Defense Federal Acquisition Regulation Supplement: Prompt Payments of Small Business Contractors (DFARS Case 2018-D068)
| Published date | 31 May 2019 |
| Citation | 84 FR 25225 |
| Record Number | 2019-11309 |
| Section | Proposed rules |
| Court | Defense Acquisition Regulations System |
Federal Register, Volume 84 Issue 105 (Friday, May 31, 2019)
[Federal Register Volume 84, Number 105 (Friday, May 31, 2019)]
[Proposed Rules]
[Pages 25225-25228]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-11309]
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DEPARTMENT OF DEFENSE
Defense Acquisition Regulations System
48 CFR Parts 212, 232, and 252
[Docket DARS-2019-0025]
RIN 0750-AK25
Defense Federal Acquisition Regulation Supplement: Prompt
Payments of Small Business Contractors (DFARS Case 2018-D068)
AGENCY: Defense Acquisition Regulations System, Department of Defense
(DoD).
ACTION: Proposed rule.
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SUMMARY: DoD is proposing to amend the Defense Federal Acquisition
Regulation Supplement (DFARS) to implement a section of the National
Defense Authorization Act for Fiscal Year 2019 that provides for
accelerated payments to small business contractors and subcontractors.
DATES: Comments on the proposed rule should be submitted in writing to
the address shown below on or before July 30, 2019, to be considered in
the formation of a final rule.
ADDRESSES: Submit comments identified by DFARS Case 2018-D068, using
any of the following methods:
[cir] Federal eRulemaking Portal: http://www.regulations.gov.
Search for ``DFARS Case 2018-D068.'' Select ``Comment Now'' and follow
the instructions provided to submit a comment. Please include ``DFARS
Case 2018-D068'' on any attached documents.
[cir] Email: [email protected]. Include DFARS Case 2018-D068 in
the subject line of the message.
[cir] Fax: 571-372-6094.
[cir] Mail: Defense Acquisition Regulations System, Attn: Jennifer
D. Johnson, OUSD(A-S)DPC/DARS, Room 3B941, 3060 Defense Pentagon,
Washington, DC 20301-3060.
Comments received generally will be posted without change to http://www.regulations.gov, including any personal information provided. To
confirm receipt of your comment(s), please check www.regulations.gov,
approximately two to three days after submission to verify posting
(except allow 30 days for posting of comments submitted by mail).
FOR FURTHER INFORMATION CONTACT: Ms. Jennifer D. Johnson, telephone
571-372-6100.
SUPPLEMENTARY INFORMATION:
I. Background
This rule proposes to revise the DFARS to implement section 852 of
the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2019
(Pub. L. 115-232). Section 852 provides for accelerated payments to
small business contractors and to small business subcontractors by
accelerating payments to their prime contractors. Specifically, section
852 requires DoD, to the fullest extent permitted by law, to establish
an accelerated payment date for small business contractors, with a goal
of 15 days after receipt of a proper invoice, if a specific payment
date is not established by contract. For contractors that subcontract
with small businesses, section 852 requires DoD, to the fullest extent
permitted by law, to establish an accelerated payment date, with a goal
of 15 days after receipt of a proper invoice, if: (1) A specific
payment date is not established by contract, and (2) the contractor
agrees to make accelerated payments to the subcontractor without any
further consideration from, or fees charged to, the subcontractor.
The requirements of section 852 are similar to current DoD policy
and practice regarding payments to small business contractors and
subcontractors. DFARS 232.903 states DoD's policy of assisting small
businesses by paying them as quickly as possible after receipt of
invoices and proper documentation, and before normal payment due dates
established in the contract. In practice, the Defense Financial
Accounting Service (DFAS) currently provides accelerated payments to
nearly all DoD contractors, as permitted by law.
[[Page 25226]]
II. Discussion and Analysis
This rule proposes to amend DFARS parts 212, 232, and 252 to
implement section 852 of the NDAA for FY 2019. In part 232, this rule
proposes to add section 232.009, Providing accelerated payments to
small business subcontractors, to address compliance with section 852.
The clause at Federal Acquisition Regulation (FAR) 52.232-40, Providing
Accelerated Payments to Small Business Subcontractors, already includes
most of the requirements of section 852. Therefore, DoD will continue
to use the FAR clause, in order to avoid unnecessary duplication.
However, this rule proposes to add a new contract clause at DFARS
252.232-7XXX, Accelerating Payments to Small Business Subcontractors--
Prohibition on Fees and Consideration. In accordance with section 852,
this new clause prohibits contractors from requiring any further
consideration from, or charging fees to, their small business
subcontractors when making accelerated payments under FAR 52.232-40.
The rule proposes to add this new clause to the list at section
212.301, Solicitation provisions and contract clauses for the
acquisition of commercial items.
III. Expected Impact of the Proposed Rule
Current DoD policy, as stated in DFARS 232.903, is to pay small
business contractors as quickly as possible after receipt of invoices
and proper documentation. This rule proposes to specify that DoD will
provide payment as quickly as possible, to the fullest extent permitted
by law, with a goal of 15 days after receipt of proper invoices and
documentation, and before normal payment due dates. For items that
ordinarily require payment in less than 15 days (e.g., perishable
food), DoD will provide payment as quickly as possible after receipt of
proper invoices and documentation, and before the normal payment due
date.
With few exceptions, DoD will provide accelerated payments to small
business contractors and to other contractors that agree to provide
accelerated payments to their small business subcontractors without
further consideration or fees. DoD will not be able to provide
accelerated payments if such payments put DoD at risk of a violation of
law.
DoD estimates that 40,282 contractors (including 30,498 small
businesses) will receive accelerated payments each year, based on data
obtained from the Federal Procurement Data System and input from
subject matter experts. Specifically, DoD awarded contracts to an
average of 40,689 unique entities (including 30,806 small businesses)
each year from FY 2016 through FY 2018. Subject matter experts
estimated that DoD would not provide accelerated payments to
approximately 1 percent (407, including 308 small businesses) of these
contractors because such payments would put DoD at risk of a violation
of law. Therefore, approximately 40,282 contractors (including 30,498
small businesses) per year would receive accelerated payments.
The clause at FAR 52.232-40, Providing Accelerated Payments to
Small Business Subcontractors, currently requires contractors to
provide accelerated payments to their small business subcontractors
when the Government provides accelerated payments to the contractors.
DoD contracting officers are required to include this clause in DoD
contracts. As a result, DoD contractors should already be providing
accelerated payments to small business subcontractors.
In accordance with section 852 of the NDAA for FY 2019, this rule
proposes to prohibit contractors from requiring any further
consideration from, or charging fees to, their small business
subcontractors when making accelerated payments. This prohibition will
be communicated to contractors in a new contract clause at DFARS
252.232-7XXX, Accelerating Payments to Small Business Subcontractors--
Prohibition on Fees and Consideration. This prohibition would benefit
small business subcontractors who have been required to provide
consideration or pay fees to the prime contractor in order to receive
accelerated payments. Any costs for prime contractors to implement the
prohibition on fees and consideration are expected to be de minimis
since DoD expects that only a small number of contractors have required
such consideration or fees from their small business subcontractors.
It is not possible for DoD to estimate the number of small business
subcontractors who have been required to provide consideration or pay
fees for accelerated payments from prime contractors, nor is it
possible to estimate the dollar value of the consideration provided or
fees paid. The lack of available data makes it difficult to predict the
impact of the proposed rule. Depending on the extent to which small
business subcontractors have been required to provide consideration or
pay fees to receive accelerated payments, the proposed prohibition
could result in cost savings. DoD invites public comment regarding the
number of small businesses required to provide such consideration or
fees to prime contractors, the basis for such estimates, and the cost
impact of the consideration or fees.
IV. Applicability to Contracts at or Below the Simplified Acquisition
Threshold and for Commercial Items, Including Commercially Available
Off-the-Shelf Items
DoD intends to apply the requirements of section 852 of the NDAA
for FY 2019 to contracts at or below the simplified acquisition
threshold (SAT) and to contracts for the acquisition of commercial
items, including commercially available off-the-shelf (COTS) items.
A. Applicability to Contracts at or Below the SAT
41 U.S.C. 1905 governs the applicability of laws to contracts or
subcontracts in amounts not greater than the simplified acquisition
threshold. It is intended to limit the applicability of laws to such
contracts or subcontracts. 41 U.S.C. 1905 provides that if a provision
of law contains criminal or civil penalties, or if the FAR Council
makes a written determination that it is not in the best interest of
the Federal Government to exempt contracts or subcontracts at or below
the SAT, the law will apply to them. The Principal Director, Defense
Pricing and Contracting (DPC), is the appropriate authority to make
comparable determinations for regulations to be published in the DFARS,
which is part of the FAR system of regulations.
Given that the requirements of section 852 of the NDAA for FY 2019
were enacted to provide accelerated payments to small business
contractors and subcontractors, and since approximately 96 percent of
DoD contracts are valued at or below the SAT, DoD intends to determine
that it is in the best interest of the Federal Government to apply the
rule to contracts at or below the SAT. An exception for contracts at or
below the SAT would exclude contracts intended to be covered by the
law, thereby undermining the overarching public policy purpose of the
law.
B. Applicability to Contracts for the Acquisition of Commercial Items,
Including COTS Items
10 U.S.C. 2375 governs the applicability of laws to DoD contracts
and subcontracts for the acquisition of commercial items, including
COTS items, and is intended to limit the applicability of laws to
contracts and subcontracts for the acquisition of
[[Page 25227]]
commercial items, including COTS items. 10 U.S.C. 2375 provides that if
a provision of law contains criminal or civil penalties, or if the
Under Secretary of Defense for Acquisition and Sustainment (USD(A&S))
makes a written determination that it is not in the best interest of
the Federal Government to exempt commercial item contracts, the
provision of law will apply to contracts for the acquisition of
commercial items. Due to delegations of authority from USD(A&S), the
Principal Director, DPC, is the appropriate authority to make this
determination.
Given that the requirements of section 852 of the NDAA for FY 2019
were enacted to provide accelerated payments to small business
contractors and subcontractors, and since more than half of DoD's
contractors are small businesses providing commercial items, including
COTS items, DoD intends to determine that it is in the best interest of
the Federal Government to apply the rule to contracts for the
acquisition of commercial items, including COTS items, as defined at
FAR 2.101. An exception for contracts for the acquisition of commercial
items, including COTS items, would exclude the contracts intended to be
covered by the law, thereby undermining the overarching public policy
purpose of the law.
V. Executive Orders 12866 and 13563
Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess
all costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). E.O.
13563 emphasizes the importance of quantifying both costs and benefits,
of reducing costs, of harmonizing rules, and of promoting flexibility.
This is not a significant regulatory action and, therefore, was not
subject to review under section 6(b) of E.O. 12866, Regulatory Planning
and Review, dated September 30, 1993. This rule is not a major rule
under 5 U.S.C. 804.
VI. Executive Order 13771
This rule is not expected to be subject to the requirements of E.O.
13771, because this rule is not a significant regulatory action under
E.O. 12866.
VII. Regulatory Flexibility Act
DoD expects that this proposed rule may have a significant economic
impact on a substantial number of small entities within the meaning of
the Regulatory Flexibility Act, 5 U.S.C. 601, et seq. Therefore, an
initial regulatory flexibility analysis has been performed and is
summarized as follows:
DoD is proposing to amend the DFARS to implement section 852 of the
National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2019
(Pub. L. 115-232). Section 852 requires DoD, to the fullest extent
permitted by law, to establish an accelerated payment date for small
business contractors, with a goal of 15 days after receipt of a proper
invoice, if a specific payment date is not established by contract. For
contractors that subcontract with small businesses, section 852
requires DoD, to the fullest extent permitted by law, to establish an
accelerated payment date, with a goal of 15 days after receipt of a
proper invoice, if--(1) a specific payment date is not established by
contract and (2) the contractor agrees to make accelerated payments to
the subcontractor without any further consideration from, or fees
charged to, the subcontractor.
The objective of the rule is to provide accelerated payments to
small business contractors and subcontractors. The legal basis is
section 852 of the NDAA for FY 2019.
According to data obtained from the Federal Procurement Data
System, DoD awarded contracts to an average of 30,806 unique small
entities each year from FY 2016 through FY 2018. DoD estimates that it
may not be possible to provide accelerated payments to approximately
308 small contractors (1%) because such payments would put DoD at risk
of a violation of law. Therefore, approximately 30,498 small
contractors per year would receive accelerated payments.
This rule does not impose any new reporting, recordkeeping or other
compliance requirements for small entities.
This rule does not duplicate, overlap, or conflict with any other
Federal rules.
There are no known alternatives that would accomplish the stated
objectives of the applicable statute.
DoD invites comments from small business concerns and other
interested parties on the expected impact of this rule on small
entities.
DoD will also consider comments from small entities concerning the
existing regulations in subparts affected by this rule in accordance
with 5 U.S.C. 610. Interested parties must submit such comments
separately and should cite 5 U.S.C 610 (DFARS Case 2018-D068), in
correspondence.
VIII. Paperwork Reduction Act
The rule does not contain any information collection requirements
that require the approval of the Office of Management and Budget under
the Paperwork Reduction Act (44 U.S.C. chapter 35).
List of Subjects in 48 CFR Parts 212, 232, and 252
Government procurement.
Jennifer Lee Hawes,
Regulatory Control Officer, Defense Acquisition Regulations System.
Therefore, 48 CFR parts 212, 232, and 252 are proposed to be
amended as follows:
0
1. The authority citations for 48 CFR part 212, 232, and 252 continue
to read as follows:
Authority: 41 U.S.C. 1303 ad 48 CFR chapter 1.
PART 212--ACQUISITION OF COMMERCIAL ITEMS
0
2. Amend section 212.301 by adding paragraph (f)(xiii)(G) to read as
follows:
212.301 Solicitation provisions and contract clauses for the
acquisition of commercial items.
* * * * *
(f) * * *
(xiii) * * *
(G) Use the clause at 252.232-7XXX, Accelerating Payments to Small
Business Subcontractors--Prohibition on Fees and Consideration, as
prescribed in 232.009-2(2).
* * * * *
PART 232--CONTRACT FINANCING
0
3. Add sections 232.009, 232.009-1, and 232.009-2 to read as follows:
232.009 Providing accelerated payments to small business
subcontractors.
232.009-1 General.
Section 852 of the National Defense Authorization Act for Fiscal
Year 2019 (Pub. L. 115-232) requires DoD to provide accelerated
payments to small business contractors and subcontractors, to the
fullest extent permitted by law, with a goal of 15 days.
232.009-2 Contract clause.
Use the clause at 252.232-7XXX, Accelerating Payments to Small
Business Subcontractors--Prohibition on Fees and Consideration, in
solicitations and contracts, including those using FAR part 12
procedures for the acquisition of commercial items, that include the
clause at FAR 52.232-40, Providing Accelerated Payments to Small
Business Subcontractors.
[[Page 25228]]
Subpart 232.9--Prompt Payment
0
4. Revise section 232.903 to read as follows:
232.903 Responsibilities.
In accordance with section 852 of the National Defense
Authorization Act for Fiscal Year 2019 (Pub. L. 115-232), DoD shall
assist small business concerns by providing payment as quickly as
possible, to the fullest extent permitted by law, with a goal of 15
days after receipt of proper invoices and all required documentation,
including acceptance, and before normal payment due dates established
in the contract (see 232.906(a)).
PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
0
5. Add section 252.232-7XXX to read as follows:
252.232-7XXX Accelerating Payments to Small Business Subcontractors--
Prohibition on Fees and Consideration.
As prescribed in 232.009-2, use the following clause:
ACCELERATING PAYMENTS TO SMALL BUSINESS SUBCONTRACTORS--PROHIBITION ON
FEES AND CONSIDERATION (DATE)
(a) In accordance with section 852 of Public Law 115-232, the
contractor shall not require any further consideration from or
charge fees to the small business subcontractor when making
accelerated payments to subcontractors under the clause at FAR
52.232-40, Providing Accelerated Payments to Small Business
Subcontractors.
(b) Include the substance of this clause, including this
paragraph (b), in all subcontracts with small business concerns,
including those for the acquisition of commercial items.
(End of clause)
[FR Doc. 2019-11309 Filed 5-30-19; 8:45 am]
BILLING CODE 5001-06-P
