Prime Contractors Beware: Reduced Or Untimely Subcontractor Payments May Require Reporting

A new Federal Acquisition Regulation ("FAR") final rule that implements a section of the Small Business Jobs Act of 2010 requires certain prime contractors to "self-report" to their contracting officers all reduced or untimely payments to their small business subcontractors. 82 Fed. Reg. 93481.

New FAR 52.242-5(b) explains that the "Contractor shall notify the Contracting Officer, in writing, not later than 14 days after-(1) A small business subcontractor was entitled to payment under the terms and conditions of the subcontract; and (2) The Contractor-(i) Made a reduced or untimely payment to the small business subcontractor; or (ii) Failed to make a payment, which is now untimely."  Id.  If a contractor fails to make the required payment, it is required to "include the reason(s) for making the reduced or untimely payment in any Notice required under paragraph (b) of this clause."  Id.