[Federal Register Volume 86, Number 186 (Wednesday, September 29, 2021)]
[Proposed Rules]
[Pages 53923-53927]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-20852]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 12, 32, and 52

[FAR Case 2020-007; Docket No. FAR-2020-0007; Sequence No. 1]
RIN 9000-AO10


Federal Acquisition Regulation: Accelerated Payments Applicable 
to Contracts With Certain Small Business Concerns

AGENCY: Department of Defense (DoD), General Services Administration 
(GSA), and National Aeronautics and Space Administration (NASA).

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: DoD, GSA, and NASA are proposing to amend the Federal 
Acquisition Regulation (FAR) to

[[Page 53924]]

implement a section of the National Defense Authorization Act for 
Fiscal Year 2020 to provide for accelerated payments to small business 
contractors and subcontractors and a comparable statute applicable only 
to the Department of Defense.

DATES: Interested parties should submit written comments to the 
Regulatory Secretariat Division at the address shown below on or before 
November 29, 2021 to be considered in the formation of the final rule.

ADDRESSES: Submit comments in response to FAR Case 2020-007 to the 
Federal eRulemaking portal at https://www.regulations.gov by searching 
for ``FAR Case 2020-007''. Select the link ``Comment Now'' that 
corresponds with ``FAR Case 2020-007''. Follow the instructions 
provided on the ``Comment Now'' screen. Please include your name, 
company name (if any), and ``FAR Case 2020-007'' on your attached 
document. If your comment cannot be submitted using https://www.regulations.gov, call or email the points of contact in the FOR 
FURTHER INFORMATION CONTACT section of this document for alternate 
instructions.
    Instructions: Please submit comments only and cite ``FAR Case 2020-
007'' in all correspondence related to this case. Comments received 
generally will be posted without change to https://www.regulations.gov, 
including any personal and/or business confidential information 
provided. To confirm receipt of your comment(s), please check https://www.regulations.gov, approximately two to three days after submission 
to verify posting.

FOR FURTHER INFORMATION CONTACT: Ms. Zenaida Delgado, Procurement 
Analyst, at 202-969-7207 or by email at [email protected], for 
clarification of content. For information pertaining to status or 
publication schedules, contact the Regulatory Secretariat Division at 
202-501-4755 or [email protected]. Please cite FAR Case 2020-007.

SUPPLEMENTARY INFORMATION:

I. Background

    DoD, GSA, and NASA are proposing to revise the FAR to implement a 
policy that provides for accelerated payments to contractors that are 
small businesses and to small business subcontractors by accelerating 
payments to their prime contractors. This change implements section 873 
of the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 
2020 (Pub. L. 116-92). Section 873 amends 31 U.S.C. 3903(a). 
Specifically, section 873 requires agencies to establish an accelerated 
payment date for small business prime contractors, to the fullest 
extent permitted by law, with a goal of 15 days after receipt of a 
proper invoice, if a specific payment date is not established by 
contract. Section 873 also requires that, to the fullest extent 
permitted by law, the head of an agency establish an accelerated 
payment date for prime contractors that subcontract with small 
businesses, with a goal of 15 days after receipt of a proper invoice, 
if--
    (1) A specific payment date is not established by contract; and
    (2) The contractor agrees to make accelerated payments to the 
subcontractor without any further consideration from, or fees charged 
to, the subcontractor. The proposed rule implements both aspects of 
section 873.
    The FAR currently addresses providing accelerated payments to small 
business subcontractors at FAR 32.009 and requires contracting officers 
to insert the clause at FAR 52.232-40, Providing Accelerated Payments 
to Small Business Subcontractors, in solicitations and contracts. FAR 
52.232-40 requires prime contractors to provide accelerated payments to 
their small business subcontractors when the Government provides 
accelerated payments to the prime contractors.
    In addition, this rule implements 10 U.S.C. 2307, which includes 
the same provisions regarding accelerated payments, applicable only to 
the Department of Defense.

II. Discussion and Analysis

    The following summarizes the proposed changes to the FAR:
    The policy at FAR 32.009-1 has been expanded to address accelerated 
payments to small business contractors. A goal of payment within 15 
days after receipt of a proper invoice is added, and prime contractors 
are prohibited from requesting any further consideration from the 
subcontractor in exchange for the accelerated payments. Section 873 
does not specify the number of days for the prime to make accelerated 
payments to the subcontractor; however, DoD, GSA, and NASA propose, as 
a matter of policy, that the prime contractor make payments to the 
small business subcontractor within 15 days of receiving the 
accelerated payment from the Government, after receipt of a proper 
invoice and all other required documentation from the small business 
subcontractor.
    These requirements are also incorporated into the clause at FAR 
52.232-40, Providing Accelerated Payments to Small Business 
Subcontractors. For applicability to contracts for the acquisition of 
commercial items, because this clause is now based on a statutory 
requirement, it is incorporated into FAR clause 52.212-5, Contract 
Terms and Conditions Required To Implement Statutes or Executive 
Orders--Commercial Items, rather than being separately prescribed at 
FAR 12.301(d).
    There are other conforming changes at FAR 12.301, 32.903, 32.906, 
52.213-4, and 52.244-6.
    To further improve cash flow and access to the Federal marketplace, 
DoD, GSA, and NASA are considering additional regulatory actions to 
further broaden the reach of accelerated payments to small business 
subcontractors and welcome public comment on how this broadening might 
best be accomplished. This proposed rule flows down the requirement for 
accelerated payments from the prime contractor to small business 
subcontractors; the accelerated payment requirement does not flow down 
to other than small businesses, i.e., large business subcontractors. As 
drafted, large business subcontractors in the supply chain are not 
required to receive accelerated payments, and therefore are not 
required to accelerate payments to their small business subcontractors. 
Should the rule be expanded to apply the accelerated payment 
requirement to large business subcontractors in order to reach lower 
tier small business subcontractors? In other words, should all 
businesses, large and small, be directed to accelerate payment to their 
subcontractors, all the way down the tiers? What are the benefits, 
burdens, and unintended consequences, if any, of this type of 
expansion?

III. Applicability to Contracts at or Below the Simplified Acquisition 
Threshold (SAT) and for Commercial Items, Including Commercially 
Available Off-The-Shelf (COTS) Items

    This rule does not add any new solicitation provisions or clauses. 
This rule proposes to amend the following FAR clauses: 52.212-5, 
Contract Terms and Conditions Required To Implement Statutes or 
Executive Orders-Commercial Items; 52.213-4, Terms and Conditions-
Simplified Acquisitions (Other Than Commercial Items); 52.232-40, 
Providing Accelerated Payments to Small Business Subcontractors; and 
52.244-6, Subcontracts for Commercial Items.
    The FAR rule makes the 10 U.S.C. 2307 and 31 U.S.C. 3903 statutory 
changes to a requirement already applicable to contracts at or below 
the SAT and to contracts for the acquisition of commercial items, 
including COTS items. The Federal Acquisition Regulatory Council (FAR 
Council) is

[[Page 53925]]

proposing, in accordance with 41 U.S.C. 1905, 41 U.S.C. 1906, and 41 
U.S.C. 1907, to apply the rule to contracts at or below the SAT and 
acquisitions of commercial items, including acquisitions for COTS 
items. The FAR Council will consider public feedback before making a 
final determination on the scope of the final rule.

A. Applicability to Contracts at or Below the Simplified Acquisition 
Threshold

    41 U.S.C. 1905 governs the applicability of laws to acquisitions at 
or below the SAT. Section 1905 generally limits the applicability of 
new laws when agencies are making acquisitions at or below the SAT, but 
provides that such acquisitions will not be exempt from a provision of 
law under certain circumstances, including when the FAR Council makes a 
written determination and finding that it would not be in the best 
interest of the Federal Government to exempt contracts and subcontracts 
in amounts not greater than the SAT from the provision of law.
    The FAR Council intends to make a determination to apply this 
statute to acquisitions at or below the SAT. These accelerated payments 
provide benefits to contractors that are small businesses, to 
contractors that subcontract with small businesses, and to small 
business subcontractors by accelerating payments to their prime 
contractors, without adding any reporting or recordkeeping 
requirements. Approximately 96 percent of Federal contracts are in 
amounts at or below the SAT. An exception for contracts and 
subcontracts at or below the SAT would exclude contracts and 
subcontracts 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 Commercially Available Off-The-Shelf (COTS) Items

    41 U.S.C. 1906 governs the applicability of laws to contracts for 
the acquisition of commercial items and is intended to limit the 
applicability of laws to contracts for the acquisition of commercial 
items. Section 1906 provides that if the FAR Council 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.
    41 U.S.C. 1907 states that acquisitions of COTS items will be 
exempt from certain provisions of law unless the Administrator for 
Federal Procurement Policy makes a written determination and finds that 
it would not be in the best interest of the Federal Government to 
exempt contracts for the procurement of COTS items.
    The FAR Council intends to make a determination to apply this 
statute to acquisitions for commercial items. The Administrator for 
Federal Procurement Policy intends to make a determination to apply 
this statute to acquisitions for COTS items. These accelerated payments 
provide benefits to contractors that are small businesses, to 
contractors that subcontract with small businesses, and to small 
business subcontractors by accelerating payments to their prime 
contractors, without adding any reporting or recordkeeping 
requirements. Over 50 percent of Federal contracts are awarded using 
commercial item procedures. An exception for commercial items, 
including COTS items, contracts and subcontracts would exclude 
contracts and subcontracts intended to be covered by the law, thereby 
undermining the overarching public policy purpose of the law.

IV. 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 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.

V. Congressional Review Act

    As required by the Congressional Review Act (5 U.S.C. 801-808) 
before an interim or final rule takes effect, DoD, GSA, and NASA will 
send the rule and the ``Submission of Federal Rules Under the 
Congressional Review Act'' form to each House of the Congress and to 
the Comptroller General of the United States. A major rule cannot take 
effect until 60 days after it is published in the Federal Register. 
This rule is not anticipated to be a major rule under 5 U.S.C. 804.

VI. Regulatory Flexibility Act

    DoD, GSA, and NASA do not expect this rule to have a significant 
economic impact on a substantial number of small entities within the 
meaning of the Regulatory Flexibility Act, 5 U.S.C. 601-612, because 
the rule is not implementing any requirements with which small entities 
must comply. However, an Initial Regulatory Flexibility Analysis (IRFA) 
has been performed and is summarized as follows:

    DoD, GSA, and NASA are proposing to amend the FAR to provide for 
accelerated payments to contractors that are small businesses and to 
small business subcontractors by accelerating payments to their 
prime contractors. Specifically, section 873 of the NDAA for FY 2020 
requires agencies, 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 873 
requires the FAR, 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 is to implement section 873 of the NDAA for FY 
2020 (Pub. L. 116-92), which amends 31 U.S.C. 3903(a). The rule also 
implements 10 U.S.C. 2307, which applies the same requirements to 
the Department of Defense. The legal basis for this rule is 40 
U.S.C. 121(c), 10 U.S.C. chapter 137, and 51 U.S.C. 20113.
    This rule applies to small businesses that are prime contractors 
and to small businesses that are subcontractors on Federal prime 
contracts. Based on data obtained from the Federal Procurement Data 
System, 129,450 unique entities (including 84,468 small businesses) 
were awarded contracts for FY 2019. DoD, GSA, and NASA do not have 
data as to how many subcontracts are awarded to small businesses. 
Regarding the impact of the prohibition on fees or other 
consideration in return for accelerated payments, it is not possible 
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.
    The proposed rule does not include additional reporting or 
record keeping requirements. The rule does not duplicate, overlap, 
or conflict with any other Federal rules. There are no available 
alternatives to the proposed rule to accomplish the desired 
objective of the statute.
    Although this proposed rule may have a positive impact on small 
businesses, the rule is not expected to have a significant economic 
impact on a substantial number of small entities.

    The Regulatory Secretariat Division has submitted a copy of the 
IRFA to the Chief Counsel for Advocacy of the Small Business 
Administration. A copy of the IRFA may be obtained from the

[[Page 53926]]

Regulatory Secretariat Division. DoD, GSA, and NASA invite comments 
from small business concerns and other interested parties on the 
expected impact of this rule on small entities.
    DoD, GSA, and NASA will also consider comments from small entities 
concerning the existing regulations in subparts affected by the rule in 
accordance with 5 U.S.C. 610. Interested parties must submit such 
comments separately and should cite 5 U.S.C. 610 (FAR Case 2020-007), 
in correspondence.

VII. Paperwork Reduction Act

    This 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. 3501-3521).

List of Subjects in 48 CFR Parts 12, 32, and 52

    Government procurement.

William F. Clark,
Director, Office of Government-wide Acquisition Policy, Office of 
Acquisition Policy, Office of Government-wide Policy.

    Therefore, DoD, GSA, and NASA propose amending 48 CFR parts 12, 32, 
and 52 as set forth below:

0
1. The authority citation for 48 CFR parts 12, 32, and 52 continues to 
read as follows:

    Authority:  40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 51 
U.S.C. 20113.

PART 12--ACQUISITION OF COMMERCIAL ITEMS


12.301   [Amended]

0
2. Amend section 12.301 by removing paragraph (d)(15).

PART 32--CONTRACT FINANCING

0
3. Revise sections 32.009 and 32.009-1 to read as follows:


32.009   Providing accelerated payments to small business contractors 
and to prime contractors that subcontract with a small business 
concern.


32.009-1   General.

    (a) Pursuant to 31 U.S.C. 3903(a) and 10 U.S.C. 2307(a), agencies 
shall provide accelerated payments, to the fullest extent permitted by 
law, with a goal of 15 days after receipt of a proper invoice and all 
other required documentation, if a specific payment date is not 
established by contract, to--
    (1) Small business contractors; and
    (2) Prime contractors that subcontract with a small business 
concern, if the prime contractor agrees to make payments to the small 
business subcontractor within 15 days of receiving the accelerated 
payment from the Government, after receipt of a proper invoice and all 
other required documentation from the small business subcontractor, to 
the maximum extent practicable, without any further consideration from 
or fees charged to the subcontractor.
    (b) This acceleration does not provide any new rights under the 
Prompt Payment Act and does not affect the application of the Prompt 
Payment Act late payment interest provisions.
    (c) Agencies may use the Governmentwide commercial purchase card as 
a method of payment (see 32.1108) to facilitate accelerated payment, to 
earn refunds, and to reduce invoice processing costs.


32.903  [Amended]

0
4. Amend section 32.903 by removing from paragraph (a)(5) ``5 CFR 
1315.5'' and adding ``5 CFR 1315.5, but see 32.009-1(a)'' in its place.


32.906   [Amended]

0
5. Amend section 32.906 by removing from paragraph (a)(2) ``are 
necessary (see 32.903(a)(5))'' and adding ``is necessary. See 
32.903(a)(5), but see 32.009-1(a)'' in its place.

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0
6. Amend section 52.212-5 by--
0
a. Revising the date of the clause;
0
b. Redesignating paragraphs (a)(5) and (6) as paragraphs (a)(6) and 
(7); and adding a new paragraph (a)(5);
0
c. Redesignating paragraph (e)(1)(xxii) as paragraph (e)(1)(xxiii); and 
adding a new paragraph (e)(1)(xxii); and
0
d. In Alternate II--
0
i. Revising the date of the Alternate;
0
ii. Redesignating paragraph (e)(1)(ii)((U) as paragraph (e)(1)(ii)(V); 
and adding a new paragraph (e)(1)(ii)((U);
    The revision and addition read as follows:


52.212-5   Contract Terms and Conditions Required To Implement Statutes 
or Executive Orders--Commercial Items.

* * * * *

Contract Terms and Conditions Required To Implement Statutes or 
Executive Orders--Commercial Items (DATE)

    (a) * * *
    (5) 52.232-40, Providing Accelerated Payments to Small Business 
Subcontractors (DATE) (31 U.S.C. 3903 and 10 U.S.C. 2307).
* * * * *
    (e)(1) * * *
    (xxii) 52.232-40, Providing Accelerated Payments to Small 
Business Subcontractors (DATE) (31 U.S.C. 3903 and 10 U.S.C. 2307). 
Flow down required in accordance with paragraph (c) of 52.232-40.
* * * * *

Alternate II (DATE). * * *

    (e)(1) * * *
    (ii) * * *
    (U) 52.232-40, Providing Accelerated Payments to Small Business 
Subcontractors (DATE) (31 U.S.C. 3903 and 10 U.S.C. 2307). Flow down 
required in accordance with paragraph (c) of 52.232-40.
* * * * *
0
7. Amend section 52.213-4 by--
0
a. Revising the date of the clause;
0
b. Redesignating paragraphs (a)(1)(viii) and (ix) as paragraphs 
(a)(1)(ix) and (x); and adding a new paragraph (a)(1)(viii);
0
c. Removing paragraph (a)(2)(vi);
0
d. Redesignating paragraphs (a)(2)(vii) through (ix) as paragraphs 
(a)(2)(vi) through (viii); and
0
e. Removing from the newly redesignated paragraph (a)(2)(vii) ``(JUL 
2021)'' and adding ``(DATE)'' in its place.
    The revision and addition read as follows:


52.213-4   Terms and Conditions--Simplified Acquisitions (Other Than 
Commercial Items).

* * * * *

Terms and Conditions--Simplified Acquisitions (Other Than Commercial 
Items) (DATE)

    (a) * * *
    (1) * * *
    (viii) 52.232-40, Providing Accelerated Payments to Small 
Business Subcontractors (DATE) (31 U.S.C. 3903 and 10 U.S.C. 2307).
* * * * *
0
8. Amend section 52.232-40 by revising the date of the clause and 
paragraphs (a) and (c) to read as follows:


52.232-40   Providing Accelerated Payments to Small Business 
Subcontractors.

* * * * *

Providing Accelerated Payments to Small Business Subcontractors (DATE)

    (a)(1) In accordance with 31 U.S.C. 3903 and 10 U.S.C. 2307, 
within 15 days after receipt of accelerated payments from the 
Government, the Contractor shall make accelerated payments to its 
small business subcontractors under this contract, to the maximum 
extent practicable and prior to when such payment is otherwise 
required under the applicable contract or subcontract, after receipt 
of a proper invoice and all other required documentation from the 
small business subcontractor, if a specific payment date is not 
established by contract.
    (2) The Contractor agrees to make such payments to its small 
business subcontractors without any further consideration from or 
fees charged to the subcontractor.
* * * * *

[[Page 53927]]

    (c) Subcontracts. Include the substance of this clause, 
including this paragraph (c), in all subcontracts with small 
business concerns, including subcontracts with small business 
concerns for the acquisition of commercial items.
* * * * *
0
9. Amend section 52.244-6 by--
0
a. Revising the date of the clause; and
0
b. Removing from paragraph (c)(1)(xix) ``(DEC 2013)'' and adding 
``(DATE)'' in its place.
    The revision reads as follows:


52.244-6   Subcontracts for Commercial Items.

* * * * *

Subcontracts for Commercial Items (DATE)

* * * * *
[FR Doc. 2021-20852 Filed 9-28-21; 8:45 am]
BILLING CODE 6820-EP-P