For two years, it has been the policy of individual agencies of the federal government to encourage prime contractors, upon receipt of progress payments from an agency, to accelerate payments to small business subcontractors. Now, this policy has been formalized by publication of a rule and contract clause in the Federal Acquisition Regulation (FAR), effective December 28, 2013.
Here is the background. The Department of Defense (DoD), the General Services Administration (GSA), and the National Aeronautical and Space Administration (NASA) originally published a proposed rule in the Federal Register at 77 FR 75089 on December 19, 2012, to implement OMB Memorandum M–12–16 that would provide for the acceleration of payments to small business subcontractors. OMB released Memorandum M–12–16, Providing Prompt Payment to Small Business Subcontractors, on July 11, 2012. This policy memorandum outlined the steps agencies should take to ensure that prime contractors pay their small business subcontractors as promptly as possible. OMB released Memorandum M–13–15, Extension of Policy to Provide Accelerated Payment to Small Business Subcontractors, on July 11, 2013. This policy memorandum extended the OMB
Memorandum M–12–16’s expiration date by one year to July 11, 2014.
With the publication of a formal rule in the FAR, the accelerated payment policy is now in effect, government-wide. Below is the clause that is to be placed in all federal contracts containing subcontracting opportunities:
FAR Part 52.232–40
Providing Accelerated Payments to
Small Business Subcontractors (Dec.
(a) Upon 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
(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