The Federal Acquisition Regulatory Council has issued a final rule amending the Federal Acquisition Regulation (FAR) to implement a section of the Small Business Jobs Act of 2010. The new rule, which goes into effect on January 19, 2017, will require certain prime contractors to “self-report” to their contracting officers all reduced or untimely payments to their small business subcontractors within 14 days of when the payment was due and the reason for the reduced or untimely payment.
Specifically, the contract will contain a new FAR clause, 52.242-5, which will state:
(a) Definitions. As used in this clause-
Reduced payment means a payment that is for less than the amount agreed upon in a subcontract in accordance with its terms and conditions, for supplies and services for which the Government has paid the prime contractor.
Untimely payment means a payment that is more than 90 days past due under the terms and conditions of a subcontract, for supplies and services for which the Government has paid the prime contractor.
(b) Notice. The Contractor shall notify the Contracting Officer, in writing, not later than 14 days after-
(1) A small business subcontractor was entitled to payment under the terms and conditions of the subcontract; and
(2) The Contractor-
(i) Made a reduced or untimely payment to the small business subcontractor; or
(ii) Failed to make a payment, which is now untimely.
(c) Content of Notice. The Contractor shall include the reason(s) for making the reduced or untimely payment in any Notice required under paragraph (b) of this clause.
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