Changes to the Federal Acquisition Regulation (FAR) are forthcoming that will allow small businesses with government prime contracts and subcontracts to get paid on an accelerated basis, within 15 days of invoicing. Four agencies have recently issued memoranda that may authorize changes to existing contracts to allow for these accelerated payments in advance of those regulations. The four agencies are the Department of Health and Human Services (HHS), the Department of Homeland Security (DHS), the Department of the Treasury (Treasury) and the General Services Administration (GSA).

Accordingly, contractors and subcontractors should consider whether they qualify for the faster payments and contact the government as needed, to facilitate faster payments. For example, a business with a Small Business Innovation Research contract (SBIR) with DHS, is currently paid within 30 days of invoice and could be eligible for modification of its contract for faster payments upon the exercise of any options under that contract.

Section 873 of the National Defense Authorization Act for Fiscal Year 2020 (Section 873) effectively requires agencies to establish an accelerated payment date for certain contracts with a goal of 15 days after an invoice for the amount due is received (if a specific payment date is not established by contract). Ultimately, such a change will be implemented via a change to the applicable FAR provisions on point and will apply to prime contracts with:

• small businesses
• large businesses where there is a subcontract with a small business and where that prime contractor has agreed to make payments to such subcontractor in accordance with the accelerated payment date (without any further consideration from or fees charged to such subcontractor).

The FAR Council (comprised of the Department of Defense, the General Services Administration, and NASA) are engaged in rulemaking to formally amend the FAR. However, on April 6, 2020, ostensibly in response to the COVID-19 impact on small businesses, the Civilian Agency Acquisition Council (the CAAC) issued a memo that recommended agencies issue class deviations (i.e., changes that will affect more than one contract) to implement the changes sooner. The CAAC memo included recommended language, most notably:

FAR 32.009-1 (Providing accelerated payments to small business subcontractors) to provide for accelerated payments to prime contractors who have small business subcontractors:

(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 in accordance with the accelerated payment date, to the maximum extent practicable, without any further consideration from or fees charged to the subcontractor;

and

FAR 52.232-40 (Providing Accelerated Payments to Small Business Subcontractors) to reflect the changed language in FAR 32.009-1:

(a)(1) In accordance with 31 U.S.C. 3903 and 10 U.S.C. 2307, upon receipt of accelerated payments from the government, the contractor shall make accelerated payments to its small business subcontractors under this contract in accordance with the accelerated payment date established, to the maximum practicable and prior to when such payment is otherwise required under the applicable contract or subcontract, with a goal of 15 days 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.

(b) The acceleration of payments under this clause does not provide any new rights under the Prompt Payment Act.

(c) 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.

The CAAC memo also provided related modifications to other clauses, including FAR 52.212-5 (Contract Terms and Conditions Required to Implement Statutes or Executive Orders—Commercial Items), FAR 52.213-4 (Terms and Conditions- Simplified Acquisitions (Other Than Commercial Items)), and FAR 52.244-6 (Subcontracts for Commercial Items).

Thus far, the recommended class deviations have been issued by four agencies: the HHS, DHS, Treasury, and the GSA. The class deviations apply to solicitations issued after, and contracts awarded after, the issuance of the respective deviations. The DHS memorandum further specifies that contracts awarded prior to the date of its class deviation shall be modified to include the revised clauses if new orders are placed against those contracts. It is unclear whether HHS, Treasury, or GSA intend for modifications of existing contracts.

This is certainly welcome news to small businesses seeking to alleviate hardships created by the COVID-19 pandemic and small businesses with contracts with the agencies above should not be shy about contacting their contracting officer (or working with the prime contractor to contact the contracting officer) to seek a modification to existing contracts to get paid sooner.