CAAC Recommends Class Deviation to Accelerate Payments to Small Business Contractors

In the ongoing effort to minimize the effects of COVID-19, the Civilian Agency Acquisition Council (CAAC) has recommended that agencies implement a class deviation to accelerate payments to small business prime contractors to prime contractors with small business subcontractors.

Under FAR 1.404, agency heads, or their designees, are permitted to issue class deviations to the FAR (i.e., ones that will affect more than one contract action). Typically, agencies initiate class deviations and then consult with the CAAC’s chairperson before they issue the deviation. Given the unique circumstances presented by the COVID-19 menace, CAAC took the initiative, issuing a memo regarding “Class Deviation from the Federal Acquisition Regulation (FAR) to provide for accelerated payments to small business contractors and subcontractors.”

In that memo, CAAC urges agencies to issue a class deviation to implement Section 873 of the NDAA for FY 2020, which addresses the acceleration of payments to small businesses under the Prompt Payment Act. The memo advises that DoD, NASA, and GSA (which together comprise the FAR Council) have already undertaken rulemaking to formally incorporate the change in the FAR. In the interim, however, CAAC authorizes agencies to issue “a class deviation to provide for accelerated payments to contractors that are small businesses, and to small business subcontractors by accelerating payment to their prime contractors.”

As a guide for drafting the suggested deviation, CAAC attached additions and deletions to existing FAR provisions necessary to implement it. For example, FAR 32.009-1 would be revised to read:

(a) Pursuant to 31 U.S.C. 3903(a) and 10 U.S.C. 2307(a), agencies shall provide accelerated payments, to the fullest extent permitted by law, with a goal of 15 days after receipt of a proper invoice and all other required documentation, if a specific payment date is not established by contract, to–

1) Small business contractors, and

2) Prime contractors that subcontract with a small business concern, if the prime contractor agrees to make payments to the small business subcontractor in accordance with the accelerated payment date, to the maximum extent practicable, without any further consideration from or fees charged to the subcontractor.

In addition, the FAR contract provision, FAR 52.232-40 (Providing Accelerated Payments to Small Business Subcontractors), would be revised to read this way:

(a)(1) In accordance with 31 U.S.C. 3903 and 10 U.S.C. 2307, upon receipt of accelerated payments from the Government, the Contractor shall make accelerated payments to its small business subcontractors under this contract in accordance with the accelerated payment date established, to the maximum practicable and prior to when such payment is otherwise required under the applicable contract or subcontract, with a goal of 15 days after receipt of a proper invoice and all other required documentation from the small business subcontractor if a specific payment date is not established by contract.

(2) The Contractor agrees to make such payments to its small business subcontractors without any further consideration from or fees charged to the subcontractor.

(b) The acceleration of payments under this clause does not provide any new rights under the Prompt Payment Act.

(c) Include the substance of this clause, including this paragraph (c), in all subcontracts with small business concerns, including subcontracts with small business concerns for the acquisition of commercial items.

This urged deviation won’t, by any stretch, resolve the economic strain caused by COVID-19 and felt by government contractors. But it does reflect another avenue the government is using to, hopefully, stem the tide of the significant financial pressures presently confronting small business contractors.

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