The government’s policy encouraging prompt payment to small business subcontractors has been extended to December 31, 2017.
In a Memorandum issued on January 11, 2017 by the Office of Management and Budget, OMB Director Shaun Donovan ordered that the popular policy be extended to the end of the year, and provided additional direction to agencies regarding their quarterly reports on implementing the accelerated payment policies.
The OMB’s accelerated payment policy was originally implemented by OMB Memorandum M-11-32, “Accelerating Payments to Small Businesses for Goods and Services,” which was issued on September 14, 2011. Memorandum M-11-32 specified that, to the greatest extent permitted by law, agencies should accelerate payments to small business prime contractors with the goal of making payments within 15 days of receipt of relevant documents (i.e., an invoice and confirmation that the goods and services have been received and accepted). Memorandum M-11-32 did not specify an expiration date.
On July 11, 2012, OMB took the next step under Memorandum M-12-16, “Providing Prompt Payment to Small Business Subcontractors.” Memorandum M-12-16 provided that, “agencies should, to the full extent permitted by law, temporarily accelerate payments to all prime contractors, in order to allow them to provide prompt payment to small business subcontractors.” The Memorandum established a goal of “paying all prime contractors within 15 days of receiving proper documentation.” Unlike Memorandum M-11-32, however, the policy established by Memorandum M-12-16 was intended as a “temporary, transitional policy,” and was to expire after one year. In subsequent memorandums, the temporary policy was extended to December 31, 2016.
The OMB later adopted requirements that agencies provide six-month reports on their progress in meeting the accelerated payment goals; OMB subsequently increased the reporting frequency to every three months. The January 11 Memorandum, numbered Memorandum M-17-13, extends the temporary policy under Memorandum M-12-16 to December 31, 2017. The new Memorandum also updates the reporting requirements, calling for agencies to make three-month reports on their progress in making accelerated payments to small business prime contractors and to all contractors, as well as “the progress of any other steps that the agency has undertaken to ensure that small business contractors and small business subcontractors are paid in a prompt manner.”
The OMB’s new Memorandum is welcome news for small business subcontractors, some of whom rely on prompt payments to maintain appropriate cash flow. It’s unclear, of course, how the incoming Administration will view the goals established by Memorandums M-11-32 and M-12-16, but supporting small business has long been a priority for many on both sides of the political aisle. Hopefully, that means that further extensions (or perhaps even a permanent extension) will be in the works in 2018–but we’ll just have to wait and see.