[Federal Register Volume 85, Number 68 (Wednesday, April 8, 2020)]
[Rules and Regulations]
[Pages 19692-19698]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-06727]
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DEPARTMENT OF DEFENSE
Defense Acquisition Regulations System
48 CFR Parts 212, 232, and 252
[Docket DARS-2019-0025]
RIN 0750-AK25
Defense Federal Acquisition Regulation Supplement: Prompt
Payments of Small Business Contractors (DFARS Case 2018-D068)
AGENCY: Defense Acquisition Regulations System, Department of Defense
(DoD).
ACTION: Final rule.
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SUMMARY: DoD is issuing a final rule amending the Defense Federal
Acquisition Regulation Supplement (DFARS) to implement a section of the
National Defense Authorization Act for Fiscal Year 2019 that provides
for accelerated payments to small business contractors and
subcontractors.
DATES: Effective April 8, 2020.
FOR FURTHER INFORMATION CONTACT: Ms. Jennifer D. Johnson, telephone
571-372-6100.
SUPPLEMENTARY INFORMATION:
I. Background
DoD published a proposed rule in the Federal Register at 84 FR
25225 on May 31, 2019, to implement section 852 of the National Defense
Authorization Act (NDAA) for Fiscal Year (FY) 2019 (Pub. L. 115-232).
Section 852 provides for accelerated payments to DoD contractors that
are small businesses and to small business subcontractors by
accelerating payments to their prime contractors. Thirteen respondents
submitted public comments in response to the proposed rule.
II. Discussion and Analysis
DoD reviewed the public comments in the development of the final
rule. A
[[Page 19693]]
discussion of the comments and the changes made to the rule as a result
of those comments is provided, as follows:
A. Summary of Significant Changes From the Proposed Rule
This final rule adds a definition of ``accelerated payment'' to the
clause at DFARS 252.232-7017, Accelerating Payments to Small Business
Subcontractors--Prohibition on Fees and Consideration. The definition
specifies that accelerated payments are made as quickly as possible,
with a goal of 15 days or less after receipt of payment from the
Government or receipt of a proper invoice from the subcontractor,
whichever is later.
B. Analysis of Public Comments
1. Support for the Rule
Comment: Most respondents expressed support for the proposed rule.
Response: DoD acknowledges the respondents' support.
2. Timely Payments to Small Business Subcontractors
Comment: One respondent expressed overall support for the proposed
rule if the rule ensures all large business prime contractors are
required to pay their subcontractors within 15 days of receiving an
invoice from their small business subcontractors, regardless of whether
the prime has been paid by the Federal Government. Another respondent
suggested an authority to enforce, and a forum to address, grievances
for payments from the Government that are past due.
Response: This final rule incorporates the statutory language of
section 852 of the NDAA for FY 2019, as implemented via 10 U.S.C. 2307,
which establishes the 15-day timeframe as a goal, rather than a firm
deadline. The rule provides for prime contractors to make accelerated
payments to small business subcontractors after receipt of payment from
the Government because a prime contractor who subcontracts with small
businesses could be a small business itself. Federal Acquisition
Regulation (FAR) subpart 32.9 implements the statutory requirements
concerning required documentation for invoice and acceptance, the
establishment of payment due dates, and the payment of late payment
interest penalties after the due date established under the Prompt
Payment Act (e.g., 30 days). DoD payment offices must adhere to these
requirements and make payments as quickly as possible, to the fullest
extent permitted by law.
Concerning the respondent's suggestion regarding a forum to address
late payments, as prescribed in 5 CFR 1315.18, 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 Business
Programs.
3. Interest Penalties for Late Payments to Subcontractors
Comment: One respondent suggested that the rule could be improved
by also imposing an interest penalty on all small business invoices
submitted to the prime contractor that are not paid within 15 days of
receipt. Another respondent recommended an authority for the Government
to pay interest penalties to both contractors when invoices are past
due.
Response: Section 852 does not provide for interest penalties to be
paid by the prime contractor for late payments to a subcontractor.
Therefore, this final rule does not impose interest penalties beyond
those implemented in FAR subpart 32.9 under the Prompt Payment Act. The
subcontract between the prime contractor and the subcontractor is a
business arrangement between two private parties, and therefore Prompt
Payment Act interest penalties do not apply.
4. 15-Day Payment Goal
Comment: Two respondents expressed a preference for the proposed
rule to mandate prompt payment instead of making it a goal, however,
they commended the DoD proposal to revise the DFARS to implement
section 852 of the NDAA for FY 2019 to pay small businesses within 15
days, rather than the current 30-day standard. It is viewed as an
important first step for DoD small business contractors. Two other
respondents stated that FAR 52.232-40 does not provide for the 15-day
payment goal ``to the fullest extent permitted by law,'' which creates
a conflict with the specific 15-day goal that section 852 directs DoD
to adopt. One of the respondents recommends a new DFARS prescription
and contract clause to supplement FAR 52.232-40 be added that provides
for the 15-day payment goal ``to the fullest extent permitted by law.''
The respondent supports the revision to DFARS 232.903 to comport with
the provisions of section 852 with respect to small business prime
contractors.
Response: DoD recognizes the respondents' preference to mandate
payment within 15 days instead of making it a goal; and agrees that the
goal is an important step for small business contractors working with
the DoD. DoD also affirms support for the revision to DFARS 232.903 to
implement the provisions of section 852.
Regarding a conflict with the FAR, this final DFARS rule provides
details to supplement, rather than conflict with, the requirements of
FAR 52.232-40, Providing Accelerated Payments to Small Business
Subcontractors. The rule relies on the FAR clause and the DFARS clause
at 252.232-7017, used together in a contract, to communicate to prime
contractors the requirements concerning accelerated payments. See
section III of this preamble for a more detailed explanation of how the
clauses are used together. DoD agrees that it is important to clarify
what constitutes an accelerated payment from a prime contractor to a
small business subcontractor in the context of this DFARS rule.
Therefore, the final rule revises the clause at DFARS 252.232-7017 to
define ``accelerated payment'' as a payment made to a small business
subcontractor as quickly as possible, with a goal of 15 days or less
after receipt of payment from the Government or receipt of a proper
invoice from the subcontractor, whichever is later.
5. Clarifications
a. Small Business Subcontractors
Comment: One respondent suggested that the definition of small
business subcontractors be clarified for the purposes of accelerated
payments as those that are directly supporting or charged to a DoD
contract in which the prime contractor is receiving accelerated
payments (i.e., not those supporting indirect, commercial, or foreign
efforts by the prime contractor).
Response: This final rule does not provide a definition of ``small
business subcontractor.'' This term is defined at FAR 2.101. The
definition provided in the FAR applies to the DFARS, including this
rule.
b. Section Heading for DFARS 232.009
Comment: One respondent suggested that the heading to DFARS 232.009
be changed to read ``Providing accelerated payments to small business
contractors and small business subcontractors'' because DFARS 232.009-1
adds coverage for both small business and small business
subcontractors. In addition, the respondent suggested that the term
``small business primes'' in
[[Page 19694]]
both DFARS 232.009 and DFARS 232.009-1 would be clearer than ``small
business contractor''.
Response: The final rule does not include the respondent's
suggested edits. Revising the heading of DFARS 232.009 as suggested
would create a disconnect with the title of the new contract clause
prescribed in this section. In addition, DFARS 232.009 is numbered to
correspond to FAR 32.009, which addresses the same subject matter. This
drafting convention allows contracting officers to locate more easily
coverage of similar topics in the FAR and DFARS. It is not necessary to
add ``prime contractors'' to the heading because, in the FAR and DFARS,
the term ``contractor'' means the prime contractor.
6. Governmentwide Application of the Rule
Comment: One respondent stated that section 852 addresses two types
of accelerated payments, but noted both are applicable to DoD only. The
first type addresses payments to small business prime contractors; the
second type addresses payments to any DoD prime contractor that
subcontracts with small businesses. The respondent indicated a
preference for both types of accelerated payments to be made applicable
governmentwide. The respondent also stated that, at a minimum, the rule
should acknowledge the governmentwide application of making accelerated
payments to small business prime contractors, as provided for in FAR
clause 52.232-25, Prompt Payment.
Response: DoD affirms the respondent's statement that section 852
of the NDAA for FY 2019 applies to DoD only. As such, this final DFARS
rule will be applicable to DoD only. DoD notes, however, that FAR Case
2020-007, Accelerated Payments Applicable to Contracts with Certain
Small Business Concerns, is in process to implement section 873 of the
NDAA for FY 2020, which modifies 31 U.S.C. 3903(a) to require
accelerated payments for small business prime contractors and prime
contractors that subcontract with small business concerns.
7. Definition of ``small business''
Comment: One respondent expressed concern that the rule could be
improved by defining what constitutes a small business.
Response: The FAR defines ``small business concern'' in subpart
2.1, Definitions. The definition of ``small business concern'' in the
FAR applies throughout the DFARS, including to this rule.
8. Estimate of Fees Paid by Small Business Subcontractors
Comment: One respondent commented on DoD's inability to estimate
the number of small business subcontractors who have been required to
pay fees or provide consideration in return for accelerated payments
from prime contractors, or the dollar value of these fees or
consideration. The respondent asked if it was feasible to survey a
sample of subcontractors to DoD prime contractors regarding the average
fees paid to the prime contractors, and use that data to estimate fees
paid by subcontractors to DoD prime contractors in general. The
respondent also asked if the contractors could be sorted by size (i.e.,
small, medium, and large), with an average fee for each size
contractor, to find a weighted average number of contractors and fee.
Response: Resources are not available for a survey such as the
respondent suggested. DoD does not have any data on which to base an
estimate of the number of subcontractors required to pay fees or
provide consideration to the prime contractor in return for accelerated
payments, or the dollar value of the fees or consideration. Public
comments did not provide insight into whether small business
subcontractors had been required to pay fees or provide consideration
for accelerated payments, or the dollar value of such fees or
consideration.
9. Initial Regulatory Flexibility Analysis
Comment: One respondent expressed concern that the initial
regulatory flexibility analysis prepared for the proposed rule lacked
adequate information to allow small businesses to determine the impact
of the rule.
Response: See section VII. of this preamble.
C. Other Changes
This final rule adds a reference to the statute (10 U.S.C. 2307(a)
to the instruction at DFARS 212.301(f)(xiii)(G) for use of the clause
at DFARS 252.232-7017 in commercial item acquisitions. In the contract
clause, this final rule adds a new paragraph (a) to provide a
definition for ``Accelerated payment'' also adds the paragraph heading
of ``Subcontracts'' to paragraph (c).
III. Expected Impact of the Rule
Current DoD policy, as stated in DFARS 232.903, is to pay small
business contractors as quickly as possible after receipt of invoices
and proper documentation. This rule specifies that DoD will provide
payment as quickly as possible, to the fullest extent permitted by law,
with a goal of 15 days after receipt of proper invoices and
documentation, and before normal payment due dates. For items that
ordinarily require payment in less than 15 days (e.g., perishable
food), DoD will provide payment as quickly as possible after receipt of
proper invoices and documentation, and before the normal payment due
date.
With few exceptions, DoD will provide accelerated payments to small
business contractors and to prime contractors that agree to provide
accelerated payments to their small business subcontractors without
further consideration or fees. DoD will not be able to provide
accelerated payments to prime contractors if such payments would result
in a violation of the Antideficiency Act. An example would be a lapse
in appropriated funds.
This final DFARS rule relies on a FAR clause and a DFARS clause,
used together in a contract, to--
(1) Communicate to the prime contractor the requirement to provide
accelerated payments to small business subcontractors; and
(2) Obtain the prime contractor's agreement, by signature of the
contract, to provide accelerated payments without requiring further
consideration from, or charging fees to, the small business
subcontractor.
DoD contracting officers do not use the DFARS in isolation; they
use the DFARS together with the FAR. The FAR currently requires
contracting officers to insert the clause at FAR 52.232-40, Providing
Accelerated Payments to Small Business Subcontractors, in solicitations
and contracts. This final DFARS rule will require DoD contracting
officers to insert the new DFARS clause 252.232-7017, Accelerating
Payments to Small Business Subcontractors--Prohibition on Fees and
Consideration, in solicitations and contracts that include FAR 52.232-
40. This means both clauses will be included in DoD contracts.
The FAR clause and the DFARS clause will work together to require
accelerated payments to small business subcontractors when DoD provides
accelerated payments to the prime contractor. FAR 52.232-40 currently
requires prime contractors to provide accelerated payments to their
small business subcontractors when the Government provides accelerated
payments to the prime contractors. DFARS clause 252.232-7017 defines
``accelerated payment'' as ``a payment made to a small business
subcontractor as quickly as possible, with a goal of 15 days or less
after receipt of payment
[[Page 19695]]
from the Government or receipt of a proper invoice from the
subcontractor, whichever is later.'' By using both clauses together in
a contract, this final DFARS rule requires a prime contractor who
receives an accelerated payment from the Government to pay its small
business subcontractors as quickly as possible, with a goal of 15 days
or less after receipt of payment from the Government or receipt of a
proper invoice from the subcontractor, whichever is later.
DoD estimates that 40,282 contractors (including 30,498 small
businesses) will receive accelerated payments each year, based on data
obtained from the Federal Procurement Data System (FPDS) and input from
subject matter experts from the Defense Finance and Accounting Services
and the Office of the Under Secretary of Defense (Comptroller).
Specifically, DoD awarded contracts to an average of 40,689 unique
entities (including 30,806 small businesses) each year from FY 2016
through FY 2018. Subject matter experts estimated that DoD would not
provide accelerated payments to approximately 1 percent of these
contractors (407, including 308 small businesses) because such payments
could result in a violation of the Antideficiency Act (e.g., during a
lapse in appropriated funds). Therefore, approximately 40,282
contractors (including 30,498 small businesses) per year would receive
accelerated payments.
DoD estimates that there were approximately 9,483 small business
subcontractors on DoD prime contracts in FY 2018, based on data from
USASpending.gov cross-referenced with size representations for DoD
contracts. DoD further estimates that approximately 1 percent (95)
small business subcontractors may not receive accelerated payments
because DoD was not able to provide accelerated payments to the prime
contractor (see the previous paragraph).
This rule prohibits contractors from requiring any further
consideration from, or charging fees to, their small business
subcontractors when making accelerated payments. This prohibition would
benefit small business subcontractors who have been required to provide
consideration or pay fees to the prime contractor in order to receive
accelerated payments. Any costs for prime contractors to implement the
prohibition on fees and consideration are expected to be de minimis
since DoD expects that only a small number of contractors have required
such consideration or fees from their small business subcontractors.
As noted in a preceding paragraph, DoD estimates there were
approximately 9,483 small business subcontractors on DoD prime
contracts in FY 2018. It is not possible for DoD to estimate how many
of these small business subcontractors may have been required to
provide consideration or pay fees to the prime contractor in order to
receive accelerated payments, nor is it possible to estimate the dollar
value of the consideration provided or fees paid. Despite a request for
comments on this specific topic, DoD received no information from the
public that would inform these estimates. If any small business
subcontractors have been required to provide consideration or pay fees
in return for accelerated payments, the prohibition on such
consideration or fees could result in cost savings. However, if no
small business subcontractors have been required to provide
consideration or pay fees, there would be no cost savings as a result
of this rule.
IV. Applicability to Contracts at or Below the Simplified Acquisition
Threshold and for Commercial Items, Including Commercially Available
Off-the-Shelf Items
This rule applies the requirements of section 852 of the NDAA for
FY 2019 to contracts at or below the simplified acquisition threshold
(SAT) and to contracts for the acquisition of commercial items,
including commercially available off-the-shelf (COTS) items.
A. Applicability to Contracts at or Below the Simplified Acquisition
Threshold
41 U.S.C. 1905 governs the applicability of laws to contracts or
subcontracts in amounts not greater than the simplified acquisition
threshold. It is intended to limit the applicability of laws to such
contracts or subcontracts. 41 U.S.C. 1905 provides that if a provision
of law contains criminal or civil penalties, or if the FAR Council
makes a written determination that it is not in the best interest of
the Federal Government to exempt contracts or subcontracts at or below
the SAT, the law will apply to them. The Principal Director, Defense
Pricing and Contracting (DPC), is the appropriate authority to make
comparable determinations for regulations to be published in the DFARS,
which is part of the FAR system of regulations.
Given that the requirements of section 852 of the NDAA for FY 2019
were enacted to provide accelerated payments to small business
contractors and subcontractors, and since approximately 96 percent of
DoD contracts are valued at or below the SAT, DoD has determined that
it is in the best interest of the Federal Government to apply the rule
to contracts at or below the SAT. An exception for contracts at or
below the SAT would exclude contracts intended to be covered by the
law, thereby undermining the overarching public policy purpose of the
law.
B. Applicability to Contracts for the Acquisition of Commercial Items,
Including COTS Items
10 U.S.C. 2375 governs the applicability of laws to DoD contracts
and subcontracts for the acquisition of commercial items, including
COTS items, and is intended to limit the applicability of laws to
contracts and subcontracts for the acquisition of commercial items,
including COTS items. 10 U.S.C. 2375 provides that if a provision of
law contains criminal or civil penalties, or if the Under Secretary of
Defense for Acquisition and Sustainment (USD(A&S)) makes a written
determination that it is not in the best interest of the Federal
Government to exempt commercial item contracts, the provision of law
will apply to contracts for the acquisition of commercial items. Due to
delegations of authority from USD(A&S), the Principal Director, DPC, is
the appropriate authority to make this determination.
Given that the requirements of section 852 of the NDAA for FY 2019
were enacted to provide accelerated payments to small business
contractors and subcontractors, and since more than half of DoD's
contractors are small businesses providing commercial items, including
COTS items, DoD has determined that it is in the best interest of the
Federal Government to apply the rule to contracts for the acquisition
of commercial items, including COTS items, as defined at FAR 2.101. An
exception for contracts for the acquisition of commercial items,
including COTS items, would exclude the contracts intended to be
covered by the law, thereby undermining the overarching public policy
purpose of the law.
V. Executive Orders 12866 and 13563
Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess
all costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). E.O.
13563 emphasizes the importance of quantifying both costs
[[Page 19696]]
and benefits, of reducing costs, of harmonizing rules, and of promoting
flexibility. This is not a significant regulatory action and,
therefore, was not subject to review under section 6(b) of E.O. 12866,
Regulatory Planning and Review, dated September 30, 1993. This rule is
not a major rule under 5 U.S.C. 804.
VI. Executive Order 13771
This rule is not subject to E.O. 13771, because this rule is not a
significant regulatory action under E.O. 12866.
VII. Regulatory Flexibility Act
A final regulatory flexibility analysis (FRFA) has been prepared
consistent with the Regulatory Flexibility Act, 5 U.S.C. 601, et seq.
The FRFA is summarized as follows:
This final rule is necessary in order to amend the DFARS to
implement section 852 of the National Defense Authorization Act (NDAA)
for Fiscal Year (FY) 2019 (Pub. L. 115-232). Section 852 provides for
accelerated payments to DoD contractors that are small businesses and
to small business subcontractors by accelerating payments to their
prime contractors. Specifically, section 852 requires DoD, to the
fullest extent permitted by law, to establish an accelerated payment
date for small business contractors, with a goal of 15 days after
receipt of a proper invoice, if a specific payment date is not
established by contract. For contractors that subcontract with small
businesses, section 852 requires DoD, to the fullest extent permitted
by law, to establish an accelerated payment date, with a goal of 15
days after receipt of a proper invoice, if--
(a) A specific payment date is not established by contract; and
(b) The contractor agrees to make accelerated payments to the
subcontractor without any further consideration from, or fees charged
to, the subcontractor.
The objective of the rule is to implement section 852 by providing
accelerated payments to small business contractors and to small
business subcontractors via accelerated payments to prime contractors.
DoD received comments from the Chief Counsel for Advocacy of the
Small Business Administration in response to the proposed rule, which
are summarized below:
(a) Number of subcontractors required to pay fees: DoD did not
provide the number of small business subcontractors who have been
required to provide consideration or pay fees in return for accelerated
payments from prime contractors.
(b) Conclusion regarding cost savings: DoD concludes, without sound
data, that the rule could result in cost savings because of the
proposed prohibition on fees and consideration in return for
accelerated payments.
(c) Conflict with FAR: The rule conflicts with FAR 52.232-40,
Providing Accelerated Payments to Small Business Subcontractors, which
does not require payment within 15 days.
(d) Reason for not accelerating payment: According to DoD, subject
matter experts have estimated that DoD would not provide accelerated
payments to approximately 1 percent of contractors because such
payments would put DoD at risk of a violation of law. DoD did not
qualify these individuals as subject matter experts or provide the
bases or assumptions that support their conclusions. DoD did not
provide small businesses with information on what would constitute a
violation of law that would result in DoD not providing accelerated
payments to small businesses.
(e) Action plan when payments are not accelerated: The rule does
not provide a sound action plan for small businesses who may be denied
the legal right to accelerated payments.
DoD provides the following responses, including changes made to the
final rule as a result of the comments:
(a) Number of subcontractors required to pay fees: DoD has no data
on which to base an estimate of the number of small business
subcontractors who have been required to pay fees or provide
consideration to prime contractors in return for accelerated payments.
In the proposed rule, DoD requested public comment on the topic of
consideration or fees in return for accelerated payments. However, none
of the public comments addressed this topic. Therefore, in the final
rule DoD has provided a rough estimate of the number of small business
subcontractors on DoD contracts. DoD estimates there were approximately
9,483 small business subcontractors on DoD contracts in FY 2018.
(b) Conclusion regarding cost savings: The conclusion that the rule
could result in cost savings was based on a reasonable assumption that,
if a small business was required to pay a fee in return for accelerated
payments, and the rule prohibits that fee, then the small business will
not be required to pay the fee in the future. If no small businesses
have been required to pay a fee, then there would be no cost savings as
a result of this rule. In the final rule, DoD has made this
clarification in section III of the preamble for this final rule.
(c) Conflict with FAR: The rule provides details to supplement,
rather than conflict with, the requirements of FAR 52.232-40, Providing
Accelerated Payments to Small Business Subcontractors. DoD agrees that
it is important to clarify what constitutes an accelerated payment from
a prime contractor to a small business subcontractor in the context of
this DFARS rule. Therefore, the final rule revises the clause at DFARS
252.232-7017, Accelerating Payments to Small Business Subcontractors--
Prohibition on Fees and Consideration, to clarify that ``accelerated
payment'' means ``a payment made to a small business subcontractor as
quickly as possible, with a goal of 15 days or less after receipt of
payment from the Government or receipt of a proper invoice from the
subcontractor, whichever is later.'' See paragraph (e) for an
explanation of how the FAR clause and the DFARS clause will be used
together to provide for accelerated payments to small business
subcontractors.
(d) Reason for not accelerating payment: The estimate that 1
percent of contractors would not receive accelerated payments was based
on DoD's expectation that this would be a rare occurrence. DoD's
subject matter experts from the Defense Finance and Accounting Service
and the Office of the Under Secretary of Defense (Comptroller) have
provided clarification on the circumstances that could result in DoD
not providing accelerated payments to small businesses. DoD would not
be able to provide accelerated payments if such payments would result
in a violation of the Antideficiency Act. An example would be a lapse
in appropriated funds. DoD has made this clarification in section III
of the preamble for this final rule.
(e) Action plan when payments are not accelerated: DoD's
interpretation of section 852 of the NDAA for FY 2019 is that section
852 does not create a right to accelerated payments. It requires DoD,
to the fullest extent permitted by law, to pay contractors on an
accelerated basis, with a goal of 15 days. It also requires the prime
contractor's agreement to provide accelerated payments without
requiring further consideration from, or charging fees to, the small
business subcontractor. As with any issue or concern related to
payments, small businesses may seek assistance from the Office of Small
Business Programs for DoD or for the DoD component that awarded the
prime
[[Page 19697]]
contract. This final DFARS rule relies on a FAR clause and a DFARS
clause used together in a contract to--
(i) Communicate to the prime contractor the requirement to provide
accelerated payments to small business subcontractors; and
(ii) Obtain the prime contractor's agreement, by signature of the
contract, to provide accelerated payments without requiring further
consideration from, or charging fees to, the small business
subcontractor.
DoD contracting officers use the FAR and DFARS together to award
contracts, not one or the other in isolation. The FAR currently
requires contracting officers to insert FAR 52.232-40 in solicitations
and contracts. This final rule will require contracting officers to
insert the new DFARS clause 252.232-7017 in solicitations and contracts
that include FAR 52.232-40. This means both clauses will exist in DoD
contracts and will work together to require accelerated payments to
small business subcontractors when DoD provides accelerated payments to
the prime contractor. FAR 52.232-40 currently requires prime
contractors to make accelerated payments to their small business
subcontractors upon receipt of accelerated payments from the
Government. DFARS clause 252.232-7017 defines accelerated payment as
``a payment made to a small business subcontractor as quickly as
possible, with a goal of 15 days or less after receipt of payment from
the Government or receipt of a proper invoice from the subcontractor,
whichever is later.'' By using both clauses together, this final DFARS
rule requires a prime contractor who receives an accelerated payment
from the Government to pay its small business subcontractors as quickly
as possible, with a goal of 15 days or less after receipt of payment
from the Government or receipt of a proper invoice from the
subcontractor, whichever is later.
This rule applies to small businesses that are DoD prime
contractors. According to data obtained from the Federal Procurement
Data System, DoD awarded contracts to an average of 30,806 unique small
entities each year from FY 2016 through FY 2018. DoD estimates that it
may not be possible to provide accelerated payments to approximately
308 small business contractors (1 percent) because such payments would
put DoD at risk of a violation of the Antideficiency Act (e.g., during
a lapse in appropriated funds). Therefore, approximately 30,498 small
contractors per year would receive accelerated payments.
This rule also applies to small businesses that are subcontractors
on DoD prime contracts. DoD estimates that there were approximately
9,483 small business subcontractors on DoD prime contracts in FY 2018,
based on data from www.USASpending.gov cross-referenced with size
representations for DoD contracts. DoD estimates that approximately 95
small business subcontractors (1 percent) may not receive accelerated
payments because DoD was not able to provide accelerated payments to
the prime contractor. With regard to the impact of the prohibition on
fees or other consideration in return for accelerated payments, it is
not possible for DoD to estimate how many of these small business
subcontractors may have been required to provide consideration or pay
fees to the prime contractor in order to receive accelerated payments.
This rule does not impose any new reporting, recordkeeping, or
other compliance requirements for small entities.
There are no known, significant alternatives that would accomplish
the objectives of the applicable statute.
VIII. Paperwork Reduction Act
The rule does not contain any information collection requirements
that require the approval of the Office of Management and Budget under
the Paperwork Reduction Act (44 U.S.C. chapter 35).
List of Subjects in 48 CFR Parts 212, 232, and 252
Government procurement.
Jennifer Lee Hawes,
Regulatory Control Officer, Defense Acquisition Regulations System.
Therefore, 48 CFR parts 212, 232, and 252 are amended as follows:
0
1. The authority citations for 48 CFR part 212, 232, and 252 continue
to read as follows:
Authority: 41 U.S.C. 1303 and 48 CFR chapter 1.
PART 212--ACQUISITION OF COMMERCIAL ITEMS
0
2. Amend section 212.301 by adding paragraph (f)(xiii)(G) to read as
follows:
212.301 Solicitation provisions and contract clauses for the
acquisition of commercial items.
* * * * *
(f) * * *
(xiii) * * *
(G) Use the clause at 252.232-7017, Accelerating Payments to Small
Business Subcontractors--Prohibition on Fees and Consideration, as
prescribed in 232.009-2(2), to comply with 10 U.S.C. 2307(a).
* * * * *
PART 232--CONTRACT FINANCING
0
3. Add sections 232.009, 232-009-1, and 232.009-2 to read as follows:
232.009 Providing accelerated payments to small business
subcontractors.
232.009-1 General.
Section 852 of the National Defense Authorization Act for Fiscal
Year 2019 (Pub. L. 115-232) requires DoD to provide accelerated
payments to small business contractors and subcontractors, to the
fullest extent permitted by law, with a goal of 15 days.
232.009-2 Contract clause.
Use the clause at 252.232-7017, Accelerating Payments to Small
Business Subcontractors--Prohibition on Fees and Consideration, in
solicitations and contracts, including those using FAR part 12
procedures for the acquisition of commercial items, that include the
clause at FAR 52.232-40, Providing Accelerated Payments to Small
Business Subcontractors.
0
4. Revise section 232.903 to read as follows:
232.903 Responsibilities.
In accordance with section 852 of the National Defense
Authorization Act for Fiscal Year 2019 (Pub. L. 115-232), DoD shall
assist small business concerns by providing payment as quickly as
possible, to the fullest extent permitted by law, with a goal of 15
days after receipt of proper invoices and all required documentation,
including acceptance, and before normal payment due dates established
in the contract (see 232.906(a)).
PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
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5. Add section 252.232-7017 to read as follows:
252.232-7017 Accelerating Payments to Small Business Subcontractors--
Prohibition on Fees and Consideration.
As prescribed in 232.009-2, use the following clause:
Accelerating Payments to Small Business Subcontractors--Prohibition on
Fees and Consideration (APR 2020)
(a) Definition. Accelerated payment, as used in this clause,
means a payment made to a small business subcontractor as quickly as
possible, with a goal of 15 days or less after receipt of payment
from the Government or receipt of a proper invoice from the
subcontractor, whichever is later.
[[Page 19698]]
(b) In accordance with section 852 of Public Law 115-232, the
Contractor shall not require any further consideration from or
charge fees to the small business subcontractor when making
accelerated payments, as defined in paragraph (a) of this clause, to
subcontractors under the clause at FAR 52.232-40, Providing
Accelerated Payments to Small Business Subcontractors.
(c) Subcontracts. Include the substance of this clause,
including this paragraph (c), in all subcontracts with small
business concerns, including those for the acquisition of commercial
items.
(End of clause)
[FR Doc. 2020-06727 Filed 4-7-20; 8:45 am]
BILLING CODE 5001-06-P