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Wyoming Business Tips for Dec. 4-Dec. 10
November 28, 2011 — A weekly look at Wyoming business questions from the Wyoming Small Business Development Center (WSBDC), part of WyomingEntrepreneur.Biz, a collection of business assistance programs at the University of Wyoming.
By Jeffrey W. Sneddon, Wyoming Procurement Technical Assistance Center procurement specialist
"How do I get paid on time for federal government contracts," Dean, Lovell
Getting paid in a timely manner for the services rendered or the products supplied on a government contract is certainly paramount among the needs of a small business owner.
If the government is slow paying, the business owner falls behind paying suppliers and subcontractors. Those business owners down the line then fall behind on paying their obligations. As a consequence, the delinquencies spread and finances of many firms are affected.
The government's payment regulations are spelled out in the Federal Acquisition Regulations (FAR) Subpart 32.9 - Prompt Payment. This part can be found at: https://www.acquisition.gov/far.
Prompt payment requires federal agencies to pay interest on contractor invoices that are not paid in a timely manner. Contracting activities must pay contractors interest on amounts owed to the contractor and not paid within 30 days for supplies and services and 14 days for construction.
All of this depends upon submitting a properly prepared invoice sent to the location specified in the contract or purchase order. The contracting business must notify the contractor within seven days of receiving an erroneous invoice to explain any defects or improprieties.
It is important for contractors to understand that the 30-day or 14-day clock does not start until the government receives a correct invoice at the right location. It is the contractors' obligation to make certain that happens. If the invoicing instructions are incomplete or unclear, the contractor must call the contracting officer to clarify.
Many agencies are moving away from requirements for a hard-copy invoice and going to electronic invoicing. The Department of Defense has been doing this for a number years using "Wide Area Workflow." Now being implemented in agencies within the Department of Interior is "Internet Payment Platform." These systems eliminate delivery problems and speed the payment process.
There also is good news for small business government contractors in the form of a recent Office of Management and Budget (OMB) memo directing agencies to cut in half the time it takes to pay small businesses after receiving an invoice.
The prompt payment regulations authorize agencies to make accelerated payments when agencies determine it is necessary. Now, OMB is telling agencies to make that necessity determination, "to the extent practicable," and pay contractors within 15 days. Although the memo also noted that failure to meet the 15-day deadline carriers no penalties under statute, and that not all agencies will be able to guarantee payments to contractors within 15 days.
The policy in the memorandum is based on OMB's conclusion that an agency may lawfully determine, under the Prompt Payment Act, that it is "necessary" for the agency to make accelerated payments to small business vendors.
Small business owners must understand the invoice requirements of the specific contract and the FAR regulations dealing with prompt payment. The government must fulfill its obligations for timely payment. Anything other than that is inexcusable and harmful to both the agency and the small business.
A blog version of this article and an opportunity to post comments is available at http://www.wyomingentrepreneur.typepad.com/blog/.
The WSBDC is a partnership of the U.S. Small Business Administration, the Wyoming Business Council and the University of Wyoming. To ask a question, call 1-800-348-5194, email firstname.lastname@example.org or write 1000 E. University Ave., Dept. 3922, Laramie, WY, 82071-3922.