Time Is Money; It's in the FAR

Out of all small businesses that fail, 82% fail for the same reason: insufficient cash flow. But, as some may find surprising, in most of these cases, the problem was not that the company had not earned enough. Instead, delays in obtaining payment for the completed work are what usually do them in....

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Bibliographic Details
Published inContract management Vol. 60; no. 1; pp. 12 - 13
Main Author Gorelik, Alexander
Format Magazine Article
LanguageEnglish
Published McLean National Contract Management Association 01.01.2020
Subjects
Cash flow
Contractors
Government contracts
Payments
Small business
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Summary:Out of all small businesses that fail, 82% fail for the same reason: insufficient cash flow. But, as some may find surprising, in most of these cases, the problem was not that the company had not earned enough. Instead, delays in obtaining payment for the completed work are what usually do them in. Challenges that stem from late payments are not unique to businesses in the private sector. As the Government Accountability Office (GAO) has observed, the government's late payments to its contractors can "increase their borrowing costs, discourage them from competing for the government's business, or result in higher prices to compensate for delays in payment." In recognition of those challenges for industry, the Congress passed the Prompt Payment Act to set government wide standards for determining when the government had to pay its bills. Most significant, yet commonly forgotten, is that the Prompt Payment clauses offer no benefit to a contractor when its entitlement to a payment is somehow in dispute. In short, contractors must comply with the requirements of their contracts before they can take advantage of any Prompt Payment clause provision.
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ISSN:0190-3063