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Primes Who Are Slow to Pay Can Be Reported

Small Business Subcontractors Are Feeling Used

Closing a Small Business Loophole

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Bill Jaffe
September 18, 2013
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If a prime contractor pays a subcontractor late or less than agreed upon, the contracting officer can take them to task, and even reduce their CPARS ratings.

In the last few posts I’ve been digging down into the details of the SBA’s final rule from July 16, 2013, issued to implement provisions from the Small Business Jobs Act of 2010. First, we discussed the rule that prime contractors must give small business subcontractors every possible opportunity to fulfill the work on their projects.

Then, we looked at the problem where prime contractors say in a bid that they’ll set aside project revenue to a small and/or specially-certified business, but then neglect to award that work in the same scope, amount and quality that was used to submit the quote or bid.

The next problem that subcontractors deal with on a regular basis is with the payment process. We’ve talked before about some of the financing challenges for government contractors. Now as a sub, your customer is the prime, not the government, and so that’s who pays you. If the prime hasn’t addressed their own financing challenges, or is trying to avoid their own financing charges, that might result in late or even reduced payments.

Section 125.3(c)(5) of the proposed rule deals with Section 1334 of the Jobs Act, and requires that a prime contractor notify the contracting officer in writing whenever a payment to a subcontractor is reduced or is 90 days or past due, when the Federal agency has paid the contractor, including the reason.

Similar to the other rules we’ve discussed, the SBA final rule now gives the small business the right to address the contracting officer directly and raise an objection when prime contractors pay slowly or reduced amounts. And the CO can report those late payments, which means the prime contractor will be deemed to be out of compliance in the Contractor Performance Assessment Reporting System (CPARS). The contracting officer can really take the prime to task properly on this issue.

We’re still faced with the reality that none of this will have any effect if the contracting officer doesn’t take action. But if they do use their newfound right to talk to the prime about late or reduced payments, or reduce their CPARS ratings, then this rule will begin to have a real and strenuous effect.

Related posts:

  1. Small Business Subcontractors Are Feeling Used
  2. Maximum Practicable Opportunity for Small Business Subcontractors – New SBA Final Rule
  3. Payroll Financing for Government Contractors
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The All-Small Mentor-Protégé Program

SBA had a well-established mentor-protégé program (MPP) for SBA 8(a) certified firms but lacked an MPP program for other small business concerns and specifically, one for specialized certified concerns such as WOSB, EDWOSB, SDVOSB, & HubZone. The 2010 Jobs Act and 2013 NDAA gave SBA the authorization to address this by establishing an all-encompassing mentor-protégé program. Ms. Sandi Clifford, deputy director of the All Small Mentor-Protégé Program (ASMPP), visited the Mid-Tier Advocacy (MTA) earlier this year to discuss the program. Here are some of the highlights of this candid and informative discussion: As Ms. Clifford explained, mentor services to protégés include: • Management and technical assistance (internal business management systems) • Financial assistance (in the form of equity investments and/or loans) • Contracting assistance (contracting processes, capabilities acquisitions and performance) • International trade education (learn how to export, international trade business plan, finding markets) • Business development assistance (strategy, finding contracting and partnership opportunities) • General and/or administrative assistance (business processes and support) As administrators of the program, SBA provides: • Central HQ as opposed to 8(a) distributive model • Online application – certify.sba.gov • Online course tutorial requirement • Annual review and evaluation • Template agreements, i.e., MPA (Mentor-Protégé Agreement) Other All-Small Mentor-Protégé Program (ASMPP) details: • A protégé may generally only have one mentor at a time; SBA may approve a second (two is the maximum) where no competition exists, or if the protégé registers under a new NAICS or otherwise requires new mentor skills.  • Both protégé and mentor must be for-profit (with exception of protégé being an agriculture cooperative). • A mentor may have no more than three protégés at same time (no lifetime limit). • A participant can be both a protégé and mentor at the same time, if there is no competition or conflict. • The ASMPP is self-certifying and is open to businesses who qualify as small in their primary NAICS code, or who are seeking business development assistance in a secondary NAICs where they also qualify as small.  • SBA will not authorize MPAs in second NAICS in which firm has never performed any work; or where firm would only bring “small” status to Mentor and nothing else. • Existing 8(a) firms in last 6 months of the 8(a) program may transfer their MPA to the ASMPP via the online application process. Coordinate with 8(a) office to fine tune the process but there is no reapplication required. • Application requirements include upload of business plan, but no financial statements or tax returns. • JV agreements: ASMPP will not review and approve joint venture agreements. How to apply for the ASMPP: • Applicants are required to register in the System for Award Management (SAM) prior to submitting their mentor/protégé application. • Complete your business profile in certify.SBA.gov. • Evaluate and select your mentor prior to applying. This is not a matching program. SBA will not find a mentor for you. • Begin the ASMPP application process. • Protégés and mentors must complete the online tutorial and have their certificate of completion and all other required documents ready for upload Thank you to Sandi Clifford, Deputy Director, All Small Mentor-Protégé Program, for this helpful overview. TAPE has mentored several small businesses over it’s life as a large business (we’re large in some NAICS codes, though still small in others) and it has been gratifying, satisfying, and integral to our success. As protégés ourselves, we have benefitted from working with some really classy large businesses, and have also had the experience of being a protégé and really getting no tangible benefits. We are currently working with two small businesses, and negotiating ASMPP agreements. You can learn more about the ASMPP on the SBA site. To join MTA and attend future events like this one, please visit www.midtier.org.
Bill Jaffe
August 23, 2017
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