Thank you to our friends at Alaska PTAC for sharing this information!
It’s final! Accelerated Payments for Subs!
On November 25, 2013, the FAR Council issued a final rule requiring prime contractors to make accelerated payments to small business subcontractors upon receiving an accelerated payment from the federal government. The rule goes into effect on December 26, 2013, requiring a new clause to be included in all new solicitations, including solicitations for the acquisition of commercial items.
What the new rule doesn’t do…
The clause does not create new penalties for noncompliance beyond the government’s ability to discontinue accelerated payments to the prime contractor if the prime contractor “fails to accelerate payments to the maximum extent practicable.” The rule also provides that the federal government may review prime contractor payments to ensure compliance with the clause. Prime contractors will be required to flow down the clause in subcontracts with other small business concerns, including those for commercial items.
The clause also doesn’t create any rights under the Prompt Payment Act, such as extending late payment interest to subcontractors. Similarly, in the preamble to the rule, the government clarified that directing the prime contractor to accelerate payments to subcontractors would not create privity of contract between the government and the subcontractors. However, small business subcontractors arguably may be able to bring claims related to the clause as intended third-party beneficiaries.
