New FAR Rule on Prime Contractor Payments to Small Business Subcontractors

FAR Council Addresses Many of AGC’s Concerns
On Dec. 20, the Federal Acquisition Regulation (FAR) Council issued a final rule requiring a prime contractor to notify federal contracting officers if (1) the prime contractor makes a reduced payment to a small business subcontractor or (2) if the prime contractor’s payment to a small business subcontractor is more than 90 days past due. The rule goes into effect on Jan. 19. The FAR Council did not withdraw the proposal as AGC recommended based on a myriad of existing small business subcontractor payment legal protections. However, it did take into account many of AGC’s concerns with the proposed rule.
For example, the FAR Council at AGC’s recommendation included:

  • Examples where a prime contractor need not report reduced or late prime contractor payments to small business subcontractors, including subcontract performance disputes, administrative mistakes and late performance by such subcontractors.

  • Clarification that the rule does not flow down beyond the first tier of subcontracting. The rule only applies to prime contractor payments to small business subcontractors at the first subcontracting tier. Therefore, any small business subcontractor below the first tier does not receive the benefit of this rule and prime contractors are not responsible for monitoring any flow down conditions.

Compliance with the rule will be considered in the small business past performance evaluation factor for prime contractors. It should be noted, however, that prime contractors may receive an exceptional rating where they “did not have a history of three or more unjustified reduced or untimely payments to small business subcontractors within a 12-month period.”
AGC also called upon the FAR Council to address the greatest problem facing contractor payment: government agency-caused payment delays. The FAR Council noted that “the FAR already contains adequate policy on Government-caused delays and changes to contract terms and conditions.” AGC disagrees. As such, AGC is already working with Congress on ways to address government-caused payment delays in the context of change orders. A hearing in the House of Representatives on the topic will likely occur in the first quarter of 2017.
For more information, contact Jimmy Christianson at [email protected] or 703-837-5325.

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Water Resources and Infrastructure Bill Heads to White House

Last week the Senate (78–21) and the House of Representatives (360–61) voted overwhelmingly to pass the Water Infrastructure Improvements for the Nation (WIIN) Act. Thanks to those of you who wrote to your members of Congress, urging them to support passing this important legislation.
The WIIN Act includes provisions from the House and Senate Water Resource Development Act (WRDA) bills, which passed in September and authorizes the Army Corps of Engineers Chief's Reports submitted to Congress since WRDA 2014. The WIIN Act also includes the Water and Waste Act of 2016, which makes changes to the Safe Drinking Water Act and Solid Waste Disposal Act. WIIN also authorizes the EPA-approved state coal ash disposal programs.
AGC will continue to monitor the progress of the WIIN Act as it heads to the president's desk to be signed into law.
For more information, contact Scott Berry at [email protected] or (703) 837-5321.

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“Civilian BRAC” Bill Passes Congress

$8 Billion in Federal Real Property Up for Consideration
Last week, Congress passed the AGC-supported Federal Assets Sale and Transfer Act. This bipartisan bill will shrink the federal footprint and streamline the disposal of excess or underutilized federal buildings. AGC has long been involved in pushing for federal real property reform and strongly supports these efforts.
The disposal of unneeded federal real property could allow for millions and potentially billions of dollars in private and federal construction work throughout the nation, as excess federal buildings exist in every state. According to the most recent Federal Real Property Summary, the government owns more than 254,000 buildings, comprising 2.5 billion square feet of space, costing the taxpayer $14.4 billion annually. Recent estimates show 77,000 buildings are underutilized, costing $1.7 billion annually.
For more information, contact Jordan Howard at [email protected] or 703-837-5325.

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