52.232-40 Providing Accelerated Payments to Small Business Subcontractors
Source: FAR 52.232-40 on acquisition.gov
Prime contractors must pay small business subcontractors within 15 days of receiving accelerated payments from the government, without charging fees, and must flow down this requirement to all small business subcontracts.
Overview
FAR 52.232-40 requires prime contractors to provide accelerated payments to their small business subcontractors when the government makes accelerated payments to the prime. The clause mandates that, to the maximum extent practicable, these payments must be made within 15 days of receiving accelerated payment from the government, provided the subcontractor has submitted a proper invoice and all required documentation. Contractors are prohibited from charging fees or requiring additional consideration from small business subcontractors for these accelerated payments. The clause also clarifies that this acceleration does not create new rights under the Prompt Payment Act. Additionally, the substance of this clause must be flowed down to all subcontracts with small business concerns, including those for commercial products or services.
Key Rules
- Accelerated Payment Requirement
- Contractors must pay small business subcontractors within 15 days of receiving accelerated payment from the government, after receipt of a proper invoice and required documentation.
- No Additional Fees
- Contractors cannot charge fees or require further consideration from small business subcontractors for accelerated payments.
- No New Prompt Payment Act Rights
- The clause does not create new rights under the Prompt Payment Act.
- Flowdown Requirement
- The clause must be included in all subcontracts with small business concerns, including those for commercial products or services.
Responsibilities
- Contracting Officers: Ensure inclusion of this clause in applicable contracts and monitor compliance.
- Contractors: Make timely accelerated payments to small business subcontractors, do not charge fees, and flow down the clause to all relevant subcontracts.
- Agencies: Oversee contractor compliance and address any issues related to payment acceleration.
Practical Implications
- This clause is designed to improve cash flow for small business subcontractors, supporting their financial stability and participation in federal contracting.
- Contractors must adjust payment processes to ensure compliance with the 15-day accelerated payment window.
- Failure to comply can result in contractual disputes or negative performance evaluations.
As prescribed in 32.009-2 , insert the following clause:
Providing Accelerated Payments to Small Business Subcontractors (Mar 2023)
(a)
(1) In accordance with https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title31-section3903&num=0&edition=prelim" target="_blank">31 U.S.C. 3903 and https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title10-section3801&num=0&edition=prelim" target="_blank">10 U.S.C. 3801, within 15 days after receipt of accelerated payments from the Government, the Contractor shall make accelerated payments to its small business subcontractors under this contract, to the maximum extent practicable and prior to when such payment is otherwise required under the applicable contract or subcontract, after receipt of a proper invoice and all other required documentation from the small business subcontractor.
(2) The Contractor agrees to make such payments to its small business subcontractors without any further consideration from or fees charged to the subcontractor.
(b) The acceleration of payments under this clause does not provide any new rights under the Prompt Payment Act.
(c) Include the substance of this clause, including this paragraph (c), in all subcontracts with small business concerns, including subcontracts with small business concerns for the acquisition of commercial products or commercial services.
(End of clause)