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New Rule Designed to Enforce Prime Contractor Payments Accountability

Posted by Daniel McAuliffe on Jan 17, 2017 2:51:27 PM

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Prime Contractor Payments Responsibilities

A new rule goes into effect on January 19, 2017 that amends the Federal Acquisition Regulation (FAR) and requires contractors to notify the contracting officer if the prime contractor payments are reduced price to a small business subcontractor or if the prime contractor payments to a small business subcontractor is more than 90 days past due.

The rule, originally published in the Federal Register on July 16, 2013 at 78 FR 42391, requires prime contractors to self-report late or reduced payments to their small business subcontractors. The rule also requires contracting officers to record the identity of contractors with a history of late or reduced payments to small business subcontractors in the Federal Awardee Performance and Integrity System (FAPIIS).

Some past-due payment situations are exempt from the reporting requirements and these are:

  • There is a contract dispute on performance.
  • Partial payment is made for amounts not in dispute.
  • A payment is reduced due to past overpayments.
  • There is an administrative mistake.
  • Late performance by the subcontractor leads to later payment by the prime contractor.

The rule will be implemented by requiring contracting officers to include FAR clause 52.242-5, Payments to Small Business Subcontractors, in all solicitations and contracts containing the clause at 52.219-9, Small Business Subcontracting Plan.

The rule applies to payments made to small businesses that are first-tier subcontractors to prime government contractors. This rule also imposes new recordkeeping and reporting requirements and contains information collection requirements. Small businesses are not required to report under this information collection because it only applies to prime contractors whose contracts contain the clause 52.219-9, Small Business Subcontracting Plan, which is not applicable to small businesses. There will be no burden on small businesses, as small businesses do not have subcontracting plans. The goal of the rule is to help small business subcontractors by encouraging large business prime contractors to pay small business subcontractors in a timely manner and the agreed upon contractual price.

To review the new rule, please visit https://www.federalregister.gov/documents/2016/12/20/2016-30221/federal-acquisition-regulations-payment-of-subcontractors.

Topics: Government Procurement, government contracting, government contracts attorney, Government Contracts Law Firm

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