FAR Council Issues Final Rule on Accelerated Payments to Small Businesses

The Federal Acquisition Regulation (FAR) Council recently published a final rule to implement a policy that provides for accelerated payments to small business prime contractors and small business subcontractors. This noteworthy final rule became effective on March 16, 2023.  

The Department of Defense (DoD), the General Services Administration, and the National Aeronautics and Space Administration published a proposed rule at 86 FR 53923 on September 29, 2021, to implement a policy that provides for accelerated payments to small business prime contractors and small business subcontractors. This change implements section 873 of the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2020 (Pub. L. 116–92), which in turn amends 31 U.S.C. 3903(a).

Specifically, Section 873 requires federal agencies to establish an accelerated payment date for small business prime contractors, to the fullest extent permitted by law, with a goal of 15 days after receipt of a proper invoice, if a specific payment date is not established by contract. Section 873 also requires that, to the fullest extent permitted by law, the head of an agency establish an accelerated payment date for prime contractors that subcontract with small businesses, with a goal of 15 days after receipt of a proper invoice, if:

1. A specific payment date is not established by contract; and
2. The contractor agrees to make accelerated payments to the subcontractor without any further consideration from, or fees charged to, the subcontractor.

The final rule implements both aspects of Section 873.

For DoD, however, the final rule implements Section 815 of the William M. (Mac) Thornberry NDAA for FY 2021, which amended 10 U.S.C. 2307(a)(2)(A) (now found at 10 U.S.C. 3801) by striking the language “if a specific payment date is not established by contract.” As such, this rule excludes that conditional language from DoD contracts and, instead, simply requires that an accelerated payment date be established with a goal of 15 days after receipt of a proper invoice.