OMB Adopts New Accelerated Payment Policy for Small Businesses

The Office of Management and Budget (“OMB”) recently established a new policy requiring agencies to make payments to small business contractors as soon as possible, with the goal of making the payments within 15 days of receipt of proper documentation. Office of Mgmt. & Budget, Executive Office of the President, OMB Bull. No. M-11-32, Accelerating Payments to Small Businesses for Goods and Services. available at http://www.whitehouse.gov/sites/ default/files/omb/memoranda/2011/m11-32.pdf. Under the Prompt Payment Act (“PPA”), agencies are generally only required to pay contractors within 30 days.  In practice, agencies generally do not initiate payment until 21 days after receipt of the invoice.  It should be noted, however, that OMB’s new 15 day time period for small business payments is only a goal.  The late-payment interest penalty under the PPA will generally only apply to payments made after 30 days.  Agencies were required to report to OMB by November 1 when they will implement the accelerated payments so small business contractors should soon see an impact on their accounts receivable.

Jeffry Cook is the attorney responsible for the content of this article.