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The GovCon Bulletin™

January 20, 2016
PROPOSED FAR RULE REQUIRES PRIME CONTRACTORS TO REPORT LATE OR REDUCED SUBCONTRACTOR PAYMENTS

Today, the General Services Administration, the National Aeronautics and Space Administration, and the Department of Defense (collectively, the Federal Agencies), published a proposed rule that implements two requirements under the Small Business Jobs Act of 2010 and under a subsequent Small Business Administration's (“SBA”) final rule, published on July 16, 2013. The first requirement is that a prime contractor must report to a contracting officer when the prime contractor makes reduced or untimely payments to small business subcontractors. The second requirement is that a contracting officer must record the identity of contractors with a history of unjustified reduced or untimely payments to subcontractors in the Federal Awardee Performance and Integrity Information System (FAPIIS).

Today's proposed rule implements these self-reporting requirements by amending FAR 42.1504 to require contracting officers to include FAR clause 52.242-XX, Payments to Small Business Subcontractors, in all solicitations and contracts containing the clause at 52.219-9, Small Business Subcontracting Plan. This new FAR clause requires a prime contractor to provide a written notice to the contracting officer if it makes a payment to a small business subcontractor that is for less than the amount agreed upon in a subcontract in accordance with its terms and conditions for supplies and services for which the Government has paid the prime contractor, or if payment to a subcontractor is more than 90 days past due under the terms and conditions of a subcontract for supplies and services for which the Government has paid the prime contractor.  In accordance with the SBA final rule, today's proposed rule would apply to prime contracts that require small business subcontracting plans.

The proposed rule also revises FAR 42.1502(g) to include in the past performance evaluation reduced or untimely payments reported to the contracting officer by the prime contractor that are determined by the contracting officer to be unjustified. Likewise, the proposed rule revises FAR 42.1503(b)(2)(v) to include reduced or untimely payments made to small business subcontractors under a subcontracting plan to the list of “Small business subcontracting” past performance evaluation factors. The proposed rule also amends FAR 42.1503(h) to require contracting officers to report to FAPIIS a contractor that has a history of three or more reduced or untimely payments to small business subcontractors within a 12-month period under a single contract that are unjustified. FAR Table 42-2, “Evaluation Ratings Definitions (for the Small Business Subcontracting Evaluation Factor, When 52.219-9 is Used),” is also amended to include unjustified reduced or untimely payments to small business subcontractors as part of the definition of ratings for the “small business subcontracting” past performance evaluation factors. Contracting officers will consider the reported information in evaluating contractor past performance to determine if a contractor has a history of unjustified reduced or untimely payments to small business subcontractors.

The proposed rule would apply to payments made to small businesses that are first-tier subcontractors to prime government contractors and would cover acquisitions for commercial items, including acquisitions for commercial-off-the-shelf (COTS) items.

Interested parties must submit comments to the Federal Agencies on or before March 21, 2016.