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DOD/DARC RIN: 0750-AK25 Publication ID: Fall 2019 
Title: Prompt Payments of Small Business Subcontractors (DFARS Case 2018-D068) 
Abstract:

DoD is amending the Defense Federal Acquisition Regulation Supplement (DFARS) to implement section 852 of the National Defense Authorization Act for Fiscal Year 2019, which requires accelerated payment dates for small business prime contractors and prime contractors that subcontract with small business concerns. This rule will amend the DFARS to require accelerated payment dates with a goal of 15 days after receipt of a proper invoice, if a specific payment date is not established by contract. In addition, prime contractors that have subcontracts with small businesses must agree to make payments to their small business subcontractors in accordance with the accelerated payment date, to the maximum extent practicable, without any further consideration from, or fees charged to, the subcontractor.

 
Agency: Department of Defense(DOD)  Priority: Other Significant 
RIN Status: Previously published in the Unified Agenda Agenda Stage of Rulemaking: Final Rule Stage 
Major: No  Unfunded Mandates: No 
EO 13771 Designation: Other 
CFR Citation: 48 CFR 232   
Legal Authority: 41 U.S.C. 1303    Pub. L. 115-874, sec. 852    10 U.S.C. 2306a   
Legal Deadline:  None

Statement of Need:

This rule will amend the Defense Federal Acquisition Regulation Supplement (DFARS) to implement section 852 of the National Defense Authorization Act for Fiscal Year 2019, which requires accelerated payment dates for small business prime contractors and for prime contractors that subcontract with small business concerns. This rule will require accelerated payment dates with a goal of 15 days after receipt of a proper invoice, if a specific payment date is not established by contract. In addition, prime contractors that have subcontracts with small businesses must agree to make payments to their small business subcontractors in accordance with the accelerated payment date, to the maximum extent practicable, without any further consideration from, or fees charged to, the subcontractor.

Summary of the Legal Basis:

This regulation is issued under the authorities of section 852 of the National Defense Authorization Act for Fiscal Year 2019 and 41 U.S.C. 1303.

Alternatives:

DoD considered the following alternatives: (1) taking no action; (2) amending the DFARS to implement section 852. DoD has a policy in place to pay small business prime contractors as quickly as possible after receipt of invoices and proper documentation. However, the existing policy does not fully implement the requirements of section 852. Therefore, DoD is amending the DFARS.

Anticipated Costs and Benefits:

The clause at Federal Acquisition Regulation (FAR) 52.232-40, Providing Accelerated Payments to Small Business Subcontractors, currently requires contractors to provide accelerated payments to their small business subcontractors when the Government provides accelerated payments to the contractors. DoD contracting officers are required to include this clause in DoD contracts. As a result, DoD contractors should already be providing accelerated payments to small business subcontractors. Current DoD policy, as stated in DFARS 232.903, is to pay small business contractors as quickly as possible after receipt of invoices and proper documentation. With few exceptions, DoD will provide accelerated payments to small business contractors and to other contractors that agree to provide accelerated payments to their small business subcontractors without further consideration or fees. DoD will not be able to provide accelerated payments if such payments put DoD at risk of a violation of law. In accordance with section 852, this rule will prohibit contractors from requiring any further consideration from, or charging fees to, their small business subcontractors when making accelerated payments. This prohibition would benefit small business subcontractors who have been required to provide consideration or pay fees to the prime contractor in order to receive accelerated payments. It is not possible for DoD to estimate the number of small business subcontractors who have been required to do this, nor is it possible to estimate the dollar value of the consideration provided or fees paid.

Risks:

Timetable:
Action Date FR Cite
NPRM  05/31/2019  84 FR 25225   
NPRM Comment Period End  07/30/2019 
Final Action  01/00/2020 
Final Action Effective  01/00/2020 
Regulatory Flexibility Analysis Required: Yes  Government Levels Affected: Federal 
Small Entities Affected: Businesses  Federalism: No 
Included in the Regulatory Plan: Yes 
RIN Data Printed in the FR: Yes 
Agency Contact:
Jennifer Hawes
Department of Defense
Defense Acquisition Regulations Council
3060 Defense Pentagon, Room 3B941,
Washington, DC 20301-3060
Phone:571 372-6115
Email: jennifer.l.hawes2.civ@mail.mil