Government Contracts Monitor

Short Takes

December 2, 2013

Newly-issued Federal Acquisition Circular (FAC) 2005-71, 78 Fed. Reg. 70476 (Nov. 25, 2013) amends the Federal Acquisition Regulation (FAR) to add a new clause (FAR 52.232-40), that requires prime contractors receiving accelerated payments from the Government to make accelerated payments to their small business subcontractors to the maximum extent possible and prior to when such payment otherwise is required. This clause will be included in all solicitations issued after December 26, 2013, and flowed down to all levels in contracts under such solicitations. Final Rule, Federal Acquisition Regulation: Accelerated Payments to Small Business Subcontractors, 78 Fed. Reg. 70477 (Nov. 25, 2013). The new clause implements OMB Memorandum M-12-16, (July 11, 2012) and M-13-15, (July 11, 2013), directing agencies to take steps to ensure that primes pay their small business subcontractors promptly (previously discussed here).

While the rule does not create any new remedies for payment issues, if the Government finds that a prime has failed to make a required accelerated payment to its small business subcontractor, the Government may discontinue accelerated payments to the prime. While not referenced by the FAR Council, the SBA’s recent final rule on Small Business Subcontracting, 78 Fed. Reg. 42391 (July 16, 2013), prohibits a prime from foreclosing a sub from discussing any material matter pertaining to payments with the prime’s Contracting Officer (13 C.F.R. § 125.3(c)(1)(iii)), and requires Contracting Officers to evaluate whether the prime has complied with its subcontracting plan, and specifically whether the prime has failed to timely pay its subcontractors (13 C.F.R. §§ 125.3(d)(3) & (6)). The new clause does not provide any new rights under the Prompt Payment Act, and does not affect the application of the Prompt Payment Act late interest provisions.

Hopewell Darneille is the attorney responsible for the content of this article.