GSA Continues Prompt Payment Extension
Last month in a memo from Steve VanRoekel, acting Deputy Director for the Office of Management and Budget (OMB), it was announced that the agency extended the prompt payment policy it established in a 2012 memo for another year. This policy instructs government agencies to pay off their invoices more quickly to contractors, and further requires contractors make timely payments to any small business subcontractors. Prior to the establishment of this policy, agencies were required to pay off invoices within 30 days, leaving cash-strapped small business subcontractors waiting even longer for their share of the payment to trickle down from the prime.
With this prompt payment extension, the GSA administration has a year to review the options and evaluate the impact that accelerated payments have on business dealings, and most importantly on small business contractors. This year’s extension provides an opportunity for the Federal Acquisition Regulatory (FAR) Council to gather input from the public on how to better maintain long term effective cash flows and prompt payments to small businesses. With this policy extended, it is important to be aware of the cash flows within a transaction; and for a government contractor this includes making timely payments to any subcontractors and to receiving payments from government agencies on time.