Information Memorandum No. 05-222 Subject:
Prime Contractor Timely Payment of Subcontractor Invoices
(INFORMATION) Date: August 24, 2005 Target Audience: CMO Team
Leaders, Administrative Contracting Officers, and Contract Administrators
Due to the impact on day to day operations, prime
contractors and subcontractors monitor the timeliness of contract payments.
This is especially true for Small Business Concerns. FAR Clause
52.219-8, Utilization of Small Business Concerns, specifically states, "It is
further the policy of the United States that its prime contractors establish
procedures to ensure the timely payment of amounts due pursuant to the terms
of their subcontracts with small business concerns, ..."
Contracting Officers and Contract Administrators are
reminded of the following remedies that are available when prime contractors
fail to pay subcontractors in accordance with the terms and conditions of a
subcontract or subcontract invoice -
Recommend removal of the prime contractor from the
Direct Billing Program for not following approved payment procedures, in
coordination with DCAA.
Assign high risk ratings on prime contractor
subcontracting plans for failure to manage subcontracts.
Decrement billing rates, in coordination with DCAA.
Implement fee or payment withholding.
Suspend or reduce progress payments.
Document poor subcontract management in contract
Disallow unpaid subcontract costs for financing and
Most prime contractors manage their subcontractors in
an acceptable manner. Occasionally the ACO may receive a notice from a
subcontractor regarding the prime contractors failure to make timely payments.
When reviewing the notice, the ACO should use discretion and make every effort
to protect the subcontractor's relationship with the prime contractor.