Payments to Small Business Subcontractors
Prime contractors must promptly notify the Contracting Officer in writing within 14 days if a small business subcontractor receives a reduced or untimely payment, including the reasons for the payment issue.
Overview
FAR 52.242-5, Payments to Small Business Subcontractors, requires prime contractors to promptly notify the Contracting Officer if they make reduced or untimely payments to small business subcontractors. The clause defines key terms such as "reduced payment" (less than agreed upon) and "untimely payment" (more than 90 days past due), specifically for supplies and services for which the Government has already paid the prime contractor. The notification must be in writing and submitted within 14 days of the payment issue, and it must include the reasons for the reduced or late payment. This clause is designed to ensure transparency and accountability in payments to small business subcontractors, supporting fair treatment and timely compensation within the federal contracting process.
Key Rules
- Notification Requirement
- Prime contractors must notify the Contracting Officer in writing within 14 days if a small business subcontractor receives a reduced or untimely payment, or if payment is not made and is now untimely.
- Content of Notice
- The notice must include the reasons for the reduced or untimely payment.
- Definitions
- "Reduced payment" and "untimely payment" are specifically defined for compliance purposes.
Responsibilities
- Contracting Officers: Receive and review notifications from contractors regarding payment issues to small business subcontractors.
- Contractors: Monitor payments to small business subcontractors, provide timely written notification of any reduced or untimely payments, and explain the reasons for such payments.
- Agencies: Oversee contractor compliance and ensure small business subcontractors are treated fairly.
Practical Implications
- This clause exists to protect small business subcontractors from delayed or insufficient payments, promoting fair business practices.
- Contractors must have systems in place to track payments and respond quickly to issues.
- Failure to comply can result in negative performance evaluations or other contractual consequences.