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Policy Memorandum- Providing Prompt Payment to Small Business Subcontractors

August 15, 2012
To:OPDIV Chief Financial Officers
OPDIV Accounting Officers
From:Sheila Conley
Deputy Assistant Secretary
Subject:Policy Memorandum- Providing Prompt Payment to Small Business Subcontractors

The purpose of this memorandum is to provide HHS financial management policy regarding acceleration of payments to small businesses.

On September 14, 2011, the Office of Management and Budget (OMB) issued Memorandum 11-32, “Accelerating Payments to Small Business for Goods and Services” (  The memorandum established 11the Executive Branch policy that, to the full extent permitted by law, agencies shall make their payments to small business contractors as soon as practicable, with the goal of making payments within 15 days11 of receipt of pertinent documents.

To further accelerate payments to small businesses, OMB issued Memorandum 12-16, "Providing Prompt Payment to Small Business Subcontractors," on July 11, 2012 ( The memorandum established temporary steps for one year to ensure that prime contractors are able to pay their small business subcontractors in a prompt fashion.

To comply with this temporary policy, Accounting Centers shall immediately begin making accelerated payments to all contractors to accommodate accelerated payments to small business contractors, to the extent practicable, within 15 days of receiving proper documentation, including an invoice for the amount due and confirmation that the goods or services have been received and accepted by the Federal Government.

In addition, to assist with the endeavor, the Federal Acquisition Regulatory Council (FAR Council) is developing a standard interim clause to be included in future contracts with the prime contractors that provides prompt payment from the prime contractor to its small business subcontractors. Upon approval it will be disseminated to the Heads of the Contracting Activity.

These steps do not affect the application of the Prompt Payment Act's late-payment interest penalty provisions, which generally requires payments to prime contractors within 30 days from when the agency receives proper documentation to avoid a late-payment interest penalty. Under the Prompt Payment Act and OMB's implementing regulations, the interest penalty is triggered when an agency does not pay the contractor the amount due by “the required payment date.” This memorandum and its implementation do not modify the "required payment date” and do not otherwise modify the operation of the interest penalty.

OMB will be tracking each agencies progress in making accelerated payments, therefore, we will be requesting data monthly and will provide to OMB. OMB will provide further guidance after a year on the appropriate steps that agencies should consider ensuring that small business subcontractors continue to be paid promptly by their prime contractors.

Thank you for your assistance and cooperation. If you have any questions regarding this memorandum please contact Margie Yanchuk at 202-205-7239.

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*NOTE: Persons using assistive technology may not be able to fully access information in the file above. For assistance, contact the GSA Office of Governmentwide Policy.