FAR Council Addresses Many of Ҵýapp’s Concerns
On Dec. 20, the Federal Acquisition Regulation (FAR) Council issued a requiring a prime contractor to notify federal contracting officers if (1) the prime contractor makes a reduced payment to a small business subcontractor or (2) if the prime contractor’s payment to a small business subcontractor is more than 90 days past due. The rule goes into effect on Jan. 19. The FAR Council did not withdraw the proposal as Ҵýapp recommended based on a myriad of existing small business subcontractor payment legal protections. However, it did take into account many of with the proposed rule.
For example, the FAR Council at Ҵýapp’s recommendation included:
- Examples where a prime contractor need not report reduced or late prime contractor payments to small business subcontractors, including subcontract performance disputes, administrative mistakes and late performance by such subcontractors.
- Clarification that the rule does not flow down beyond the first tier of subcontracting. The rule only applies to prime contractor payments to small business subcontractors at the first subcontracting tier. Therefore, any small business subcontractor below the first tier does not receive the benefit of this rule and prime contractors are not responsible for monitoring any flow down conditions.
Compliance with the rule will be considered in the small business past performance evaluation factor for prime contractors. It should be noted, however, that prime contractors may receive an exceptional rating where they “did not have a history of three or more unjustified reduced or untimely payments to small business subcontractors within a 12-month period.”
Ҵýapp also called upon the FAR Council to address the greatest problem facing contractor payment: government agency-caused payment delays. The FAR Council noted that “the FAR already contains adequate policy on Government-caused delays and changes to contract terms and conditions.” Ҵýapp disagrees. As such, Ҵýapp is already working with Congress on ways to address government-caused payment delays in the context of change orders. A hearing in the House of Representatives on the topic will likely occur in the first quarter of 2017.
For more information, contact Jimmy Christianson at christiansonj@agc.org or 703-837-5325.