Type: Law Bulletins
Date: 12/02/2013

Accelerated Payments to Small Business Subcontractors Rule Finalized

A Final Rule published in the Nov. 25, 2013, Federal Register amends the FAR to add a new clause: “Providing Accelerated Payments to Small Business Subcontractors.” This new FAR clause follows two previous, well-received Office Management and Budget memorandums issuing guidance on this same topic in 2012 and 2013. The clause is independent from the Prompt Payment Act.

This FAR clause is to be inserted into all new solicitations and contracts issued after Dec. 26, 2013 (when the rule becomes effective). The clause requires the prime contractor, upon receipt of accelerated payment from the government, to make accelerated payments to their small business subcontractors to the maximum extent practicable, after the subcontractors have submitted proper invoices and proper documentation. If the prime contractor fails to accelerate payments to small business subcontractors, when it has already benefited from accelerated payments itself, the government may discontinue issuing accelerated payments to the prime contractor.

To accommodate varying prime contractor capabilities to make accelerated payments, the final regulation allows the government to review prime contractor payments and procedures to ensure the required payments to small business subcontractors are being made on the accelerated basis to the extent practicable.

The Final Rule is published at 78 FR 70477, and the new clause will be set forth at FAR 52.232-40.

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