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I work for a Large Business who is prime on a government contract. One of our major subcontractors is a small business. I am being asked to request inclusion of 52.232-40 in our contract. I know it's now required for all solicitations/orders, however, I would like feedback on what I believe is a misinterpretation of the clause. My program office feels that inclusion of the clause allows the government to provide accelerated payments to us as the prime that we may in turn accelerate invoice payments to our small business subcontractor. I disagree. I believe the purpose is to notify the Prime that SHOULD the government accelerate its payments that it, must in turn, accelerate payments to the small business. Even if it were not now a required clause, inclusion doesn't help us as Prime at all. It's designed to protect the small business subcontractor as it should. Anyway, read a few memos, M-12-16; M-13-15; and M-14-10 and it looks like the government plans to accelerate payments whenever possible at least through December 2016. With that, I will advise (if you all agree) that M-14-10 helps to improve the likelihood that we as Prime are paid within 15 days; there is no clause that would guarantee accelerated payment to us under these circumstances; and 52.232-40 is included in the contract under the Christian Doctrine and therefore our subcontractor should rest assured that they are protected,

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You are right and your program office is wrong. FAR 52.232-40 requires that if the government provides accelerated payments to the prime, then the prime must provide accelerated payments to its small business subs. The clause does not provide for accelerated payments to the prime.

It is government policy, as stated in the OMB memos, to provide accelerated payments to small business primes.

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Who is asking that you include the clause? The subcontractor or the program office?

Regardless, I would not agree that "52.232-40 is included in the contract under the Christian Doctrine" -- if the program office wants to add the clause, that is a matter of mutual agreement supported by consideration - see FAR 1.108( d )( 3 ).

Otherwise, the clause is not in the contract and is not enforceable. Read the prescribing language from FAC 2005-71: "This clause will be inserted into all new solicitations issued after the effective date of this rule and resultant contracts, including solicitations and contracts for the acquisition of commercial items."

As far as interpreting the clause, you and Vern have actually read the clause and you rightly understand what it actually says. Others with opinions on the matter may never have actually read the clause.

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What is an accelerated payment? Is it the same as a prompt payment or could it also include other "types" of payments, say payment for partial delivery or a progress payment?

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Whynot,

I'm not sure our payments offices know the difference between invoice payments and contract financing payments -- these are defined in FAR 32.001, Definitions -- I'm not sure that many contracting offices know the difference, either -- generally, the interest penalties of the Prompt Payment Act apply to invoice payments but not to contract financing payments. But I have known of payment offices who insist on paying interest for late payments for contract financing payments, because they can't tell the difference.

Anyway, I have never seen any discussion limiting the OMB reach or the clause at FAR 52.232-40 only to invoice payments, so I have generally thought that the policy applied to all payments.

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