OMB redoubles call for prompt payments to small subs

The Office of Management and Budget is calling for a change to the Federal Acquisition Regulations to require prime contractors to promptly pay small businesses.

OMB acting Director Jeff Zients sent a memo to agency secretaries Wednesday setting new requirements and building on the September 2011 executive order mandating agencies speed up payments to small firms.

Zients said agencies should encourage prime contractors to accelerate payments to small business subcontractors by taking three steps, including adding language to current contracts.

In the long term, the FAR Council and the Small Business Administration will work on a proposed rule to incorporate a prompt payment clause into the regulations.

Jeff Zients, acting OMB director
“OMB is encouraging the FAR Council to consider as an example the provision in the Prompt Payment Act (PPA) that, for the purposes of construction contracts awarded by an agency, flows down an accelerated payment schedule to subcontractors for satisfactory contract performance,” the memo stated.

OMB also is encouraging agencies to include a prompt payment clause into future contracts.

Agencies must report to OMB in six months and again in a year on:

  • The progress they are making in accelerating payments to prime contractors.
  • The progress of the agency’s 25 largest prime contractors in incorporating prompt payment clauses in their subcontracts with small businesses.
  • The progress of any other steps that the agency has undertaken to ensure that small business subcontractors are paid in a prompt manner.

The prompt payment to small business subcontractors is one of six steps the administration announced it’s taking to help small firms.

SBA has three steps focused on easing the process to apply for disaster loans and improving access to capital for small companies.

SBA is launching a “QuickApp” for surety bonds under $250,000 to “eliminate the need for contractors to complete five unnecessary forms to apply for surety bonds.”

The administration wants SBA to increase the Small Loan Advantage program to an annual amount of $350,000 from $250,000. The agency also is trying to reduce the amount of paperwork to apply for a disaster loan.


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