A federal contracting rule published February 14, 2023 sets out a 15-day accelerated-payment goal for small business contractors, but does not give them a new right to late-payment interest after that period. The Federal Acquisition Regulation change takes effect March 16. Its timing depends on receipt of a proper invoice and all other required documentation—not simply the day a supplier sends a bill. [S1]

For civilian agencies, the revised rule calls for accelerated payments to the fullest extent permitted by law, with a goal of 15 days after receipt of the invoice and required documents, if the contract does not establish a specific payment date. The Department of Defense provision omits that last condition. Both provisions cover small business prime contractors and primes that subcontract with small businesses, subject to the prime agreeing to the specified accelerated payments to those subcontractors without fees or other consideration. [S1]

A small subcontractor has a different starting point. Revised FAR clause 52.232-40 requires the prime to make accelerated payments within 15 days after receiving accelerated payment from the government, to the maximum extent practicable and before payment would otherwise be due under the contract or subcontract. The prime must also have received a proper invoice and all other required documentation from the small subcontractor. It cannot demand a fee or further consideration for that acceleration. For the subcontractor, sending an invoice is not enough to start a guaranteed 15-day countdown. [S1]

The agencies left the documentation requirement intact. In their response to comments, the Defense Department, General Services Administration and NASA declined to narrow it to documents that were commercially reasonable unless required by law. They said the statute did not create or change the definition and that documentation could be required by the contract, the law, or both. For suppliers, that makes the full invoice package—not just the bill—the relevant check. [S1]

Accelerated payment to small subcontractors is not a new concept in the FAR. The original clause adopted in November 2013 already tied the prime's obligation to receipt of accelerated government payment, a proper subcontractor invoice and the required documents. That original clause required acceleration to the maximum extent practicable but did not put a numerical 15-day period in its payment paragraph. The February 2023 text spells out that period and the prohibition on charging for acceleration. The rule also applies to contracts at or below the simplified acquisition threshold and to commercial products and services, including commercially available off-the-shelf items. [S1][S2]

The agencies expect the change to improve small businesses' cash flow and access to federal work; the rule is not evidence that invoices have already been paid faster. It explicitly leaves Prompt Payment Act late-payment interest provisions unchanged and creates no new rights under that Act. A supplier therefore needs to keep the accelerated-payment goal separate from the payment terms and interest protections that otherwise apply. [S1]

Source documents

  1. Federal Acquisition Regulation: Accelerated Payments Applicable to Contracts With Certain Small Business Concernshttps://www.govinfo.gov/content/pkg/FR-2023-02-14/html/2023-02425.htm
  2. Federal Acquisition Regulation; Accelerated Payments to Small Business Subcontractorshttps://www.govinfo.gov/content/pkg/FR-2013-11-25/html/2013-28053.htm