Extended Payment Terms

[TS1049065]

It is a progressive practice in the commercial world to have extended payment terms with preferred suppliers (i.e., NET 45, NET 60 etc.) While I understand the intent of the prompt payment sections of the FAR and DFARS, I do not read it as being specifically prohibited. Small businesses aside, am I missing something? Thx!

[Guest Jason Lent]

FAR 52.232-25 (for non-AE and non-construction contracts where the commercial items terms and conditions clause at 52.212-4 isn't included) has the max of 30 days and its prescription at 32.908 only allows for changing the payment "clock" between 7 and 30 days, given agency policies.

From the prescription for 52.232-25 at 32.908©(2):

As provided in 32.903, agency policies and procedures may authorize amendment of paragraphs (a)(1)(i) and (ii) of the clause to insert a period shorter than 30 days (but not less than 7 days) for making contract invoice payments.

The Prompt Payment clause makes it pretty clear that the government will pay in 30 days or less after acceptance and doesn't seem to give latitude to extend that, only shorten it with proper justification/approval.

FAR 52.212-4(g)(2) even says invoices will be handled in accordance wit the Prompt Payment Act.

Where in Federal Contracting (ha ha!) would you be considering extended payment terms?

EDIT: I should lurk more and realize that not everyone here is speaking from the perspective of a government CO. D'oh.

[here_2_help]

It is a progressive practice in the commercial world to have extended payment terms with preferred suppliers (i.e., NET 45, NET 60 etc.)

I question your use of the terms "progressive" and "preferred" in the quote above. If the suppliers are "preferred" why would you penalize their cash flow by extending payment terms? A more "progressive" approach is to create win/win partnerships where the higher-tier does not treat the lower-tier supplier as an adversarial party.

That being said, if your subcontract agreement states payment terms of longer than 30 days, you can pay your supplier IAW subconract terms, so long as the supplier is not a small business.

H2H