Obama wants small businesses paid in 15 days

The government will be paying some small businesses in half the time under a new proposal by President Barack Obama.

Obama announced his new “QuickPay” plan on Sept. 14. It requires agencies to cut checks in 15 days, instead of 30 days, after they receive a valid invoice. The 15-day payments apply only to prime contractors.

“Today I’m ordering all federal agencies to make sure those small-business owners get paid a lot faster than they do now. In many cases, it will be twice as fast. So that puts more money in their pockets quicker, which means they can hire folks quicker,” Obama said Sept. 14 in Raleigh, N.C.

The plan goes into effect immediately.

The administration decided getting cash to companies is necessary in these economic times and moved the payment deadline under the Prompt Payments Act, Jacob Lew, director of the Office of Management and Budget, wrote in a memo released Sept. 14.

“When small contractors get their money in 15 days instead of 30, it results in a permanent infusion of cash flow into their businesses,” Small Business Administration Administrator Karen Mills said in a statement. “Their financial footing gets stronger — permanently.”

Lew is also telling agency officials that by November, they must tell OMB officials when they began paying small businesses in 15 days and the name of the federal official responsible for it.

The government awards nearly $100 billion annually in federal contracts to small firms, and sending money out quickly would help those companies in tough times, officials said.

Rep. Sam Graves (R-Mo.), chairman of the House Small Business Committee, applauded the president's new plan.

"Small businesses bring more competition and reduced prices to federal contracting, so we should make sure the federal government pays them in a timely manner, especially considering most of them are operating on tight profit margins and trying to do more with less," he said.

On Sept. 8, Obama said the government could help struggling small-business contractors by sending payments more quickly.

Joe Jordan, associate administrator of government contracting and business development at the SBA, said the 15-day mark benefits small businesses the most while not forcing agencies to change or modify their automated systems or processes.

“It really has a great confidence component," he said.

"By taking actions that will enable these payments to be made as promptly as possible, we will improve cash flow for small businesses and provide them with a more predictable stream of resources," Jeffrey Zients, chief performance officer and deputy director for management at OMB, wrote in a new post on OMB's blog.

About the Author

Matthew Weigelt is a freelance journalist who writes about acquisition and procurement.

Reader Comments

Fri, Jul 11, 2014

While State of Illinois owes $7.6 billion to vendors with months of delay.

Mon, Jul 7, 2014

I work for the Agency that pays these Vendors. Before putting all the blame on the Paying Agency, Vendors should pay attention to their Contracts to keep in mind the requirements they needed to submit with their Invoices. Most of the time the delay is caused by their inadequacies to submit the requirements needed to process their payments. Our Pay System is set up in such a way that missing information will not let the payment process to go through.

Thu, Dec 1, 2011 mythought Wash. DC

It's amazing how far people will go to disagree with our President, even to their own detriment. I run a small construction/ design firm here in Washington DC, area and I know 15 day payments help us tremendously. Having a small line of credit helps but hurts when you have to factor in the costs of credit into your cost for services, it limits your competitive edge. If we can get our clients to pay us in 15 days in lieu of 30 -45 we save money on interest we would have had to pay on out line of credit, while at the same time, able to offer our clients a more competitive price for service. I thank the President for at least considering small businesses. Keep fighting for America Mr.President.

Fri, Sep 16, 2011

I am a business owner and cash flow is a critical issue for my small; but, very successful business. Prior to the “QuickPay” plan, we would have to pay our employees 30 days (and in some cases as much as three months) in advance of compensation from our governmental customers. These conditions have at times created significant payroll issues and this initiative is expected to be a tremendous help in this area. But, in addition to payroll, this initiative will ensure we are able to pay our suppliers on-time or early. This should further bolster our credit ratings, allowing us to borrow more and making us an even stronger company. I applaud the President on this measure and wanted to thank him publicly. I am optimistic that this measure alone has the potential to enable us to increase the amount of business we can pursue and grow.

Fri, Sep 16, 2011

Unless they take the money-handling away from the agencies and common service it from an accounting agency that actually knows what they are doing, it will never happen. Our money people spend half their time trying to move dollars and data between all the different agencies with incompatible accounting systems. Entire FedGov, including DoD, needs standard GAAP-compliant accounting infrastructure, and one database up in the sky to track the dollars.

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