GSA cuts payment time for small businesses

NOTE: This article first appeared on FCW.com.

The General Services Administration wants to keep money flowing to its small businesses contractors and subcontractors, reducing payment waits to15 days.

In an April 10 memo, Jeffrey Koses, GSA's senior procurement executive in the agency's Office of Acquisition Policy, said the agency was allowing GSA's contracting personnel to deviate from federal rules to speed payments to its small business prime contractors and prime contractors' small business subcontractors within 15 days, instead of the usual 30. The change, said Koses, applies to all contracts and orders where GSA is the only agency making payments. It does not apply to federal supply schedule contracts or multi-agency contracts, he said.

Under the change, federal contracting officials can insert language into contracts and solicitations allowing the accelerated payments. The change sets a goal of 15 days after receiving an invoice from a small business contractor, or a prime contractor with small business subcontractors, according to the memo.

The move, said Larry Allen, managing director of the Federal Market Access Group at BDO USA, is GSA's recognition of the new, remote, less centralized work environment and the logistics involved. In a more diffuse working environment, payments can tend to take longer, he said.

"Small businesses live and die on cash flow," he said. If payments are delayed, they can suffer or even sink, he said.

The rule probably doesn't to short term, one-time contracts, however, explained Allen. "It doesn't impact contracts such as a one-time order and shipment of 1,000 laptops," he said. "It does apply to multi-year agreements that might ship 1,000 laptops per quarter" over a longer term.