Good News for Small Businesses — Primes and Subs — on Federal Contracts

By Pamela J. Bethel

We have good news for small businesses that contract with the federal government. The government’s policy encouraging prompt payment to small business subcontractors has been extended to December 31, 2017.

In a memorandum issued on January 11, 2017, by the Office of Management and Budget, OMB Director Shaun Donovan ordered that the popular policy be extended to the end of the year, and provided additional direction to agencies regarding their quarterly reports on implementing the accelerated payment policies. The memorandum can be found here.

The OMB’s accelerated payment policy was originally implemented by OMB Memorandum M-11-32, “Accelerating Payments to Small Businesses for Goods and Services,” which was issued on September 14, 2011.  That document specified that, to the greatest extent permitted by law, agencies should accelerate payments to small business prime contractors with the goal of making payments within 15 days of receipt of relevant documents – an invoice and confirmation that the goods and services have been received and accepted. Memorandum M-11-32 did not specify an expiration date.

On July 11, 2012, OMB took the next step under Memorandum M-12-16, “Providing Prompt Payment to Small Business Subcontractors.”  Memorandum M-12-16 says that “agencies should, to the full extent permitted by law, temporarily accelerate payments to all prime contractors, in order to allow them to provide prompt payment to small business subcontractors.” All these policies were continued at the end of the Obama administration as a result of Donovan’s directive. Although President Trump has not announced his policies regarding small business, historically both political parties have been supportive of small business.

For further information, see the blog of APTAC, the Association of Procurement Technical Assistance Centers, here.

 

 

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