• A New Rule Designed to Assist Small Business Subcontractors
  • December 2, 2013 | Authors: Edward T. DeLisle; Amy M. Kirby
  • Law Firm: Cohen Seglias Pallas Greenhall & Furman PC - Philadelphia Office
  • On November 25th, the DOD, GSA and NASA issued a final rule incorporating a new clause into the FAR regarding accelerated payments to small business subcontractors on Government projects. The new rule, which takes effect December 26, 2013, requires large business prime contractors receiving accelerated payments from the Government to, in turn, accelerate payments to all of their small business subcontractors. The purpose of the new clause is to ensure that small business subcontractors are paid as promptly as possible.

    The clause will be inserted into all new solicitations and resulting contracts issued after the effective date, including those contracts for the acquisition of commercial items. Unfortunately, the rule does not create any new remedies, where accelerated payments must be issued and they are not. Under such circumstances, the Government can discontinue accelerated payment to the prime contractor, but nothing more.

    One interesting aspect of the new rule is that large business prime contractors cannot prevent their small business subcontractors from speaking to the contracting officer about the status of payment. Subcontract Agreements often state the exact opposite. Prime contractors typically do not want their subcontractors asking the contracting officers questions of any kind, let alone questions regarding payment. While this is certainly understandable, by virtue of the new rule, large business prime contractors will not have the same legal support for their position.

    There’s not a lot to sink your teeth into here. However, the fact that small business subcontractors can go right to the contracting officer about payment issues without fear of legal retribution is at least something.