[Federal Register Volume 64, Number 188 (Wednesday, September 29, 1999)]
[Rules and Regulations]
[Pages 52580-52594]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-24713]



[[Page 52579]]

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Part II





Office of Management and Budget





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5 CFR Part 1315



Prompt Payment; Final Rule

  Federal Register / Vol. 64, No. 188 / Wednesday, September 29, 1999 / 
Rules and Regulations  

[[Page 52580]]


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OFFICE OF MANAGEMENT AND BUDGET

5 CFR Part 1315

RIN 0348-AB47


Prompt Payment

AGENCY: Office of Management and Budget, Executive Office of the 
President.

ACTION: Final rule on, and codification of, Prompt Payment Act 
regulations.

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SUMMARY: OMB is issuing final revisions to its rules on the Prompt 
Payment Act, which have been found in Circular A-125. The revisions 
address the increased use of electronic commercial financial systems; 
promote the use of government credit cards and accelerated payment 
methods; reflect new requirements of the Debt Collection Improvement 
Act of 1996 and the recent repeal of the annual agency Prompt Payment 
reporting requirement; clarify and simplify language; and announce a 
toll-free number and internet website for Prompt Payment Act 
information. Finally, in addition to revising the Prompt Payment rules, 
OMB is also adopting them as codified regulations in the Code of 
Federal Regulations. OMB's issuance of codified regulations has the 
effect of superceding and rescinding Circular A-125 (``Prompt 
Payment'').

DATES: Effective Date: The regulations are effective October 29, 1999.

ADDRESSES: Copies of the regulation and other information are available 
from the Prompt Payment web site at http://www.fms.treas.gov/prompt/
index.html. Copies are also available from the Financial Management 
Service, Cash Management Policy and Planning Division, 401 14th Street, 
SW., Washington, DC 20227.

FOR FURTHER INFORMATION CONTACT: Sally Phillips, Senior Financial 
Program Specialist on (202) 874-7106; Matthew Helfrich, Financial 
Program Specialist, (202) 874-6749; Martha Thomas-Mitchell, Financial 
Program Specialist on (202) 874-6757; or Cynthia Johnson, Director, 
Cash Management Policy and Planning Division on (202) 874-6590.

SUPPLEMENTARY INFORMATION:

I. Background

    In 1982, Congress enacted the Prompt Payment Act (``Act''; Pub. L. 
97-177) to require Federal agencies to pay their bills on a timely 
basis, to pay interest penalties when payments are made late, and to 
take discounts only when payments are made by the discount date. The 
Act, as amended, is found at 31 U.S.C. Chapter 39.
    To implement the Act, and pursuant to 31 U.S.C. 3903(a), OMB issued 
Circular A-125 (``Prompt Payment'') in August 1982 (47 FR 37321, August 
25, 1982). In response to changes to the Act that Congress made in the 
Prompt Payment Act Amendments of 1988 (Pub. L. 100-496), OMB revised 
Circular A-125 in December 1989 (54 FR 52700, December 21, 1989).
    On June 17, 1998, OMB requested public comment on proposed 
revisions to Circular A-125 (63 FR 33000). As the preamble to that 
document explained (at 33000), the Circular is being updated to reflect 
the increased use of electronic commerce in the Federal government and 
in the private sector, including electronic financial systems and 
electronic funds transfer. The value of electronic commerce as a means 
of streamlining government and saving taxpayer dollars was emphasized 
by President Clinton in his memorandum to agencies of October 26, 1993, 
and by the National Performance Review, headed by Vice President Al 
Gore, in its call for an ``all electronic Treasury.'' In addition, the 
document explained (at 33001) that revisions to the Circular were being 
proposed to reflect the Debt Collection Improvement Act of 1996 
(``DCIA''; Pub. L. 104-134). Finally, the document indicated (at 33003) 
that, upon the issuance of final revisions, the Circular's provisions 
would be codified in the Code of Federal Regulations.
    The current rule responds to the comments that were received on the 
proposed revisions, issues final revisions to OMB's Prompt Payment 
regulations, and codifies these regulations at a new part 1315 of title 
5 of the Code of Federal Regulations. With the incorporation of the 
Prompt Payment rules into 5 CFR part 1315, OMB is rescinding Circular 
A-125.
    As the next part of this preamble explains, OMB has made a number 
of changes to the Prompt Payment rules in response to public and agency 
comments on the proposal. In addition, one change has been made in 
response to subsequent legislative action--the elimination of the 
requirement for agencies to report annually on their Prompt Payment 
activities. This requirement (found in Section 14 of the Circular) had 
implemented the statutory reporting requirement in Section 3906 of the 
Prompt Payment Act, but Congress repealed Section 3906 last fall, in 
Section 1301(c) of the Federal Reports Elimination Act of 1998 (Pub. L. 
105-362). As a result, agencies are no longer required to submit any 
Prompt Payment statistics to the Financial Management Service.
    Finally, in an effort to further reduce any delays relating to 
payment, the Department of Treasury is establishing an interagency 
group, including the Department of Defense and other agencies, to 
examine any ongoing problems. The group will explore causes of any 
identified delay and develop options for corrective action as 
necessary.
    As codified at Part 1315, the Prompt Payment rules generally follow 
the organization of the proposal. However, the section on 
``Definitions'' has been moved from near the end of the proposal 
(Section 18) to near the beginning of the final rule (Section 1315.2). 
Also, as noted above, the ``Reporting Requirements'' section (Section 
16 of the proposal) has been deleted.

II. Comments on, and Changes to, the Proposed Rule

    Comments were received from 21 entities: 15 Federal agencies, 5 
vendors and organizations representing vendors, and one university. 
Most of the comments addressed particular provisions in the proposed 
Prompt Payment rules. These are discussed below on a section-by-section 
basis, along with the changes that have been made to the proposed rule. 
Other, more general, comments on the proposal are discussed at the end 
of this part of the preamble.

A. Section 1315.1--Application (Proposed Section 1)

    The Commodity Credit Corporation (CCC) commented that CCC payments 
made to farm producers are not considered to be procurement payments 
and as such CCC payments should not be covered in proposed Section 
1.a., ``Application.'' A separate paragraph at final Sec. 1315.1(d) has 
been added to indicate the scope of the coverage of the Prompt Payment 
Act with respect to CCC payments (CCC payments are also addressed in 
Sec. 1315.13).
    In proposed Section 1.c, ``Utility payments,'' an agency commented 
that the section should be revised to clarify that the referenced 
``tariffs,'' which may override the Prompt Payment interest, are 
utility tariffs only. This was the intent of the proposed section, as 
with Section 2.b of the Circular, because the section addresses only 
utility services. The section has been revised to make this point 
clearer.
    One agency, with worldwide operations, recommended that proposed 
Section 1.c (``Utility payments'') should be amended to provide that, 
when late payment rates for utility services are established by foreign 
governments,

[[Page 52581]]

such rates (in addition to the late payment rates established by state 
or local governments) will take precedence over the rates that would 
otherwise apply under this part. OMB agrees that foreign late payment 
rates for utility services should be treated comparably to state or 
local rates. In both situations, the Federal government should pay the 
local rate that is generally charged to utility customers, rather than 
the Prompt Payment Act rate. Final Sec. 1315.1(c) has been revised 
accordingly.
    Finally, the paragraph at final Sec. 1315.1(b)(2) has been amended 
to include the word ``contingency'' when describing payments made 
during military operations. This parallels the language in the 
referenced provision at 10 U.S.C. 101(a)(13).

B. Section 1315.2--Definitions (Proposed Section 18)

    An agency suggested that the definition of ``Acceptance'' be 
revised to clarify that only an authorized government official may 
accept goods or services. OMB agrees and has made the change at 
Sec. 1315.2(b).
    The definition of ``Applicable interest rate,'' at Sec. 1315.2(d) 
has been revised to reflect the change in the ``Utility Payments'' in 
Sec. 1315.1(c), which clarifies that utility tariffs take precedence 
over the Prompt Payment interest rate when governmental authorities 
(including foreign governments) regulate late payment rates.
    Based on a comment from an agency, OMB has made a clarifying 
revision to the definition of ``Banking information'' at 
Sec. 1315.2(f), so that it refers to ``vendor financial institution's'' 
rather than ``their bank's'' in connection with the routing number of 
the vendor's financial institution.
    Several comments were received from agencies and from organizations 
representing Federal vendors regarding the definition of ``Contract 
financing payments,'' which in the final rule is found at 
Sec. 1315.2(h). One commenter expressed the view that OMB should revise 
the rules to expand the application of Prompt Payment Act interest 
penalties to include contract financing payments. Contract financing 
payments were not subject to interest penalties under the Circular and 
the final rule retains this position. Under Circular A-125, the 
obligation to pay interest penalties for late payments has been 
conditioned upon the agency's acceptance of the supplies or services. 
Contract financing payments, by contrast, are the ``authorized 
disbursement of monies prior to acceptance of supplies or services.'' 
Circular A-125, section 1.f (54 FR 52707); see 54 FR 52701 (discussion 
of contract financing payments). As part of its activities to examine 
potential ongoing problems with payment delays, the Treasury 
Department's interagency workgroup (discussed above) will assess the 
agencies' practices with respect to contract financing payments.
    The definition of ``Designated Agency Office'' at Sec. 1315.2(m) 
has been revised, based on a comment, to make clear that the office 
first designated to ``receive'' an invoice must also ``review'' it to 
determine if it is proper.
    An agency suggested that the definition of ``Electronic Funds 
Transfer'' (EFT) include electronic transmission of payment data. In 
light of the DCIA and requirement that federal payments be made 
electronically, the definition of EFT at Sec. 1315.2(s) has been 
modified to more closely reflect the definition found at 31 CFR part 
208, Managing Federal Agency Disbursements. An agency responsible for 
cleaning hazardous waste sites commented that the definition for 
``Emergency Payment'' should be modified to include the release or 
threatened release of hazardous substances as defined in Section 106 of 
the Comprehensive Environmental Response Compensation and Liability Act 
of 1980. OMB has made this change at Sec. 1315.2(t).
    OMB has changed the FAR subpart reference in the definition of 
``Fast Payment'' at Sec. 1315.2(v) to reflect new FAR numbering.
    The term ``Government Credit Card'' has been changed to 
``Governmentwide Commercial Purchase Cards,'' and the definition at 
Sec. 1315.2(x) have been revised to reflect changes (that are discussed 
below) to Sec. 1315.12, ``Payments to Governmentwide Commercial 
Purchase Card Issuers.'' The definition was also revised to remove the 
reference to the current simplified acquisition threshold of $100,000 
(because the threshold may change periodically), and to describe the 
types of payments for which the card may be used.
    Several agencies requested definitions for ``rebate'' and 
``settlement date.'' Definitions for these terms have been added, at 
Sec. 1315.2(aa), (ee).
    An agency suggested that the phrase ``contractual or 
noncontractual'' in the definition of ``Utilities and Telephones'' be 
removed since the Prompt Payment Act only applies to payments made as 
the result of a contract. OMB agrees, and the phrase has been removed 
from the definition at Sec. 1315.2(gg).

C. Section 1315.3--Responsibilities (Proposed Section 2)

    The discussion on ``Internal control systems'' (Sec. 1315.3(b)) has 
been modified to clarify that an agency's Quality Control program must 
include Quality Control validation at least once annually.

D. Section 1315.4--Prompt Payment Standards and Required Notices to 
Vendors (Proposed Section 3)

    We received several comments concerning the use of non-paper 
documentation. An agency requested that OMB revise the ``Required 
documentation'' subsection to state that documentation stored in an 
imaged format is an example of the electronic documentation that is 
required. In the same vein, an agency commented that facsimiles should 
be included among the ``computer-related media'' that, under the 
``Receipt of invoice'' subsection, may be used in lieu of ``written'' 
or ``original'' paper documents. Finally, an agency, which said it has 
experienced problems with non-paper media, recommended that OMB delete 
the provision that allows computer-related media to be used.
    OMB agrees that an imaged format would be acceptable for electronic 
documentation purposes. Similarly, facsimiles are one example of an 
acceptable substitute for paper documents. OMB, though, does not 
believe that it is necessary (or advisable, given the evolving nature 
of electronic technology) for the rule to offer specific examples of 
acceptable formats for electronic documentation. Any legible electronic 
format may be used in lieu of paper documentation (to clarify this 
point, the reference to ``computer-related media'' in the proposal has 
been changed to ``any media'' in the final rule). OMB does not agree 
with the recommendation to delete the provision on computer-related 
media. In order to prevent delays in payment and subsequent late 
payment interest penalties, this provision strongly encourages agencies 
to use non-paper documentation with adequate internal controls to 
prevent duplicate payments. Agencies not having internal controls which 
are adequate for preventing duplication of payments are strongly 
encouraged to adopt such controls and to use non-paper documentation 
once those controls are in place.
    Several agencies were critical of the proposed subsections on 
``Receipt of invoice'' and ``Starting the payment period,'' which were 
significantly revised versions of the Circular's provisions on those 
subjects (Sections

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1.n and 4.d of the Circular). The agencies stated that the proposed 
revisions did not provide useful clarification to the discussion of 
when an invoice is received for purposes of starting the payment period 
in accordance with the Prompt Payment Act (31 U.S.C. 3901(a)(4)). Based 
on these comments, the final rule makes only minor revisions to the 
Circular's provisions on ``Receipt of invoice'' and ``Starting the 
payment period''; the final rule's provisions are found at 
Sec. 1315.4(b), (f). In response to an agency comment, the final rule 
clarifies that an electronically-received invoice is deemed to be 
received on the date the invoice is received unless it is received 
after normal working hours, in which case the invoice is deemed to be 
received the next business day.
    OMB received a number of comments on the proposed subsection on 
``Review of invoice.'' With respect to the requirement in Section 
3.c(1) of the proposal for the agency to review the invoice to 
determine if it is improper, an agency commented that the phrase 
``appropriate office'' did not correctly capture the intention of the 
1988 amendments to the Act that the office first designated to receive 
an invoice must review it to determine if it is proper. In the final 
rule, at Sec. 1315.4(c)(1), OMB has replaced the term ``appropriate 
office'' with the term ``designated agency office'' and (as discussed 
above) has revised the definition of that term in Sec. 1315.2(m) to 
reflect the fact that this office is expected to review invoices.
    A trade organization commented that the maximum time allowed an 
agency to review an invoice and return an invoice as improper should be 
reduced from seven days to three days. The seven-day period is 
established by the Prompt Payment Act, which provides that (except in 
the case of certain specified types of contracts, for which a different 
maximum period is set) ``each invoice be reviewed as soon as 
practicable after receipt'' and ``any invoice determined not to be such 
a proper invoice suitable for payment shall be returned as soon as 
practicable, but not later than 7 days, after receipt, specifying the 
reasons that the invoice is not a proper invoice.'' 31 U.S.C. 
3903(a)(7)(A), (B). The Circular has reiterated the Act's requirement, 
by stating in Section 4.b(2), (3) that an invoice ``will be reviewed as 
soon as practicable after receipt'' and, if determined to be improper, 
``shall be returned as soon as practicable, but not later than seven 
days'' after receipt. The proposed rule at Section 3.c(1), (2) also 
stated that the invoice shall be reviewed and, if determined to be 
improper, be returned within seven days after receipt. However, as 
another trade organization noted, the proposal failed to specify that 
the invoice shall be reviewed and (if determined to be improper) 
returned ``as soon as practicable'' after receipt.
    In accordance with the Act, and the pre-existing Circular, the 
final rule states in Sec. 1315.4(c)(1), (2) that an agency shall review 
the invoice ``as soon as practicable after receipt'' and shall return 
an improper invoice ``as soon as practicable after receipt, but no 
later than 7 days after receipt.'' In addition, as did the proposal, 
the final rule provides that the agency ``will identify all defects 
that prevent payment and specify all reasons why the invoice is not 
proper and why is it being returned.'' As a result, if it is 
``practicable'' for an agency to review and return an improper invoice 
in three days, then--under the Act and the final rule--the agency is 
required to return the invoice in three days. However, if it is not 
``practicable'' for an agency to review and return an improper invoice 
in three days, then the Act and the final rule provide that the agency 
has additional time (up to seven days) in which to do so. Given the 
statutory standard, we do not believe it would be appropriate for the 
final rule to require an agency to return an improper invoice in less 
than seven days where it would not be ``practicable'' for the agency to 
do so.
    An agency commented that the proposed provision at Section 3.c(2), 
regarding the notification requirement when returning an improper 
invoice, should be consistent with proposed Section 13.a.(3) which 
stated that, for construction contracts, an agency need not return an 
improper invoice if the agency notifies the vendor electronically that 
the invoice is improper. Another agency, however, noted that the Prompt 
Payment Act, at 31 U.S.C. 3903(a)(7)(B), provides that improper 
invoices ``shall be returned.'' In the final rule, at 
Sec. 1315.14(a)(3), OMB has dropped the language concerning electronic 
notification of improper invoices for construction contracts. As a 
result, that provision is consistent with the invoice-return 
requirement at Sec. 1315.4(c)(2).
    A trade organization commented that additional language should be 
added which says that the number of days available to an agency to make 
the payment is reduced by the number of days by which an agency exceeds 
the time period during which it is required to return the improper 
invoice. OMB does not believe that additional language is necessary. 
The Circular in Section 4.b(4) has already provided for such a 
reduction in the payment period. That language was in the proposed rule 
at Section 3.g(3), and is found in the final rule at Sec. 1315.4(g)(4).
    Two agencies commented on the provision on ``Acceptance'' in 
Section 3.e of the proposal. As has the Circular (at Section 4.c), the 
proposal required agencies to ensure that acceptance is ``executed as 
promptly as possible,'' and that commercial items and services ``should 
not be subject to extended acceptance periods.'' One agency commented 
that a specific time period should be established (e.g., seven days) 
within which acceptance is required to occur, unless a longer 
acceptance period is agreed upon. OMB does not believe that a specific 
time period should be set for acceptance, but rather that acceptance 
should occur ``as promptly as possible.'' Therefore, the final rule at 
Sec. 1315.4(e) retains the language from the Circular and the proposal 
on this point. Another agency commented that the language in the 
proposal that acceptance reports should be forwarded to the designated 
agency office ``by the fifth working day after delivery'' should be 
amended to say the fifth working day ``after acceptance'' (which would 
parallel the language in the Circular at Section 4.c). OMB agrees with 
the comment and has made the change.
    With respect to the ``Payment date'' provision at Section 3.h of 
the proposal, an agency commented that there would be no instance where 
a payment would fall due ``after normal working hours.'' OMB agrees, 
and the phrase has been deleted in Sec. 1315.4(h). Finally, the text of 
the provision has been revised for clarity.

E. Section 1315.5--Accelerated Payment Methods (Proposed Section 4)

    Two agencies questioned whether the Prompt Payment Act provides the 
statutory latitude to permit payment by accelerated methods after the 
matching of documents is completed. OMB believes that accelerated 
payment methods are consistent with the Prompt Payment Act, and that 
they further substantial policy interests. The Act, at 31 U.S.C. 
3903(a)(8), provides that OMB shall prescribe regulations that ``permit 
an agency to make payment up to 7 days prior to the required payment, 
or earlier as determined by the agency to be necessary on a case-by-
case basis.'' OMB believes that, as the government moves steadily into 
the electronic commerce mainstream, agencies are increasingly likely to 
realize efficiencies and cost savings if agencies are allowed to pay 
early when it benefits the government to do so. Therefore, agencies may 
use the accelerated payment methods when they determine that such 
earlier

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payments are necessary (as final Sec. 1315.4(j) provides). When making 
these decisions, agencies should consider the cost of funds to the 
government of paying early. Prompt Payment late payment interest 
penalties apply if the payment is not made by the payment due date.
    An agency questioned whether the matching requirements for the 
accelerated payment methods would apply to payments made by agencies 
which do not use a 100 percent prepayment examination process but 
instead rely on statistical sampling in accordance with 31 U.S.C. 3521. 
This agency was concerned that only those payments chosen for the 
sample would be eligible for accelerated payments methods. OMB does not 
intend for the accelerated payment methods to be available only for 
those payments where 100 percent prepayment examinations are conducted, 
but may also be used by agencies that rely on statistical sampling, if 
such sampling reveals no unacceptable levels of problems encountered.
    An agency recommended that the proposed provision on ``A single 
invoice under $2,500'' clarify that payments of credit card invoices 
under $2,500 may be made without verification that goods have been 
received (see Treasury Financial Manual 4-4500, Government Purchase 
Cards). OMB agrees and has made this change.
    An agency commented that accelerated payments to small businesses, 
under the proposed provision on ``Small Disadvantaged Business 
Concern,'' should be mandated rather than simply authorized. However, 
under 31 U.S.C. 3903(a)(8), an agency needs to determine that such 
earlier payments are necessary. Thus, OMB does not agree that the rule 
should mandate the use of the accelerated payment methods. Another 
agency commented that accelerated payments should be made to all small 
businesses rather than (as under the proposal) only to small 
disadvantaged business concerns ``as defined in the FAR Part 19.001.'' 
OMB agrees that accelerated payments may be made to any small business 
(as defined in FAR Part 19.001) if the agency determines that such 
early payments are necessary. The final rule at Section 1315.b has been 
revised accordingly.

F. Section 1315.6--Payment Without Evidence That Supplies Have Been 
Received (Fast Payment) (Proposed Section 5)

    Several agencies commented on proposed Section 5, ``Fast Payment'' 
(the title of this section has been changed in the final rule). Several 
agencies commented that the FAR citation at Part 13 was no longer 
subpart 13.3, but is now subpart 13.4. This change has been made. An 
agency commented that proposed sections 5.b and 5.d (on ``FAR clause 
52.213.1'' and ``Obligation documents'') were not within the scope of 
this regulation and should be deleted. Based on the comments, OMB has 
decided to retain much of the language from Section 12 of the existing 
Circular (54 FR 52712). The conditions under which a fast payment 
procedure is warranted and the requirements of a fast pay contract 
remain unchanged.

G. Section 1315.7--Discounts (Proposed Section 6)

    With respect to proposed Section 6.a (``Economically justified 
discounts''), an agency commented that its first two sentences should 
be combined for clarity. In addition, another agency commented that 
agencies should be encouraged to include discount terms in the contract 
at the time of award. This would provide agencies the opportunity to 
include discount terms in their accounting systems, which could then be 
automatically evaluated to determine if they are economically justified 
and will give agencies enough time to evaluate and take the discount, 
when indicated. This agency also commented that the term ``deadline'' 
in proposed 6.b (``Discounts taken after the deadline'') should be 
replaced by the term ``discount date'' to more accurately reflect the 
date by which agencies may take a discount. OMB agrees with these 
comments and has revised the section accordingly.

H. Section 1315.8--Rebates (Proposed Section 7)

    An agency commented that a rebate formula would be useful to 
agencies in implementing this section. OMB agrees and has included a 
rebate formulate in the final rule, at Sec. 1315.17 (``Formulas''). The 
``Rebates'' section has been revised to clarify that the payment due 
date may be calculated using the rebate formula provided, unless the 
payment due date has been determined in the contract.

I. Section 1315.9--Required Documentation (Proposed Section 8)

    An agency making payments overseas to foreign landlords said that 
late payment interest penalties should not be required when routine 
lease contract renewal payments cannot be made because a foreign 
landlord no longer lives in the area where the leased property is 
located. OMB agrees that Prompt Payment interest penalties are not 
required to be paid if the vendor does not submit a corrected 
remittance address as required by final Sec. 1315.9(a)(6).
    The language in Sec. 1315.9(a)(8), regarding banking information 
required by the Debt Collection Improvement Act, has been reworded to 
parallel the language in Sec. 1315.9(a)(7), regarding interest 
penalties under the Prompt Payment Act. The requirements of these 
subsections are unchanged.
    Two agencies commented that proposed Section 8.a(8), requiring that 
banking information be submitted no later than the first request for 
payment, is inconsistent with the proposed Federal Acquisition 
Regulation (FAR Case 91-118) which required the submission of banking 
information no later than 15 days before the submission of the first 
request for payment. One of the agencies commented that coordination on 
this point was required to ensure consistency. This issue has been 
resolved by the publication of the final FAR rule on March 4, 1999 (64 
FR 10530, 10538). Unlike the proposed FAR rule, the final FAR rule does 
not require receipt of EFT information 15 days prior to the invoice.
    An agency requested clarification on whether purchase orders used 
as invoices would be in compliance with proposed Section 8.b(4) if an 
invoice number was not provided on the purchase order. An agency 
commenting on proposed Section 8.b(6) stated that the rule should not 
require payment and shipping terms on an invoice, but rather these 
terms should be specified either by agency policy or on individual 
orders or contracts. The requirements of this section are intended to 
allow an agency to require the information it needs to make a timely 
payment. The final rule at Sec. 1315.9(b)(4), (6) provides agencies 
with discretion as to whether to require this information; as these 
provisions state, the contract may specify which information is 
required.
    Several comments were received concerning the proposed rule's 
treatment in Section 8.b(7)-(8) of the collection of banking 
information and Taxpayer Identifying Numbers (TINs). Subsequent to the 
issuance of the proposal, the Treasury Department issued regulations on 
the Debt Collection Improvement Act of 1996 (DCIA) that are found in 31 
CFR Part 208 (63 FR 51490, September 25, 1998). The DCIA regulations 
require the collection of banking information in order to make an 
electronic funds transfer (EFT) payment as required by the DCIA unless 
the payment is waived under 31 CFR Part 208. The regulations also 
require the collection of the TIN,

[[Page 52584]]

which the DCIA requires for debt collection and under the Internal 
Revenue Code for vendor income reporting. See 31 U.S.C. 7701(c); 26 
U.S.C. 6109. The Treasury Department requires each agency to prepare a 
TIN implementation plan to document agency strategies for achieving 
compliance with the TIN provisions of the DCIA, and to identify 
barriers to collecting and providing TINs. See Treasury Financial 
Manual, TFM Bulletin 99-02.
    The proposed rule in Section 8.b(7)-(8) required the collection of 
banking information and TINs on the invoice unless previously collected 
by the agency. Several agencies interpreted these provisions to mean 
that an agency could not require that this information be on the 
invoice if the information had already been provided. These agencies 
commented that they would need to require the information on the 
invoice even if it had been previously provided. One agency commented 
that payment offices are not always notified in a timely manner when 
financial institutions merge and when vendors change financial 
institutions. Another agency commented that it requires the flexibility 
to require TINs on every invoice because many companies have multiple 
branches or subsidiaries, which often have their own individual TINs. 
According to the agency, if the vendor is not required to provide the 
TIN on each invoice, then the agency is forced to make a determination 
as to which TIN is associated with the invoice. OMB recognizes that 
some agencies need the flexibility to require banking information and 
TINs on invoices in addition to collecting the information sooner in 
the payment process. The final rule has been revised at 
Sec. 1315.9(b)(7)-(8) to state that banking information and TINs are 
required on the invoice unless agency procedures provide otherwise.
    An agency requested clarification that payments to vendors may be 
withheld pending submission of a proper invoice that includes banking 
information. The agency requested the clarification because a June 25, 
1998 press release issued by Treasury stated that no payments would be 
withheld as a result of the DCIA EFT requirement. OMB has been informed 
by Treasury that the payments referred to in the press release are 
payments to individuals (such as recipients of Federal salary, wage, 
benefit or retirement payments), not payments to vendors. The final 
rule at Sec. 1315.9(b)(8) requires a vendor to provide banking 
information, as part of a proper invoice, so that an electronic payment 
can be made. The invoice is not deemed proper unless the banking 
information is provided to the agency by the time the invoice is 
submitted. The payment period does not begin, and thus agencies are not 
required to pay late payment interest penalties, until after the 
banking information has been received.
    Two agencies that make payments overseas commented that proposed 
Section 8.b(7) should be amended to specifically exclude the 
requirement that TINs be provided for overseas payments, in the case of 
overseas vendors who do not have a TIN. The DCIA does not provide 
agencies the authority to waive the requirements to collect the TIN for 
purposes of offsetting Federal payments to collect debt owed the 
government. However, the Treasury Department acknowledges that there 
are some situations where it may not be possible to collect a TIN. 
Treasury has proposed a TIN implementation report from each agency to 
identify those situations where the TIN cannot be collected. (See 
Treasury Financial Manual, TFM Bulletin 99-02.)
    One agency suggested that the regulation emphasize that the 
collection of TINs is required for 1099 tax reporting purposes and that 
agencies must have systems which can distinguish between payments for 
services and payment for products because only payments for services 
are required to be reported to the Internal Revenue Service (IRS). OMB 
believes this discussion is beyond the scope of the regulation and 
defers such discussion to IRS regulations.
    An agency commented that proposed Sections 8.c.(3), (5), and (6) 
should include references to services, since receiving reports can 
apply to services as well as goods. OMB agrees and has made the change 
at Sec. 1315.9(c)(3), (5), and (6) of the final rule. The same agency 
commented that proposed language at 8.c.(8) incorrectly referenced 
Section 8.c(1)-(7) rather than Section 8.b. OMB agrees, and has 
corrected the reference in Sec. 1315.9(c)(8) so that it refers to 
Sec. 1315.9(b). Also, this provision has been revised so that the 
additional information required for a delivery ticket (when it is used 
as an invoice) will be set forth in agency procedures, which may (but 
are not required to) include the information in Sec. 1315.9(b).

J. Section 1315.10--Late Payment Interest Penalties (Proposed Section 
9)

    A trade organization commented that language should be included in 
this section, which would state that the number of days available to an 
agency to make a payment is reduced by the number of days that the 
notification of an improper invoice is late. As explained above, this 
language is already found in Sec. 1315.4(g)(4) (``Notification of 
Improper Invoice''), which discusses how to calculate the payment due 
dates when a notification of an improper invoice is late.
    The language in final Sec. 1315.10(a)(1) has been revised to 
clarify that the time period during which interest will accrue begins 
on the day after the payment due date and ends on the payment date, and 
interest will accrue at the rate in effect on the day after the payment 
due date.
    An agency commented that proposed Section 9.a.(3) should be amended 
to say that interest will accrue on the ``unpaid amount'' instead of 
``the unpaid principle and accrued interest'' because the latter 
language assumes that the principal amount has not been paid and such 
is not necessarily the case. The agency also commented that this 
paragraph be placed after proposed 9.a.(4). Two agencies commented that 
the word ``capitalized'' in proposed 9.a.(4) should be replaced with 
``compounded'' because compounded is a more easily understood term and 
reflects the same meaning. OMB agrees with these comments and the 
changes are made in Sec. 1315.10(a).
    Several agencies requested clarification on proposed Section 9.a(6) 
regarding the date through which interest accrues on discounts 
improperly taken. The final rule at Sec. 1315.10(a)(6) has been revised 
to clarify that interest is calculated beginning on the date after the 
discount date through the date of payment of the discount erroneously 
taken.
    An agency commented that the one dollar threshold in proposed 
9.a.(7) should be increased. The one dollar threshold is specified in 
the Prompt Payment Act, 31 U.S.C. 3902(c)(1), and is therefore retained 
in the final rule at Sec. 1315.10(a)(7).
    Proposed 9.a(8) addressed when interest penalties would begin to 
accrue when a vendor has supplied the agency with incorrect banking 
information. Several agencies expressed the concern that an agency 
would not know that the vendor had supplied incorrect banking 
information until the agency's payment is rejected. As a result, it 
would be very difficult and in some cases impossible for the agency to 
return the invoice as improper (due to the incorrect banking 
information) within the seven days that is allowed for returning an 
improper invoice. In response to these comments, the final rule at 
Sec. 1315.10(a)(8) provides that, if the vendor has supplied incorrect 
banking information, interest will not accrue until seven days after 
the agency receives correct information.

[[Page 52585]]

This is intended to give agencies adequate time to prepare and initiate 
a payment using the correct information, and is similar to the 
provision at Section 7.a(10) of the Circular.
    An agency commented that interest should be calculated based on a 
365-day year, rather than the 360-day year in proposed Section 9.a(9). 
The 360-day year, which has been used in Section 7.a(11) of the 
Circular, is a standard business practice, and it is used in other 
calculations such as the calculation for the rebate formula and the 
discount formula used to determine when to take discounts. Accordingly, 
the final rule at Sec. 1315.10(a)(9) retains the 360-day year.
    Two agencies commented that the phrase ``except when title of the 
goods passes to the government'' in proposed Section 9.b(1) should be 
deleted because its purpose was unclear. The exception was intended to 
address the situation where, under the Fast Payment procedure, the 
passing of title substitutes for acceptance for purposes of determining 
whether late payment interest penalties may be paid. Language has been 
added in final Sec. 1315.10(b)(1) to clarify that, in these 
circumstances, interest may be paid only after the government receives 
title for goods.
    An agency requested clarification on whether the delay of the 
passage of an appropriations bill is an example of ``the temporary 
unavailability of funds'' under proposed Section 9.b(4). That is indeed 
the situation addressed by this provision, which has been found in 
Section 7.b(3) of the Circular. The provision is taken from the Prompt 
Payment Act, at 31 U.S.C. 3902(d). Under the Act, the fact that an 
appropriation has not yet been enacted from which payments to vendors 
can be made does not relieve the agency of the obligation to pay 
interest for late payments.

K. Section 1315.11--Additional Penalties (Proposed Section 10)

    An agency commented that proposed Section 10.a should be amended to 
say that a vendor shall be entitled to interest ``of $1.00 or more,'' 
so as to clarify that interest under $1.00 need not be paid. The agency 
commented that proposed Section 10.c should be similarly amended by 
adding that no additional penalty is owed if the amount of the interest 
penalty is less than $1.00. An agency recommended that proposed Section 
10.a(3)B be amended to include the situation where a postmark is 
illegible (in addition to where there is no postmark), while another 
agency commented that the proposed language on confirmation of postmark 
should be moved to the beginning of Section 10.a(3). This agency 
commented that proposed Section 10.a(3)B should clarify that the ``date 
of receipt'' refers to receipt of the principal amount. The agency also 
commented that the proposed Section 10.d was confusing and would be 
clarified by replacing ``if paid separately'' with language that states 
that penalty determinations are made separately for each invoice when 
payments are consolidated. OMB agrees with these comments, and the 
changes are made in Sec. 1315.11.

L. Section 1315.12--Payments to Governmentwide Commercial Purchase Card 
Issuers (Proposed Section 11)

    Two agencies commented that the requirements of proposed Section 11 
(``Payments Under Government Credit Card.'') were inconsistent with the 
requirements of proposed Section 7 (``Rebates''). OMB agrees that the 
requirements for determining credit card invoice payment dates in these 
proposed sections were not consistent. In the final rule, Sec. 1315.12 
has been revised to instruct agencies to determine payment due dates in 
accordance with Sec. 1315.8.
    Two agencies commented that this section should reference the 
rebate formula and should replace the reference to the discount 
formula. A reference to the rebate formula has been added to this 
section. Several agencies commented that the terms used in the 
regulation for the credit card program should be the same as those used 
in the FAR. OMB has changed the reference to Governmentwide Commercial 
Purchase Card which is the term used in the FAR and has changed the 
title of the section to ``Payments to Governmentwide Commercial 
Purchase Card Issuers'' to reflect the new term and to reflect the new 
program's use of multiple card issuers.
    Two agencies requested clarification on whether the accelerated 
payment due dates for purchase card invoices under $2500 applied to 
individual invoices or to consolidated invoices. One of the agencies 
also requested clarification on whether purchase card invoices referred 
to invoices from vendors which would be paid by purchase card or 
invoices from purchase card issuers. A purchase card invoice means a 
single invoice submitted by a purchase card issuer for reimbursement of 
funds already paid to the vendor by the card issuer. Any single invoice 
under $2500 may be paid in accordance with this section, however a 
consolidated invoice may only be paid in accordance with this section 
and Sec. 1315.5, ``Accelerated Payment Methods'' if the total amount of 
the consolidated invoice is under $2500.
    Two agencies sought clarification on whether matching documents was 
required for purchase card invoice payments under $2500. OMB has added 
language to clarify that matching documentation under this payment 
method is not required to be performed before payment.

M. Section 1315.13--Commodity Credit Corporation Payments (Proposed 
Section 12)

    Based on comments from the Commodity Credit Corporation (CCC), 
proposed Section 12 (``Payments to Farm Producers'') has been modified 
to clarify payment standards and to include language which insures that 
the CCC may still exercise or implement, under authorities applicable 
directly to the Corporation, whatever discretion or obligation it may 
possess to deal with lawful claims, including, if appropriate, payment 
of interest penalties beyond the time provided elsewhere in the 
regulation. The title of the section has been modified to more 
accurately reflect the scope of CCC payments covered by the Prompt 
Payment Act.

N. Section 1315.14--Payments Under Construction Contracts (Proposed 
Section 13)

    As discussed above, OMB agrees with the agency comment that the 
language in proposed Section 13.a.(3), which stated that it is not 
necessary for an agency to return an improper invoice when it notifies 
the vendor electronically that the invoice is improper, was 
inconsistent with the return requirement in proposed Section 3.c(2) and 
in the Prompt Payment Act at 31 U.S.C. 3903(a)(7)(B). The language has 
therefore been deleted.

O. Section 1315.15--Grant Recipients (Proposed Section 14)

    No comments were received on this section. The final rule contains 
the proposed text.

P. Section 1315.16--Relationship to Other Laws (Proposed Section 15)

    An agency commented that proposed Section 15.a.(2) ``Relationship 
to Other Laws'' should include language which clarifies that once a 
claim is filed under the Contract Disputes Act, Prompt Payment interest 
penalties will never accrue on the disputed amount after the date the 
claim was filed. OMB agrees and has added clarifying language.

[[Page 52586]]

Q. Proposed Section 16--Reporting Requirements

    As explained above, Congress in Section 1301(c) of the Federal 
Reports Elimination Act of 1998 repealed the Prompt Payment Act's 
reporting requirements at 31 U.S.C. 3906. Accordingly, the final rule 
does not adopt the reporting requirements in proposed Section 16.

R. Section 1315.17--Formulas

    As explained above, an agency suggested that a formula be provided 
for calculating rebates, and one is provided in this section. An agency 
also commented that the Prompt Payment internet website should include 
formulas for computing interest penalties. Formulas for computing 
monthly compounded interest and daily simple interest have been added 
to this section and to the website. In addition, the website now 
includes a spreadsheet which can be used to determine when to pay a 
purchase card invoice. This section also includes a formula for 
manually calculating when to pay a credit card invoice so as to either 
maximize savings or minimize costs.

S. Section 1315.18--Inquiries (Proposed Section 17)

    A trade association representing construction subcontractors 
commented that the Prompt Payment website should include a link to the 
Prompt Payment Act of 1988 and to the Federal Acquisition Regulation 
Prompt Payment clause. The Financial Management Service has added both 
links to the Prompt Payment website. The address for the website is 
www.fms.treas.gov/prompt/index.html.

T. Section 1315.19--Regulatory References to OMB Circular A-125 (New 
Section)

    This section was added to make clear that regulatory references to 
OMB Circular A-125 shall be construed as referring to the Part until 
revised to reflect this codification. This would include references to 
A-125 contained in the FAR. (During the coming months, additional 
technical conforming changes will be made to FAR provisions and clauses 
as necessary.)

U. Interagency Payments

    At the end of Part II of the Supplementary Information section of 
the proposed rule's preamble, OMB sought comment on how the Federal 
government should address the problem of Federal agencies making late 
payments to other Federal agencies. Six agencies commented that 
Treasury's Online Payments and Collections system (OPAC) or Treasury's 
Electronic Data Interchange Payments and Collections system (EDIPAC) 
should be required to be used by all Federal agencies for interagency 
payments. One agency commented that the availability of interagency 
payment mechanisms such as OPAC/EDIPAC, credit cards and other programs 
would assist agencies in improving interagency payment efficiency. 
Another agency commented that Interagency Agreements could include 
terms which provide for billing in advance. This agency commented 
further that agencies should have a limit of one year to bill, because 
some agencies have taken much longer than a year to bill. Two agencies 
commented that Prompt Payment late payment interest penalties should be 
applied to interagency payments. Three agencies commented that there 
should be no application of Prompt Payment penalties for interagency 
payments. One agency commented that Prompt Payment was not the 
appropriate context for discussing interagency payments.
    The Prompt Payment Act does not provide for the application to 
interagency payments of the Prompt Payment rules, in particular the 
interest penalties. However, in light of the electronic fund transfer 
(EFT) requirements of the Debt Collection Improvement Act and the costs 
that agencies incur to collect overdue amounts from other agencies, OMB 
strongly encourages agencies to choose an electronic payment method for 
making interagency payments. OMB also strongly encourages agencies to 
include advance billing and other payment terms in Interagency 
Agreements to facilitate timely payments. Agencies wishing to know more 
about available electronic payment methods for interagency payments 
should contact the Department of Treasury, Financial Management 
Service, Card Technology Division, (202) 874-6550.

III. Regulatory Flexibility Act, Unfunded Mandates Reform Act, 
Congressional Review Act, and Executive Orders 12866 and 12875

    This final rule will not have a significant economic effect on a 
substantial number of small entities; the regulations implement the 
Prompt Payment Act, which requires Federal agencies to pay their bills 
on a timely basis, to pay interest penalties when payments are made 
late, and to take discounts only when payments are made by the discount 
date. For purposes of the Unfunded Mandates Reform Act of 1995 (Pub. L. 
104-4), as well as Executive Orders 12866 and 12875, the final rule 
will not significantly or uniquely affect small governments, and will 
not result in increased expenditures by State, local, and tribal 
governments, or by the private sector, of $100 million or more. 
Finally, the final rule is not a ``major rule'' under 5 U.S.C. Chapter 
8; the rule will not have any of the effects set forth in 5 U.S.C. 
804(2).

IV. Paperwork Reduction Act

    The collections of information necessary for carrying out the 
Prompt Pay Act have previously been reviewed and approved by the Office 
of Management and Budget (OMB) under section 3507(d) of the Paperwork 
Reduction Act of 1995 (44 U.S.C. Chapter 35) as follows: The collection 
of banking information required to make payments electronically has 
been approved by OMB under Control Number 1510-0066. The collection of 
Taxpayer Identification Numbers (TINs) for contracts governed by the 
Federal Acquisition Regulation for commercial and non-commercial 
contracts has been approved by OMB under Control Numbers 9000-0097 and 
9000-0136, respectively. Collections covered under these three control 
numbers are part of the implementation of the Debt Collection 
Improvement Act of 1996 (the DCIA). The DCIA requires that all Federal 
payments be made electronically after January 1, 1999 and that TINs be 
collected for the purposes of collecting debt owed the Federal 
government. Collections in this rule relating to the submission and 
payment of invoices are approved under OMB Control Numbers 9000-0070 
and 0102, which govern the submission of adequate documentation to 
support contractor requests for payment.

List of Subjects in 5 CFR Part 1315

    Administrative practice and procedure, Government contracts, 
Penalties, Reporting and recordkeeping requirements.

    Dated: September 15, 1999.
Jacob J. Lew,
Director.

Authority and Issuance

    For reasons set out in the preamble, OMB adds part 1315 to 5 CFR 
chapter III to read as follows:

PART 1315--PROMPT PAYMENT

Sec.
1315.1  Application.
1315.2  Definitions.
1315.3  Responsibilities.
1315.4  Prompt payment standards and required notices to vendors.
1315.5  Accelerated payment methods.

[[Page 52587]]

1315.6  Payment without evidence that supplies have been received 
(Fast Payment).
1315.7  Discounts.
1315.8  Rebates.
1315.9  Required documentation.
1315.10  Late payment interest penalties.
1315.11  Additional penalties.
1315.12  Payments to governmentwide commercial purchase card 
issuers.
1315.13  Commodity Credit Corporation payments.
1315.14  Payments under construction contracts.
1315.15  Grant recipients.
1315.16  Relationship to other laws.
1315.17  Formulas.
1315.18  Inquiries.
1315.19  Regulatory references to OMB Circular A-125.

    Authority: 31 U.S.C. chapter 39.


Sec. 1315.1  Application.

    (a) Procurement contracts. This part applies to contracts for the 
procurement of goods or services awarded by:
    (1) All Executive branch agencies except:
    (i) The Tennessee Valley Authority, which is subject to the Prompt 
Payment Act (31 U.S.C. chapter 39), but is not covered by this part; 
and
    (ii) Agencies specifically exempted under 5 U.S.C. 551(1); and
    (2) The United States Postal Service. The Postmaster General is 
responsible for issuing implementing procurement regulations, 
solicitation provisions, and contract clauses for the United States 
Postal Service.
    (b) Vendor payments. All Executive branch vendor payments and 
payments to those defined as contractors or vendors (see 
Sec. 1315.2(hh)) are subject to the Prompt Payment Act with the 
following exceptions:
    (1) Contract Financing Payments, as defined in Sec. 1315.2(h); and
    (2) Payments related to emergencies (as defined in the Disaster 
Relief Act of 1974, Public Law 93-288, as amended (42 U.S.C. 5121 et 
seq.)); military contingency operations (as defined in 10 U.S.C. 101 
(a)(13)); and the release or threatened release of hazardous substances 
(as defined in 4 U.S.C. 9606, Section 106).
    (c) Utility payments. All utility payments, including payments for 
telephone service, are subject to the Act except those under paragraph 
(b)(2) of this section. Where state, local or foreign authorities 
impose generally-applicable late payment rates for utility payments, 
those rates shall take precedence. In the absence of such rates, this 
part will apply.
    (d) Commodity Credit Corporation payments. Payments made pursuant 
to Section 4(h) of the Act of June 29, 1948 (15 U.S.C. 714b(h)) (``CCC 
Charter Act'') relating to the procurement of property and services, 
and payments to which producers on a farm are entitled under the terms 
of an agreement entered into under the Agricultural Act of 1949 (7 
U.S.C. 1421 et seq.) are subject to this part.


Sec. 1315.2  Definitions.

    (a) Accelerated Payment means a payment made prior to the due date 
(see discussion in Sec. 1315.5).
    (b) Acceptance means an acknowledgment by an authorized Government 
official that goods received and services rendered conform with the 
contract requirements. Acceptance also applies to partial deliveries.
    (c) Agency includes, as defined in 5 U.S.C. 551(1), each authority 
of the United States Government, whether or not it is within or subject 
to review by another agency, excluding the Congress, the United States 
courts, governments of territories or possessions, the District of 
Columbia government, courts martial, military commissions, and military 
authority exercised in the field in time of war or in occupied 
territory. Agency also includes any entity that is operated exclusively 
as an instrumentality of such an agency for the purpose of 
administering one or more programs of that agency, and that is so 
identified for this purpose by the head of such agency. The term agency 
includes military post and base exchanges and commissaries.
    (d) Applicable interest rate means the interest rate established by 
the Secretary of the Treasury for interest payments under Section 12 of 
the Contract Disputes Act of 1978 (41 U.S.C. 611) which is in effect on 
the day after the due date, except where the interest penalty is 
prescribed by other governmental authority (e.g., utility tariffs). The 
rate established under the Contract Disputes Act is referred to as the 
``Renegotiation Board Interest Rate,'' the ``Contract Disputes Act 
Interest Rate,'' and the ``Prompt Payment Act Interest Rate,'' and is 
published semiannually by the Fiscal Service, Department of Treasury, 
in the Federal Register on or about January 1 and July 1.
    (e) Automated Clearing House (ACH) means a network that performs 
interbank clearing of electronic debit and credit entries for 
participating financial institutions.
    (f) Banking Information means information necessary to facilitate 
an EFT payment, including the vendor's bank account number, and the 
vendor financial institution's routing number.
    (g) Contract means any enforceable agreement, including rental and 
lease agreements, purchase orders, delivery orders (including 
obligations under Federal Supply Schedule contracts), requirements-type 
(open-ended) service contracts, and blanket purchases agreements 
between an agency and a vendor for the acquisition of goods or services 
and agreements entered into under the Agricultural Act of 1949 (7 
U.S.C. 1421 et seq.). Contracts must meet the requirements of 
Sec. 1315.9(a).
    (h) Contract Financing Payments means an authorized disbursement of 
monies prior to acceptance of goods or services including advance 
payments, progress payments based on cost, progress payments (other 
than under construction contracts) based on a percentage or stage of 
completion, payments on performance-based contracts and interim 
payments on cost-type contracts. Contract financing payments do not 
include invoice payments, payments for partial deliveries, or lease and 
rental payments.
    (i) Contracting Office means any entity issuing a contract or 
purchase order or issuing a contract modification or termination.
    (j) Contractor (see Vendor).
    (k) Day means a calendar day including weekend and holiday, unless 
otherwise indicated.
    (l) Delivery Ticket means a vendor document supplied at the time of 
delivery which indicates the items delivered, can serve as a proper 
invoice based on contractual agreement.
    (m) Designated Agency Office means the office designated by the 
purchase order, agreement, or contract to first receive and review 
invoices. This office can be contractually designated as the receiving 
entity. This office may be different from the office issuing the 
payment.
    (n) Discount means an invoice payment reduction offered by the 
vendor for early payment.
    (o) Discount date means the date by which a specified invoice 
payment reduction, or a discount, can be taken.
    (p) Due date means the date on which Federal payment should be 
made. Determination of such dates is discussed in Sec. 1315.4(g).
    (q) Electronic Commerce means the end to end electronic exchange of 
business information using electronic data interchange, electronic 
mail, electronic bulletin boards, electronic funds transfer (EFT) and 
similar technologies.
    (r) Electronic Data Interchange means the computer to computer 
exchange of routine business information in a standard format. The 
standard formats are developed and maintained by the Accredited 
Standards Committee of the American National Standards Institute,

[[Page 52588]]

11 West 42d Street, New York, NY 10036.
    (s) Electronic Funds Transfer (EFT) means any transfer of funds, 
other than a transaction originated by cash, check, or similar paper 
instrument, that is initiated through an electronic terminal, 
telephone, computer, or magnetic tape, for the purpose of ordering, 
instructing, or authorizing a financial institution to debit or credit 
an account. The term includes, but is not limited to, Automated 
Clearing House and Fedwire transfers.
    (t) Emergency Payment means a payment made under an emergency 
defined as a hurricane, tornado, storm, flood, high water, wind-driven 
water, tidal wave, tsunami, earthquake, volcanic eruption, landslide, 
mud slide, snowstorm, drought, fire, explosion, or other catastrophe 
which requires Federal emergency assistance to supplement State and 
local efforts to save lives and property, and ensure public health and 
safety; and the release or threatened release of hazardous substances.
    (u) Evaluated Receipts means contractually designated use of the 
acceptance document and the contract as the basis for payment without 
requiring a separate invoice.
    (v) Fast Payment means a payment procedure under the Federal 
Acquisition Regulation at Part 13.4 which allows payment under limited 
conditions to a vendor prior to the Government's verification that 
supplies have been received and accepted.
    (w) Federal Acquisition Regulation (FAR) means the regulation (48 
CFR chapter 1) that governs most Federal acquisition and related 
payment issues. Agencies may also have supplements prescribing unique 
agency policies.
    (x) Governmentwide Commercial Purchase Cards means internationally-
accepted purchase cards available to all Federal agencies under a 
General Services Administration contract for the purpose of making 
simplified acquisitions of up to the threshold set by the Federal 
Acquisition Regulation or for travel expenses or payment, for purchases 
of fuel, or other purposes as authorized by the contract.
    (y) Invoice means a bill, written document or electronic 
transmission, provided by a vendor requesting payment for property 
received or services rendered. A proper invoice must meet the 
requirements of Sec. 1315.9(b). The term invoice can include receiving 
reports and delivery tickets when contractually designated as invoices.
    (z) Payment Date means the date on which a check for payment is 
dated or the date of an electronic fund transfer (EFT) payment 
(settlement date).
    (aa) Rebate means a monetary incentive offered to the Government by 
Governmentwide commercial purchase card issuers to pay purchase card 
invoices early.
    (bb) Receiving Office means the entity which physically receives 
the goods or services, and may be separate from the accepting entity.
    (cc) Receiving Report means written or electronic evidence of 
receipt of goods or services by a Government official. Receiving 
reports must meet the requirements of Sec. 1315.9(c).
    (dd) Recurring Payments means payments for services of a recurring 
nature, such as rents, building maintenance, transportation services, 
parking, leases, and maintenance for equipment, pagers and cellular 
phones, etc., which are performed under agency-vendor agreements 
providing for payments of definite amounts at fixed periodic intervals.
    (ee) Settlement Date means the date on which an EFT payment is 
credited to the vendor's financial institution.
    (ff) Taxpayer Identifying Number (TIN) means the nine digit 
Employer Identifying Number or Social Security Number as defined in 
Section 6109 of the Internal Revenue Code of 1986 (26 U.S.C. 6109).
    (gg) Utilities and Telephones means electricity, water, sewage 
services, telephone services, and natural gas. Utilities can be 
regulated, unregulated, or under contract.
    (hh) Vendor means any person, organization, or business concern 
engaged in a profession, trade, or business and any not-for-profit 
entity operating as a vendor (including State and local governments and 
foreign entities and foreign governments, but excluding Federal 
entities).


Sec. 1315.3  Responsibilities.

    Each agency head is responsible for the following:
    (a) Issuing internal procedures. Ensuring that internal procedures 
will include provisions for monitoring the causes of late payments and 
any interest penalties incurred, taking necessary corrective action, 
and handling inquiries.
    (b) Internal control systems. Ensuring that effective internal 
control systems are established and maintained as required by OMB 
Circular A-123, ``Management Accountability and Control.'' 1 
Administrative activities required for payments to vendors under this 
part are subject to periodic quality control validation to be conducted 
no less frequently than once annually. Quality control processes will 
be used to confirm that controls are effective and that processes are 
efficient. Each agency head is responsible for establishing a quality 
control program in order to quantify payment performance and qualify 
corrective actions, aid cash management decision making, and estimate 
payment performance if actual data is unavailable.
---------------------------------------------------------------------------

    \1\ For availability of OMB circulars, see 5 CFR 1310.3.
---------------------------------------------------------------------------

    (c) Financial management systems. Ensuring that financial 
management systems comply with OMB Circular A-127, ``Financial 
Management Systems.'' 2 Agency financial systems shall 
provide standardized information and electronic data exchange to the 
central management agency. Systems shall provide complete, timely, 
reliable, useful and consistent financial management information. 
Payment capabilities should provide accurate and useful management 
reports on payments.
---------------------------------------------------------------------------

    \2\ See footnote 1 in Sec. 1315.3(b).
---------------------------------------------------------------------------

    (d) Reviews. Ensuring that Inspectors General and internal auditors 
review payments performance and systems accuracy, consistent with the 
Chief Financial Officers (CFO) Act requirements.
    (e) Timely payments and interest penalties. Ensuring timely 
payments and payment of interest penalties where required.


Sec. 1315.4  Prompt payment standards and required notices to vendors.

    Agency business practices shall conform to the following standards:
    (a) Required documentation. Agencies will maintain paper or 
electronic documentation as required in Sec. 1315.9.
    (b) Receipt of invoice. For the purposes of determining a payment 
due date and the date on which interest will begin to accrue if a 
payment is late, an invoice shall be deemed to be received:
    (1) On the later of:
    (i) For invoices that are mailed, the date a proper invoice is 
actually received by the designated agency office if the agency 
annotates the invoice with date of receipt at the time of receipt. For 
invoices electronically transmitted, the date a readable transmission 
is received by the designated agency office, or the next business day 
if received after normal working hours; or
    (ii) The seventh day after the date on which the property is 
actually delivered or performance of the services is actually 
completed; unless--
    (A) The agency has actually accepted the property or services 
before the

[[Page 52589]]

seventh day in which case the acceptance date shall substitute for the 
seventh day after the delivery date; or
    (B) A longer acceptance period is specified in the contract, in 
which case the date of actual acceptance or the date on which such 
longer acceptance period ends shall substitute for the seventh day 
after the delivery date;
    (2) On the date placed on the invoice by the contractor, when the 
agency fails to annotate the invoice with date of receipt of the 
invoice at the time of receipt (such invoice must be a proper invoice); 
or
    (3) On the date of delivery, when the contract specifies that the 
delivery ticket may serve as an invoice.
    (c) Review of invoice. Agencies will use the following procedures 
in reviewing invoices:
    (1) Each invoice will be reviewed by the designated agency office 
as soon as practicable after receipt to determine whether the invoice 
is a proper invoice as defined in Sec. 1315.9(b);
    (2) When an invoice is determined to be improper, the agency shall 
return the invoice to the vendor as soon as practicable after receipt, 
but no later than 7 days after receipt (refer also to paragraph (g)(4) 
of this section regarding vendor notification and determining the 
payment due date.) The agency will identify all defects that prevent 
payment and specify all reasons why the invoice is not proper and why 
it is being returned. This notification to the vendor shall include a 
request for a corrected invoice, to be clearly marked as such;
    (3) Any media which produce tangible recordings of information in 
lieu of ``written'' or ``original'' paper document equivalents should 
be used by agencies to expedite the payment process, rather than 
delaying the process by requiring ``original'' paper documents. 
Agencies should ensure adequate safeguards and controls to ensure the 
integrity of the data and to prevent duplicate processing.
    (d) Receipt of goods and services. Agencies will ensure that 
receipt is properly recorded at the time of delivery of goods or 
completion of services.
    (e) Acceptance. Agencies will ensure that acceptance is executed as 
promptly as possible. Commercial items and services should not be 
subject to extended acceptance periods. Acceptance reports will be 
forwarded to the designated agency office by the fifth working day 
after acceptance. Unless other arrangements are made, acceptance 
reports will be stamped or otherwise annotated with the receipt date in 
the designated agency office.
    (f) Starting the payment period. The period available to an agency 
to make timely payment of an invoice without incurring an interest 
penalty shall begin on the date of receipt of a proper invoice (see 
paragraph (b) of this section) except where no invoice is required 
(e.g., for some recurring payments as defined in Sec. 1315.2(dd)).
    (g) Determining the payment due date. (1) Unless otherwise 
specified, the payment is due either:
    (i) On the date(s) specified in the contract;
    (ii) In accordance with discount terms when discounts are offered 
and taken (see Sec. 1315.7);
    (iii) In accordance with Accelerated Payment Methods (see 
Sec. 1315.5); or
    (iv) 30 days after the start of the payment period as specified in 
paragraph (f) of this section, if not specified in the contract, if 
discounts are not taken, and if accelerated payment methods are not 
used.
    (2) Certain commodity payments. (i) For meat, meat food products, 
as defined in Section 2(a)(3) of the Packers and Stockyard Act of 1921 
(7 U.S.C. 182(3)), including any edible fresh or frozen poultry meat, 
any perishable poultry meat food product, fresh eggs, any perishable 
egg product, fresh or frozen fish as defined in the Fish and Seafood 
Promotion Act of 1986 (16 U.S.C. 4003(3)), payment will be made no 
later than the seventh day after delivery.
    (ii) For perishable agricultural commodities, as defined in Section 
1(4) of the Perishable Agricultural Commodities Act of 1930 (7 U.S.C. 
499 a(4)), payment will be made no later than the 10th day after 
delivery, unless another payment date is specified in the contract.
    (iii) For dairy products (as defined in Section 111(e) of the Dairy 
Production Stabilization Act of 1983, 7 U.S.C. 4502(e)), and including, 
at a minimum, liquid milk, cheese, certain processed cheese products, 
butter, yogurt, and ice cream, edible fats or oils, and food products 
prepared from edible fats or oils (including, at a minimum, mayonnaise, 
salad dressings and other similar products), payment will be made no 
later than 10 days after the date on which a proper invoice, for the 
amount due, has been received by the agency acquiring the above listed 
products. Nothing in the Act permits limitation to refrigerated 
products. When questions arise about the coverage of a specific 
product, prevailing industry practices should be followed in specifying 
a contractual payment due date.
    (3) Mixed invoices for commodities. When an invoice is received for 
items with different payment periods, agencies:
    (i) May pay the entire invoice on the due date for the commodity 
with the earliest due date, if it is considered in the best interests 
of the agency;
    (ii) May make split payments by the due date applicable to each 
category;
    (iii) Shall pay in accordance with the contractual payment 
provisions (which may not exceed the statutory mandated periods 
specified in paragraph (g)(2) of this section); and
    (iv) Shall not require vendors to submit multiple invoices for 
payment of individual orders by the agency.
    (4) Notification of improper invoice. When an agency fails to make 
notification of an improper invoice within seven days according to 
paragraph (c)(2) of this section (three days for meat and meat food, 
fish and seafood products; and five days for perishable agricultural 
commodities, dairy products, edible fats or oils and food products 
prepared from edible fats or oils), the number of days allowed for 
payment of the corrected proper invoice will be reduced by the number 
of days between the seventh day (or the third or fifth day, as 
otherwise specified in this paragraph (g)(4)) and the day notification 
was transmitted to the vendor. Calculation of interest penalties, if 
any, will be based on an adjusted due date reflecting the reduced 
number of days allowable for payment;
    (h) Payment date. Payment will be considered to be made on the 
settlement date for an electronic funds transfer (EFT) payment or the 
date of the check for a check payment. Payments falling due on a 
weekend or federal holiday may be made on the following business day 
without incurring late payment interest penalties.
    (i) Late payment. When payments are made after the due date, 
interest will be paid automatically in accordance with the procedures 
provided in this part.
    (j) Timely payment. An agency shall make payments no more than 
seven days prior to the payment due date, but as close to the due date 
as possible, unless the agency head or designee has determined, on a 
case-by-case basis for specific payments, that earlier payment is 
necessary. This authority must be used cautiously, weighing the 
benefits of making a payment early against the good stewardship 
inherent in effective cash management practices. An agency may use the 
``accelerated payment methods'' in Sec. 1315.5 when it determines that 
such earlier payment is necessary.
    (k) Payments for partial deliveries. Agencies shall pay for partial 
delivery of supplies or partial performance of services after 
acceptance, unless specifically prohibited by the contract.

[[Page 52590]]

Payment is contingent upon submission of a proper invoice if required 
by the contract.


Sec. 1315.5  Accelerated payment methods.

    (a) A single invoice under $2,500. Payments may be made as soon as 
the contract, proper invoice , receipt and acceptance documents are 
matched except where statutory authority prescribes otherwise and 
except where otherwise contractually stipulated (e.g., governmentwide 
commercial purchase card.) Vendors shall be entitled to interest 
penalties if invoice payments are made after the payment due date.
    (b) Small Business (as defined in FAR 19.001 (48 CFR 19.001)). 
Agencies may pay a small business as quickly as possible, when all 
proper documentation, including acceptance, is received in the payment 
office and before the payment due date. Such payments are not subject 
to payment restrictions stated elsewhere in this part. Vendors shall be 
entitled to interest penalties if invoice payments are made after the 
payment due date.
    (c) Emergency payments. Payments related to emergencies and 
disasters (as defined in the Robert T. Stafford Disaster Relief Act and 
Emergency Assistance, Pub. L. 93-288, as amended (42 U.S.C. 5 121 et 
seq.); payments related to the release or threatened release of 
hazardous substances (as defined in the Comprehensive Environmental 
Response Compensation and Liability Act of 1980, Pub. L. 96-510, 42 
U.S.C. 9606); and payments made under a military contingency (as 
defined in 10 U.S.C. 101(a)(13)) may be made as soon as the contract, 
proper invoice, receipt and acceptance documents or any other agreement 
are matched. Vendors shall be entitled to interest penalties if invoice 
payments are made after the payment due date.


Sec. 1315.6  Payment without evidence that supplies have been received 
(Fast Payment).

    (a) In limited situations, payment may be made without evidence 
that supplies have been received. Instead, a contractor certification 
that supplies have been shipped may be used as the basis for 
authorizing payment. Payment may be made within 15 days after the date 
of receipt of the invoice. This payment procedure may be employed only 
when all of the following conditions are present:
    (1) Individual orders do not exceed $25,000 (except where agency 
heads permits a higher amount on a case-by-case basis);
    (2) Deliveries of supplies are to occur where there is both a 
geographical separation and a lack of adequate communications 
facilities between Government receiving and disbursing activities that 
make it impracticable to make timely payments based on evidence of 
Federal acceptance;
    (3) Title to supplies will vest in the Government upon delivery to 
a post office or common carrier for mailing or shipment to destination 
or upon receipt by the Government if the shipment is by means other 
than the Postal Service or a common carrier; and
    (4) The contractor agrees to replace, repair, or correct supplies 
not received at destination, damaged in transit, or not conforming to 
purchase requirements.
    (b) Agencies shall promptly inspect and accept supplies acquired 
under these procedures and shall ensure that receiving reports and 
payment documents are matched and steps are taken to correct 
discrepancies.
    (c) Agencies shall ensure that specific internal controls are in 
place to assure that supplies paid for are received.
    (d) As authorized by the 1988 Amendment to the Prompt Payment Act 
(Section 11(b)(1)(C)), a contract clause at 48 CFR 52.213-1 is provided 
in the Federal Acquisition Regulations (FAR) at 48 CFR part 13, subpart 
13.4 ``Fast Payment Procedure,'' for use when using this fast payment 
procedure.


Sec. 1315.7  Discounts.

    Agencies shall follow these procedures in taking discounts and 
determining the payment due dates when discounts are taken:
    (a) Economically justified discounts. If an agency is offered a 
discount by a vendor, whether stipulated in the contract or offered on 
an invoice, an agency may take the discount if economically justified 
(see discount formula in Treasury Financial Manual (TFM) 6-8040.40) 
3 but only after acceptance has occurred. Agencies are 
encouraged to include discount terms in a contract to give agencies 
adequate time to take the discount if it is determined to be 
economically justified.
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    \3\ The Treasury Financial Manual is available by calling the 
Prompt Payment Hotline at 800-266-9667 or the Prompt Payment web 
site at http://www.fms.treas.gov/prompt/index.html.
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    (b) Discounts taken after the discount date. If an agency takes the 
discount after the deadline, the agency shall pay an interest penalty 
on any amount remaining unpaid as prescribed in Sec. 1315.10(a)(6).
    (c) Payment date. When a discount is taken, payment will be made as 
close as possible to, but no later than, the discount date.
    (d) Start date. The period for taking the discount is calculated 
from the date placed on the proper invoice by the vendor. If there is 
no invoice date on the invoice by the vendor, the discount period will 
begin on the date a proper invoice is actually received and date 
stamped or otherwise annotated by the designated agency office.


Sec. 1315.8  Rebates.

    Agencies shall determine governmentwide commercial purchase card 
payment dates based on an analysis of the total costs and total 
benefits to the Federal government as a whole, unless specified in a 
contract. When calculating costs and benefits, agencies are expected to 
include the cost to the government of paying early. This cost is the 
interest the government would have earned, at the Current Value of 
Funds rate, for each day that payment was not made. Agencies may factor 
in benefits gained from paying early due to, for example, streamlining 
the payment process or other efficiencies. A rebate formula is provided 
in Sec. 1315.17 and at the Prompt Payment website at www.fms.treas.gov/
prompt/index.html.


Sec. 1315.9  Required documentation.

    Agencies are required to ensure the following payment documentation 
is established to support payment of invoices and interest penalties:
    (a) The following information from the contract is required as 
payment documentation:
    (1) Payment due date(s) as defined in Sec. 1315.4(g);
    (2) A notation in the contract that partial payments are 
prohibited, if applicable;
    (3) For construction contracts, specific payment due dates for 
approved progress payments or milestone payments for completed phases, 
increments, or segments of the project;
    (4) If applicable, a statement that the special payment provisions 
of the Packers and Stockyard Act of 1921 (7 U.S.C. 182(3)), or the 
Perishable Agricultural Commodities Act of 1930 (7 U.S.C. 499a(4)), or 
Fish and Seafood Promotion Act of 1986 (16 U.S.C. 4003(3)) shall apply;
    (5) Where considered appropriate by the agency head, the specified 
acceptance period following delivery to inspect and/or test goods 
furnished or to evaluate services performed is stated;
    (6) Name (where practicable), title, telephone number, and complete 
mailing address of officials of the Government's designated agency 
office, and of the vendor receiving the payments;
    (7) Reference to requirements under the Prompt Payment Act, 
including the payment of interest penalties on late

[[Page 52591]]

invoice payments (including progress payments under construction 
contracts);
    (8) Reference to requirements under the Debt Collection Improvement 
Act (Pub. L. 104-134, 110 Stat. 1321), including the requirement that 
payments must be made electronically except in situations where the EFT 
requirement is waived under 31 CFR 208.4. Where electronic payment is 
required, the contract will stipulate that banking information must be 
submitted no later than the first request for payment;
    (9) If using Fast Payment, the proper FAR clause stipulating Fast 
Payment is required.
    (b) The following correct information constitutes a proper invoice 
and is required as payment documentation:
    (1) Name of vendor;
    (2) Invoice date;
    (3) Government contract number, or other authorization for delivery 
of goods or services;
    (4) Vendor invoice number, account number, and/or any other 
identifying number agreed to by contract;
    (5) Description (including, for example, contract line/subline 
number), price, and quantity of goods and services rendered;
    (6) Shipping and payment terms (unless mutually agreed that this 
information is only required in the contract);
    (7) Taxpayer Identifying Number (TIN), unless agency procedures 
provide otherwise;
    (8) Banking information, unless agency procedures provide 
otherwise, or except in situations where the EFT requirement is waived 
under 31 CFR 208.4;
    (9) Contact name (where practicable), title and telephone number;
    (10) Other substantiating documentation or information required by 
the contract.
    (c) The following information from receiving reports, delivery 
tickets, and evaluated receipts is required as payment documentation:
    (1) Name of vendor;
    (2) Contract or other authorization number;
    (3) Description of goods or services;
    (4) Quantities received, if applicable;
    (5) Date(s) goods were delivered or services were provided;
    (6) Date(s) goods or services were accepted;
    (7) Signature (or electronic alternative when supported by 
appropriate internal controls), printed name, telephone number, mailing 
address of the receiving official, and any additional information 
required by the agency.
    (d) When a delivery ticket is used as an invoice, it must contain 
information required by agency procedures. The requirements in 
paragraph (b) of this section do not apply except as provided by agency 
procedures.


Sec. 1315.10  Late payment interest penalties.

    (a) Application and calculation. Agencies will use the following 
procedures in calculating interest due on late payments:
    (1) Interest will be calculated from the day after the payment due 
date through the payment date at the interest rate in effect on the day 
after the payment due date;
    (2) Adjustments will be made for errors in calculating interest;
    (3) For up to one year, interest penalties remaining unpaid at the 
end of any 30 day period will be added to the principal and subsequent 
interest penalties will accrue on that amount until paid;
    (4) When an interest penalty is owed and not paid, interest will 
accrue on the unpaid amount until paid, except as described in 
paragraph (a)(5) of this section;
    (5) Interest penalties under the Prompt Payment Act will not 
continue to accrue:
    (i) After the filing of a claim for such penalties under the 
Contract Disputes Act of 1978 (41 U.S.C. 601 et seq.); or
    (ii) For more than one year;
    (6) When an agency takes a discount after the discount date, 
interest will be paid on the amount of the discount taken. Interest 
will be calculated for the period beginning the day after the specified 
discount date through the date of payment of the discount erroneously 
taken;
    (7) Interest penalties of less than one dollar need not be paid;
    (8) If the banking information supplied by the vendor is incorrect, 
interest under this regulation will not accrue until seven days after 
such correct information is received (provided that the vendor has been 
given notice of the incorrect banking information within seven days 
after the agency is notified that the information is incorrect);
    (9) Interest calculations are to be based on a 360 day year; and
    (10) The applicable interest rate may be obtained by calling the 
Department of Treasury's Financial Management Service (FMS) Prompt 
Payment help line at 1-800-266-9667.
    (b) Payment. Agencies will meet the following requirements in 
paying interest penalties:
    (1) Interest may be paid only after acceptance has occurred or when 
title passes to the government in a fast payment contract when title 
passing to the government constitutes acceptance for purposes of 
determining when interest may be paid;
    (2) Late payment interest penalties shall be paid without regard to 
whether the vendor has requested payment of such penalty, and shall be 
accompanied by a notice stating the amount of the interest penalty, the 
number of days late and the rate used;
    (3) The invoice number or other agreed upon transaction reference 
number assigned by the vendor should be included in the notice to 
assist the vendor in reconciling the payment. Additionally, it is 
optional as to whether or not an agency includes the contract number in 
the notice to the vendor;
    (4) The temporary unavailability of funds does not relieve an 
agency from the obligation to pay these interest penalties or the 
additional penalties required under Sec. 1315.11; and
    (5) Agencies shall pay any late payment interest penalties 
(including any additional penalties required under Sec. 1315.11) under 
this part from the funds available for the administration of the 
program for which the penalty was incurred. The Prompt Payment Act does 
not authorize the appropriation of additional amounts to pay penalties.
    (c) Penalties not due. Interest penalties are not required:
    (1) When payment is delayed because of a dispute between a Federal 
agency and a vendor over the amount of the payment or other issues 
concerning compliance with the terms of a contract. Claims concerning 
disputes, and any interest that may be payable with respect to the 
period, while the dispute is being settled, will be resolved in 
accordance with the provisions in the Contract Disputes Act of 1978, 
(41 U.S.C. 601 et seq.), except for interest payments required under 31 
U.S.C. 3902(h)(2);
    (2) When payments are made solely for financing purposes or in 
advance, except for interest payment required under 31 U.S.C. 
3902(h)(2);
    (3) For a period when amounts are withheld temporarily in 
accordance with the contract;
    (4) When an EFT payment is not credited to the vendor's account by 
the payment due date because of the failure of the Federal Reserve or 
the vendor's bank to do so; or
    (5) When the interest penalty is less than $1.00.


Sec. 1315.11  Additional penalties.

    (a) Vendor entitlements. A vendor shall be entitled to an 
additional penalty payment when the vendor is owed a late

[[Page 52592]]

payment interest penalty by an agency of $1.00 or more, if it:
    (1) Receives a payment dated after the payment due date which does 
not include the interest penalty also due to the vendor;
    (2) Is not paid the interest penalty by the agency within 10 days 
after the actual payment date; and
    (3) Makes a written request that the agency pay such an additional 
penalty. Such request must be postmarked, received by facsimile, or by 
electronic mail, by the 40th day after payment was made. If there is no 
postmark or if it is illegible, the request will be valid if it is 
received and annotated with the date of receipt by the agency by the 
40th day. The written request must include the following:
    (i) Specific assertion that late payment interest is due for a 
specific invoice, and request payment of all overdue late payment 
interest penalty and such additional penalty as may be required; and
    (ii) A copy of the invoice on which late payment interest was due 
but not paid and a statement that the principal has been received, and 
the date of receipt of the principle.
    (b) Maximum penalty. The additional penalty shall be equal to one 
hundred (100) percent of the original late payment interest penalty but 
must not exceed $5,000.
    (c) Minimum penalty. Regardless of the amount of the late payment 
interest penalty, the additional penalty paid shall not be less than 
$25. No additional penalty is owed, however, if the amount of the 
interest penalty is less than $1.00.
    (d) Penalty basis. The penalty is based on individual invoices. 
Where payments are consolidated for disbursing purposes, the penalty 
determinations shall be made separately for each invoice therein.
    (e) Utility payments. The additional penalty does not apply to the 
payment of utility bills where late payment penalties for these bills 
are determined through the tariff rate-setting process.


Sec. 1315.12  Payments to governmentwide commercial purchase card 
issuers.

    Standards for payments to government wide commercial purchase card 
issuers follow:
    (a) Payment date. All individual purchase card invoices under 
$2,500 may be paid at any time, but not later than 30 days after the 
receipt of a proper invoice. Matching documents is not required before 
payment. The payment due date for invoices in the amount of $2,500 or 
more shall be determined in accordance with Sec. 1315.8. I TFM 4-
4535.10 4 permits payment of the bill in full prior to 
verification that goods or services were received.
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    \4\ See footnote 3 in Sec. 1315.7(a).
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    (b) Disputed line items. Disputed line items do not render the 
entire invoice an improper invoice for compliance with this proposed 
regulation. Any undisputed items must be paid in accordance with 
paragraph (a) of this section.


Sec. 1315.13  Commodity Credit Corporation payments.

    As provided in Sec. 1315.1(d), the provisions of this part apply to 
payments relating to the procurement of property and services made by 
the Commodity Credit Corporation (CCC) pursuant to Section 4(h) of the 
Act of June 29, 1948 (15 U.S.C. 714b(h)) (``CCC Charter Act'') and 
payments to which producers on a farm are entitled under the terms of 
an agreement entered into pursuant to the Agricultural Act of 1949 (7 
U.S.C. 1421 et seq.) (``1949 Act''.) Such payments shall be subject to 
the following provisions:
    (a) Payment standards. Payments to producers on a farm under 
agreements entered into under the 1949 Act and payments to vendors 
providing property and services under the CCC Charter Act, shall be 
made as close as possible to the required payment date or loan closing 
date.
    (b) Interest penalties. An interest penalty shall be paid to 
vendors or producers if the payment has not been made by the required 
payment or loan closing date. The interest penalty shall be paid:
    (1) On the amount of payment or loan due;
    (2) For the period beginning on the first day beginning after the 
required payment or loan closing date and, except as determined 
appropriate by the CCC consistent with applicable law, ending on the 
date the amount is paid or loaned; and
    (3) Out of funds available under Section 8 of the CCC Charter Act 
(15 U.S.C. 714f).
    (c) Contract Disputes Act of 1978. Insofar as covered CCC payments 
are concerned, provisions relating to the Contract Disputes Act of 1978 
(41 U.S.C. 601 et seq.) in Sec. 1315.10(a)(5)(i) and Sec. 1315.6(a) do 
not apply.
    (d) Extended periods for payment. Notwithstanding other provisions 
of this part, the CCC may allow claims for such periods of time as are 
consistent with authorities applicable to its operations.


Sec. 1315.14  Payments under construction contracts.

    (a) Payment standards. Agencies shall follow these standards when 
making progress payments under construction contracts:
    (1) An agency may approve a request for progress payment if the 
application meets the requirements specified in paragraph (b) of this 
section;
    (2) The certification by the prime vendor as defined in paragraph 
(b)(2) of this section is not to be construed as final acceptance of 
the subcontractor's performance;
    (3) The agency shall return any such payment request which is 
defective to the vendor within seven days after receipt, with a 
statement identifying the defect(s);
    (4) A vendor is obligated to pay interest to the Government on 
unearned amounts in its possession from:
    (i) The eighth day after receipt of funds from the agency until the 
date the vendor notifies the agency that the performance deficiency has 
been corrected, or the date the vendor reduces the amount of any 
subsequent payment request by an amount equal to the unearned amount in 
its possession, when the vendor discovers that all or a portion of a 
payment received from the agency constitutes a payment for the vendor's 
performance that fails to conform to the specifications, terms, and 
conditions of its contract with the agency, under 31 U.S.C. 3905(a); or
    (ii) The eighth day after the receipt of funds from the agency 
until the date the performance deficiency of a subcontractor is 
corrected, or the date the vendor reduces the amount of any subsequent 
payment request by an amount equal to the unearned amount in its 
possession, when the vendor discovers that all or a portion of a 
payment received from the agency would constitute a payment for the 
subcontractor's performance that fails to conform to the subcontract 
agreement and may be withheld, under 31 U.S.C. 3905(e);
    (5) Interest payment on unearned amounts to the government under 31 
U.S.C. 3905(a)(2) or 3905(e)(6), shall:
    (i) Be computed on the basis of the average bond equivalent rates 
of 91-day Treasury bills auctioned at the most recent auction of such 
bills prior to the date the vendor received the unearned amount;
    (ii) Be deducted from the next available payment to the vendor; and
    (iii) Revert to the Treasury.
    (b) Required Documentation. (1) Substantiation of the amount(s) 
requested shall include:

[[Page 52593]]

    (i) An itemization of the amounts requested related to the various 
elements of work specified in the contract;
    (ii) A listing of the amount included for work performed by each 
subcontractor under the contract;
    (iii) A listing of the total amount for each subcontract under the 
contract;
    (iv) A listing of the amounts previously paid to each subcontractor 
under the contract; and
    (v) Additional supporting data and detail in a form required by the 
contracting officer.
    (2) Certification by the prime vendor is required, to the best of 
the vendor's knowledge and belief, that:
    (i) The amounts requested are only for performance in accordance 
with the specifications, terms, and conditions of the contract;
    (ii) Payments to subcontractors and suppliers have been made from 
previous payments received under the contract, and timely payments will 
be made from the proceeds of the payment covered by the certification, 
in accordance with their subcontract agreements and the requirements of 
31 U.S.C. chapter 39; and
    (iii) The application does not include any amounts which the prime 
vendor intends to withhold or retain from a subcontractor or supplier, 
in accordance with the terms and conditions of their subcontract.
    (c) Interest penalties. (1) Agencies will pay interest on:
    (i) A progress payment request (including a monthly percentage-of-
completion progress payment or milestone payments for completed phases, 
increments, or segments of any project) that is approved as payable by 
the agency pursuant to paragraph (b) of this section, and remains 
unpaid for:
    (A) A period of more than 14 days after receipt of the payment 
request by the designated agency office; or
    (B) A longer period specified in the solicitation and/or contract 
if required, to afford the Government a practicable opportunity to 
adequately inspect the work and to determine the adequacy of the 
vendor's performance under the contract;
    (ii) Any amounts that the agency has retained pursuant to a prime 
contract clause providing for retaining a percentage of progress 
payments otherwise due to a vendor and that are approved for release to 
the vendor, if such retained amounts are not paid to the vendor by a 
date specified in the contract, or, in the absence of such a specified 
date, by the 30th day after final acceptance;
    (iii) Final payments, based on completion and acceptance of all 
work (including any retained amounts), and payments for partial 
performances that have been accepted by the agency, if such payments 
are made after the later of:
    (A) The 30th day after the date on which the designated agency 
office receives a proper invoice; or
    (B) The 30th day after agency acceptance of the completed work or 
services. Acceptance shall be deemed to have occurred on the effective 
date of contract settlement on a final invoice where the payment amount 
is subject to contract settlement actions.
    (2) For the purpose of computing interest penalties, acceptance 
shall be deemed to have occurred on the seventh day after work or 
services have been completed in accordance with the terms of the 
contract.


Sec. 1315.15  Grant recipients.

    Recipients of Federal assistance may pay interest penalties if so 
specified in their contracts with contractors. However, obligations to 
pay such interest penalties will not be obligations of the United 
States. Federal funds may not be used for this purpose, nor may 
interest penalties be used to meet matching requirements of federally 
assisted programs.


Sec. 1315.16  Relationship to other laws.

    (a) Contract Disputes Act of 1978 (41 U.S.C. 605). (1) A claim for 
an interest penalty (including the additional penalty for non-payment 
of interest if the vendor has complied with the requirements of 
Sec. 1315.9) not paid under this part may be filed under Section 6 of 
the Contract Disputes Act.
    (2) An interest penalty under this part does not continue to accrue 
after a claim for a penalty is filed under the Contract Disputes Act or 
for more than one year. Once a claim is filed under the Contract 
Disputes Act interest penalties under this part will never accrue on 
the amounts of the claim, for any period after the date the claim was 
filed. This does not prevent an interest penalty from accruing under 
Section 13 of the Contract Disputes Act after a penalty stops accruing 
under this part. Such penalty may accrue on an unpaid contract payment 
and on the unpaid penalty under this part.
    (3) This part does not require an interest penalty on a payment 
that is not made because of a dispute between the head of an agency and 
a vendor over the amount of payment or compliance with the contract. A 
claim related to such a dispute and interest payable for the period 
during which the dispute is being resolved is subject to the Contract 
Disputes Act.
    (b) Small Business Act (15 U.S.C. 644(k)). This Act has been 
amended to require that any agency with an Office of Small and 
Disadvantaged Business Utilization must assist small business concerns 
to obtain payments, late payment interest penalties, additional 
penalties, or information due to the concerns.


Sec. 1315.17  Formulas.

    (a) Rebate formula. (1) Agencies shall determine credit card 
payment dates based on an analysis of the total benefits to the Federal 
government as a whole. Specifically, agencies should compare daily 
basis points offered by the card issuer with the corresponding daily 
basis points of the government's Current Value of Funds (CVF) rate. If 
the basis points offered by the card issuer are greater than the daily 
basis points of the government'' funds, the government will maximize 
savings by paying on the earliest possible date. If the basis points 
offered by the card issuer are less than the daily basis points of the 
government'' funds, the government will minimize costs by paying on the 
Prompt Payment due date or the date specified in the contract.
    (2) Agencies may use a rebate spreadsheet which automatically 
calculates the net savings to the government and whether the agency 
should pay early or late. The only variables required for input to this 
spreadsheet are the CVF rate, the Maximum Discount Rate, that is, the 
rate from which daily basis points offered by the card issuer are 
derived, and the amount of debt. This spreadsheet is available for use 
on the prompt payment website at www.fms.treas.gov/prompt/index/.html.
    (3) If agencies chose not to use the spreadsheet, the following may 
be used to determine whether to pay early or late. To calculate whether 
to pay early or late, agencies must first determine the respective 
basis points. To obtain Daily Basis Points offered by card issuer, 
refer to the agency's contract with the card issuer. Use the following 
formula to calculate the average daily basis points of the CVF rate:

(CVF/360) * 100

    (4) For example: The daily basis points offered to agency X by card 
issuer Y are 1.5 basis points. That is, for every day the agency delays 
paying the card issuer the agency loses 1.5 basis points in savings. At 
a CVF of 5 percent, the daily basis points of the Current Value of 
Funds Rate are 1.4 basis points. That is, every day the agency delays 
paying,

[[Page 52594]]

the government earns 1.4 basis points. The basis points were calculated 
using the formula:

(CVF/360) * 100
(5/360) * 100 = 1.4

    (5) Because 1.5 is greater than 1.4, the agency should pay as early 
as possible. If the basis points offered by the card issuer are less 
than the daily basis points of the government'' funds (if for instance 
the rebate equaled 1.3 basis points and the CVF was still 1.4 basis 
points or if the rebate equaled 1.5 but the CVF equaled 1.6), the 
government will minimize costs by paying as late as possible, but by 
the payment due date.
    (b) Daily simple interest formula. (1) To calculate daily simple 
interest the following formula may be used:

P(r/360*d)

Where:
P is the amount of principle or invoice amount;
r equals the Prompt Payment interest rate; and
d equals the numbers of days for which interest is being calculated.

    (2) For example, if a payment is due on April 1 and the payment is 
not made until April 11, a simple interest calculation will determine 
the amount of interest owed the vendor for the late payment. Using the 
formula above, at an invoice amount of $1,500 paid 10 days late and an 
interest rate of 6.5%, the amount of interest owed is calculated as 
follows:

$1,500 (.065/360*10) = $2.71

    (c) Monthly compounding interest formula. (1) To calculate interest 
as required in Sec. 1315.10(a)(3), the following formula may be used:

P(1+r/12) n*(1+(r/360*d))-P

Where:

P equals the principle or invoice amount;
r equals the interest rate;
n equals the number of months; and
d equals the number of days for which interest is being calculated.

    (2) The first part of the equation calculates compounded monthly 
interest. The second part of the equation calculates simple interest on 
any additional days beyond a monthly increment.
    (3) For example, if the amount owed is $1,500, the payment due date 
is April 1, the agency does not pay until June 15 and the applicable 
interest rate is 6 percent, interest is calculated as follows:

$ 1,500(1+.06/12)\2\ *(1+(0.06/360*15))-$1,500 = $18.83


Sec. 1315.18  Inquiries.

    (a) Regulation. Inquiries concerning this part may be directed in 
writing to the Department of the Treasury, Financial Management Service 
(FMS), Cash Management Policy and Planning Division, 401 14th Street, 
S.W. Washington, D.C. 20227, (202) 874-6590, or by calling the Prompt 
Payment help line at 1-800-266-9667, by emailing questions to FMS at 
[email protected], or by completing a Prompt Payment 
inquiry form available at www.fms.treas.gov/prompt/inquiries.html.
    (b) Applicable interest rate. The rate is published by the Fiscal 
Service, Department of the Treasury, semiannually in the Federal 
Register on or about January 1 and July 1. The rate also may be 
obtained from the Department of Treasury's Financial Management Service 
(FMS) at 1-800-266-9667. This information is also available at the FMS 
Prompt Payment Web Site at http://www.fms.treas.gov/prompt/index.html.
    (c) Agency payments. Questions concerning delinquent payments 
should be directed to the designated agency office, or the office 
responsible for issuing the payment if different from the designated 
agency office. Questions about disagreements over payment amount or 
timing should be directed to the contracting officer for resolution. 
Small business concerns may obtain additional assistance on payment 
issues by contacting the agency's Office of Small and Disadvantaged 
Business Utilization.


Sec. 1315.19  Regulatory references to OMB Circular A-125.

    This part supercedes OMB Circular A-125 (``Prompt Payment''). Until 
revised to reflect the codification in this part, regulatory references 
to Circular A-125 shall be construed as referring to this part.
[FR Doc. 99-24713 Filed 9-28-99; 8:45 am]
BILLING CODE 3110-01-P