Effective January 19, 2017, DoD, GSA, and NASA issued a final rule amending the Federal Acquisition Regulation (FAR) to implement a section of the Small Business Jobs Act of 2010. According to the Federal Register, “this statute requires contractors to notify the contracting officer, in writing, if the contractor pays a reduced price to a small business subcontractor or if the contractor’s payment to a small business subcontractor is more than 90 days past due.”
The new FAR clause 52.242-5 defines a reduced payment as 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.
An untimely payment is defined as one 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.
As I discussed in a previous post, these incidents then get reported into a system called FAPIIS, and a history of delayed payments in FAPIIS will affect a prime’s CPARS rating (Contractor Performance Assessment Reporting System), which could affect eligibility for future contracts.
These new clearer definitions give this ruling some teeth. Since it’s possible to get dinged in a permanent accountable way that will be noticeable to prospective customers, it’s advantageous for primes to pay on time.
