Rules
- Accelerated Payments to Small Businesses
- Agencies must aim to pay small business contractors within 15 days of receiving a proper invoice and required documentation, unless otherwise specified in the contract.
- Prime Contractors with Small Business Subcontractors
- Prime contractors can receive accelerated payments if they commit to paying their small business subcontractors within 15 days of receiving payment from the government, without charging fees or requiring extra consideration.
- No New Rights Under Prompt Payment Act
- Accelerated payments do not alter rights or interest provisions under the Prompt Payment Act.
- Use of Purchase Cards
- Agencies may use the Governmentwide commercial purchase card to expedite payments and reduce costs.
Responsibilities
- Contracting Officers: Ensure contract terms support accelerated payments and verify proper documentation is received.
- Contractors: Submit proper invoices and required documentation promptly; prime contractors must pay small business subs within 15 days if they receive accelerated payments.
- Agencies: Implement processes for accelerated payments and consider using purchase cards for efficiency.
Practical Implications
- This rule is designed to improve cash flow for small businesses and their subcontractors, supporting their participation in federal contracting.
- Contractors must ensure timely and accurate invoicing to benefit from accelerated payments.
- Prime contractors must be prepared to pay small business subs quickly and cannot charge fees for this acceleration.
- Agencies must balance accelerated payment goals with compliance to the Prompt Payment Act and internal controls.