Prompt Payment

OFFICE OF MANAGEMENT AND BUDGET

5 CFR Part 1315

RIN 0348-AB47

Prompt Payment

AGENCY: Office of Management and Budget, Executive Office of the

President.

ACTION: Proposed rule.

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SUMMARY: This document requests comment on proposed regulations which

will revise and replace Office of Management and Budget (OMB) Circular

No. A-125, ``Prompt Payment.'' This proposal is being made to reflect

requirements of the Debt Collection Improvement Act of 1996 as well as

an increasingly electronic commercial financial systems environment; to

promote the use of government credit cards and accelerated payment

methods; to clarify and simplify current language; and to announce a

new toll-free number and internet website for Prompt Payment Act

information. The prompt payment implementing regulations are provided

in a uncodified format for comment purposes. These regulations will be

codified at the final rule stage in 5 CFR Part 1315, unless pending

legislation transfers the authority for issuing these regulations to

the Department of the Treasury. In that case, they will be codified in

Title 31 of the Code of Federal Regulations.

DATES: Comments must be received by August 17, 1998. The prompt payment

regulations are proposed to be effective 30 days after final

publication of the final rule. For payments under contracts or purchase

orders solicited on or after July 26, 1996, the requirement to collect

banking information, for purposes of making an EFT payment pursuant to

31 U.S.C. 3332, as amended, is proposed to be effective 30 days after

publication of the final rule. For payments under contracts or purchase

orders solicited before July 26, 1996, the requirement to collect

banking information is proposed to be effective January 2, 1999.

ADDRESSES: All comments should be addressed to Cynthia L. Johnson,

Director, Cash Management Policy and Planning Division, Financial

Management Service, U.S. Department of the Treasury, Room 420, 401 14th

Street S.W., Washington, D.C. 20227.

Copies of the current and proposed circulars and other information

are available from the Prompt Pay website at http://www.fms.treas.gov/

prompt/index.html or from the Treasury Department, Financial Management

Service website at the following address: http://www.fms.treas.gov/.

Copies of the current and proposed circulars are also available from

the Executive Office of the President's Publications Office, Room 2200

New Executive Office Building, 725 17th Street NW, Washington, D.C.

20503, phone (202) 395-7332, and via fax-on-demand at (202) 395-9068.

FOR FURTHER INFORMATION CONTACT: Martha Thomas-Mitchell, Financial

Program Specialist on (202) 874-6757; Diana Shevlin, Financial Program

Specialist on (202) 874-7032; Sally Phillips, Senior Financial Program

Specialist on (202) 874-6749; or, Cynthia Johnson, Director, Cash

Management Policy and Planning Division on (202) 874-6657.

SUPPLEMENTARY INFORMATION:

I. Introduction

In 1982, Congress enacted the Prompt Payment Act (``Act''; Pub. L.

97-177) to require Federal agencies to pay their bills on a timely

basis, to pay interest penalties when payments are made late, and to

take discounts only when payments are made by the discount date. The

Act, as amended, is found at 31 U.S.C. Chapter 39. To implement the

Act, and pursuant to 31 U.S.C. 3903(a), OMB issued Circular A-125

(``Prompt Payment'') in August 1982 (47 FR 37321, August 25, 1982). In

response to changes to the Act that Congress made in the Prompt Payment

Act Amendments of 1988 (Pub. L. 100-496), OMB revised Circular A-125 in

December 1989 (54 FR 52700, December 21, 1989).

The increased use of electronic commerce, in the Federal government

and in the private sector, including electronic financial systems and

electronic funds transfer, require that Circular A-125 be updated in

light of current practices. The use of electronic commerce is a

priority in the current administration. In a memorandum to agencies

dated October 26, 1993, President Clinton emphasized the need for and

importance of electronic commerce as a means for streamlining

government and saving taxpayer dollars. 3 CFR 791 (1993 Comp.). The

National Performance Review (NPR), headed by Vice President Al Gore,

recommended examining government practices to streamline regulations

and processes and, in particular, called for an ``all electronic

Treasury.'' The president's directive and the NPR recommendations

resulted in the establishment of an inter-agency workgroup to revise

the current circular to reflect the changing commercial environment

while streamlining the Federal payment function through the increased

use of electronic commerce. The Department of Treasury's Financial

Management Service (``FMS'') led the revision effort on behalf of the

Office of Management and Budget. (Under proposed legislation pending in

Congress, responsibility for regulations and reporting under the Act

would be transferred from OMB to the Treasury Department.)

II. Proposed Revisions to Circular A-125

In this proposed revision to the circular, its provisions have been

reorganized. For example, in most cases the requirements for certain

types of payment have been consolidated in the section on that payment.

Thus, whereas determining the payment due date for discounts and

determining whether to take a discount are discussed separately in the

current circular (see Sections 4.i. and 4.m.), they are found together

in the proposed circular in Section 6 entitled ``Discounts.'' In

addition, several provisions have been added to the revised circular.

For example, the revised circular is expanded (see Section 5) to

include options for making payments before 30 days if doing so is in

the best interests of the government and promotes electronic payments.

The circular has also been revised to clarify and simplify current

language. Finally, the circular announces a new toll-free number, 1-

800-266-9667, for questions about Prompt Pay policy, reporting

requirements and previous and current Prompt Pay interest rates. The

circular

[[Page 33001]]

also announces a Prompt Pay website at http://www.fms.treas.gov/prompt/

index.html. The website will contain, among other things, rate

information, frequently asked questions, copies of current circulars

and links to other related websites. The website may also be accessed

through FMS' website at http://www.fms.treas.gov/.

The following describes how the Circular has been reorganized, and

it explains the more significant changes and clarifications.

A. Proposed Revisions Implementing the Debt Collection Improvement Act

On April 26, 1996, the president signed into law the Debt

Collection Improvement Act of 1996 (``DCIA''; Pub. L. 104-134)

requiring that, in the first phase, all new Federal payments, including

vendor payments, be made electronically on or after July 26, 1996.

Treasury Department regulations implementing this phase of the DCIA (31

CFR 208, Management of Federal Agency Disbursements, Interim Rule)

define a new Federal vendor payment as one which must be paid by EFT if

``the payment is made under a contract or purchase order resulting from

a solicitation issued on or after July 26, 1996.'' All vendor payments

must be made electronically after January 1, 1999. Treasury Department

regulations implementing this phase of the DCIA are scheduled to be

published in the summer of 1998.

The revised circular (Section 8.b(8)) requires the collection of

banking information in order to make an EFT payment as required by the

DCIA unless the payment is waived under 31 C.F.R. Part 208. The

circular (Section 8.b.(7)) also requires the collection of the Taxpayer

Identifying Number (TIN). The TIN is required under DCIA for debt

collection and under the Internal Revenue Code for vendor income

reporting. See 31 U.S.C. 7701(c); 26 U.S.C. 6109. The Treasury

Department requires each agency to prepare a TIN implementation plan to

document agency strategies for achieving compliance with the TIN

provisions of the DCIA, and to identify barriers to collecting and

providing TINs.

B. Other Proposed Revisions

1. The ``Definitions'' section (Section 1 of the current circular)

has been moved to the end of the regulation (Section 18). In addition,

the term ``contractor'' has been replaced with the term ``vendor,'' and

the terms ``paying office'' and ``billing office'' have been changed to

``designated agency office.''

2. The ``Application'' section (Section 2 of the current circular)

has been redesignated Section 1. The section includes one additional

exception to the Prompt Payment Act requirements. This exception is for

payments related to certain specified emergencies and military

operations (Section 1.b(2)).

3. The ``Responsibilities'' section (Section 3 of the current

circular) has been redesignated Section 2. Specific guidance on

establishing a quality control program (Section 3.e. of the current

circular) has been replaced with general guidance on implementing a

quality control process (Section 2.b.). Quality Control (QC) systems

are required by OMB Circular A-123, ``Management Accountability and

Control.''

In addition, Section 2.c of the revised circular provides standards

for agencies' financial management systems to ensure that they are in

compliance with OMB Circular A-127, ``Financial Management Systems.''

4. The ``Standards for Prompt Payment'' section (Section 4 of the

current circular) has been redesignated Section 3 and retitled ``Prompt

Payment Standards and Required Notice to Vendors.'' Several changes

have been made to this section.

The revised circular (Section 3.b) clarifies when an invoice is

deemed to be received for invoices that are mailed or received

electronically, or when a delivery ticket serves as the invoice.

The revised circular (Section 3.c(3)) provides that agencies may

use computer-related media in place of paper documents to expedite

payment transactions, as long as there are adequate safeguards and

controls to ensure the integrity of the data.

``Starting the Payment Period'' (Section 3.f.) has been reorganized

to include all discussion related to calculating the start of the

payment period. Section 3.f. combines the discussions found in the

current circular ``Receipt of invoice'' (Section 1.n.) and ``Starting

the Payment Period'' (Section 4.d.). This provision also includes the

addition of an acceptance document or delivery ticket as the basis for

starting the payment period.

``Determining the payment due date'' (Section 3.g(1)) has been

expanded to include payments due when discounts are taken and when

accelerated payment methods are used.

``Mixed invoices for commodities'' (Section 3.g(2)D) now includes

the provision that the entire invoice may be paid on the due date for

the commodity with the earliest due date, if it is considered in the

best interests of the agency.

Guidance on notification for an improper invoice (Section 4.b(3) of

the current circular) has been moved to the section on ``Review of

Invoice'' (Section 3.c(2)).

5. Section 4 of the proposed regulation, ``Accelerated Payment

Methods,'' has been added. It includes a provision which allows

agencies to make payments for invoices under $2,500 after matching

documents. This section also provides for early payment for small,

disadvantaged businesses, and for payments related to emergencies and

disasters, as well as for military deployments.

6. Section 5 of the proposed regulation, ``Fast Payment,'' replaces

Section 12 of the current circular. The section on ``Fast Payment''

requires that payment be made within 15 days of receipt of a proper

invoice without evidence that goods or services have been received.

References to Federal Acquisition Regulation (FAR) clauses for Fast

Payment are included.

7. Section 6 of the proposed regulation, ``Discounts,'' has been

added and consolidates the requirements related to discounts. The

reference to the discount formula found in the Treasury Financial

Manual has been updated.

8. Section 7 of the proposed regulation, ``Rebates,'' has been

added to the circular. The section instructs agencies to determine

credit card payment dates based on an analysis of the total costs and

total benefits to the Federal government as a whole. When calculating

costs and benefits, agencies are expected to include the cost to the

government of paying early. This cost is the interest the government

would have earned, at the Current Value of Funds rate, for each day

that payment was not made. Agencies may also factor in the benefits,

from streamlining or other efficiencies, to the agency of paying early.

Treasury will publish a rebate formula in the Treasury Financial Manual

(TFM) which can be used to determine when a credit card invoice should

be paid. The Current Value of Funds rate is available by the toll-free

number and internet website listed above.

9. The ``Required Documentation'' section (Section 5 of the current

circular) has been redesignated Section 8.

Agencies are required (Section 8.a.(8)) to stipulate that banking

information must be submitted no later than the first request for

payment in order to make payments electronically as required by the

Debt Collection Improvement Act of 1996, except in situations addressed

in the waiver provisions for 31 CFR Part 208. Agencies will use the

appropriate

[[Page 33002]]

Federal Acquisition Regulation electronic funds transfer contract

clause.

In order for an invoice to be a proper invoice, banking information

and TINs are required to be collected on the invoice unless previously

collected in another manner (Section 8.b(7)-(8)). This requirement

ensures that payment will be made by EFT, unless waived by the

Secretary of the Treasury in 31 CFR 208. This requirement also ensures

compliance with collecting TINs. This requirement gives agencies

flexibility in determining how banking information and TINs will be

collected. Agencies are encouraged to collect this information at the

earliest possible date, including as a condition of awarding a

contract. The Central Contractor Registry (CCR) requires this

information as a condition of awarding a contract. The CCR is a

mandatory contractor enrollment system for the Department of Defense.

Although not mandatory for civilian agencies, some civilian agencies

are voluntarily using the CCR.

10. Section 6 of the current circular, ``Required notices to

vendors,'' has been removed. The notice of interest penalties is

discussed in Section 9, ``Late payment interest penalties.'' The notice

of defective invoice is discussed in Section 3.c, ``Review of

Invoice.''

11. The ``Late Payment Interest Penalties'' section (Section 7 of

the current circular) has been redesignated Section 9. Several changes

have been made to this section.

Agencies are exempt from paying late interest penalties if banking

information supplied by the vendor is incorrect and/or incomplete

(Section 9.a(8)).

In the notice to vendors on late payment interest penalties, the

contract number is optional (Section 9.b(3)). However, the invoice

number or other agreed upon transaction reference number is required to

assist the vendor in reconciling the payment.

Interest penalties are not required when an EFT payment is not

credited to the vendor's account by the payment due date because of the

failure of the Federal Reserve or the vendor's bank to do so (Section

9.c(4)).

12. The ``Additional Penalties'' section (Section 8 of the current

circular) has been redesignated Section 10. The maximum allowable

additional penalty is $5,000 (Section 10.b).

13. Section 11 of the proposed regulation, ``Payments under

Government Credit Card,'' has been added and allows agencies to pay

credit card invoices under $2,500 without matching documents and

without applying the discount formula in I TFM 6-8040.40. Undisputed

items must be paid on time.

14. Section 9 of the current circular, ``Interest Penalties Due

Farm Producers,'' has been redesignated Section 12 and retitled

``Payment to Farm Producers.'' The section has been reorganized to

follow the same format as other sections. The list of loan and closing

dates for payments made under various agricultural programs has been

removed because these programs periodically change. Accordingly,

Section 12 refers the reader to the current Farm Bill (7 U.S.C. 1421 et

seq.) which lists loan and closing dates for payments made under

current Farm Bill programs.

15. Section 10 of the current circular, ``Interest Penalties under

Construction Contracts,'' has been redesignated Section 13 and retitled

``Payments under Construction Contracts.'' The section has been

reorganized to follow the same format as other sections. In addition,

the discussion in current circular 5.d. related to required

documentation for construction contracts is moved to this section.

16. Section 11 of the current circular, ``Grant Recipients,'' has

been redesignated Section 14.

17. As noted above, Section 12 of the current circular, ``Payment

without evidence that supplies have been received,'' has been replaced

by Section 5.

18. The ``Relationship to other laws'' section (Section 13 of the

current circular) has been redesignated Section 15.

19. The ``Reporting Requirements'' section (Section 14 of the

current circular) has been redesignated Section 16, and its reporting

requirements have been reduced. Information concerning the relative

frequency and frequency distribution of penalties (see Section 14.b(3)-

(4) of the current circular) is no longer required. An ``other''

category has been added to the provision requiring reasons why interest

penalties were incurred (Section 16.a(2)E).

20. The ``Inquiries'' section (Section 16 of the current circular)

has been redesignated Section 17. As noted above, this section

announces a new toll-free number, 1-800-266-9667, for questions about

Prompt Pay policy, reporting requirements and previous and current

Prompt Pay interest rates. This section also announces a Prompt Pay

website at http://www.fms.treas.gov/prompt/index.html. The website will

contain, among other things, rate information, frequently asked

questions, copies of current circulars and links to other related

websites. The website may also be accessed through FMS'' website at

http://www.fms.treas.gov/.

21. As noted above, the ``Definitions'' section has been moved from

Section 1 of the current circular to Section 18 of the proposed

regulation.

22. The ``Effective Dates'' section (Section 15 of the current

circular) has been redesignated Section 19. Except as otherwise

provided in Section 19, the proposed regulation is effective 30 days

after final publication.

Finally, OMB seeks comment on how the Federal government can

address the problem of one Federal agency making a late payment to

another Federal agency for goods or services. Interagency payments have

historically been problematic for the Federal government because some

Federal agencies make late payments to other Federal agencies for goods

and services, and because there is not one standard method available to

make these payments. These late payments sometimes result in costs to

agencies in collecting overdue amounts. OMB seeks comment on the nature

and magnitude of this problem, and requests recommendations on how the

problem could be addressed (e.g., through a provision in the

interagency agreements themselves, the application of some existing

provision of law, or the enactment of new legal remedies).

Regulatory Flexibility Act, Unfunded Mandates Reform Act, and Executive

Orders 12866 and 12875

Pursuant to 31 U.S.C. 3903(a), the provisions of the proposed

revision and replacement of Circular A-125 constitute regulations. For

purposes of the Regulatory Flexibility Act (5 U.S.C. 601 et seq.), the

proposed regulations will not have a significant economic effect on a

substantial number of small entities; the regulations implement the

Prompt Payment Act, which requires Federal agencies to pay their bills

on a timely basis, to pay interest penalties when payments are made

late, and to take discounts only when payments are made by the discount

date. For purposes of the Unfunded Mandates Reform Act of 1995 (Pub. L.

104-4), as well as Executive Orders No. 12866 and 12875, the proposed

regulations will not significantly or uniquely affect small

governments, and will not result in increased expenditures by State,

local, and tribal governments, or by the private sector, of $100

million or more.

OMB requests comments on the proposed revisions discussed above, as

well on all other parts of the revised circular.

[[Page 33003]]

List of Subjects in 5 CFR Part 1315

Administrative practice and procedure, Government contracts,

Penalties.

Jacob J. Lew,

Acting Director.

OMB proposes that Circular A-125 be revised to read as follows:

Attachment--OMB Circular No. A-125

(Revised)

To: The Heads of Executive Departments and Establishments

Subject: Prompt Payment

Purpose. Circular A-125 (2nd Revision) prescribes policy for the

Executive departments and agencies in paying for goods and services

pursuant to the Prompt Payment Act of 1982 as amended. It is the intent

of this Circular and implementing regulations that the Federal

Government pay commercial obligations accurately and timely using

financial cash management tools.

Background. The Prompt Payment Act was enacted as P.L. 97-177 on

May 21, 1982, and amended on October 17, 1988, as P.L. 100-496. The

Prompt Payment Act (the Act), as amended, requires Executive

departments and agencies to pay commercial obligations within specific

discrete time periods and to pay interest penalties when those time

constraints are not met. Circular A-125 also provides policy direction

for payment of entitlements due under the current Farm Bill.

Policy. Agencies are to maintain payment practices consistent with

this Circular and the implementing procedures attached to the Circular.

Agencies must make payments for commercial obligations on properly

submitted invoices on payment due dates set by the attached

implementing procedures. Unless otherwise specified in this Circular or

agency regulations, payments cannot be made until proper invoices have

been received for goods or services that have been received and

accepted by the agency and contract terms have been satisfactorily

performed or fulfilled. Payments under certain accelerated payment

methods may be made before the specified due date. Payments made later

than the payment due date or later than the discount due date if a

discount is taken, may be subject to interest penalties and possibly

additional penalties. Valid interest penalties will be paid by the

agency automatically and additional penalties will be paid after

receiving a written request from the vendor. These penalties will be

paid from funds available for the administration of the program for

which the penalty was incurred. Agency implementation must be

consistent with sound cash management practices, related Treasury

regulations (Treasury Financial Manual, I TFM 6-8000, section 8040),

and the Federal Acquisition Regulation (48 CFR subpart 32.9 and FAR

Clause 52.232) or appropriate agency regulations.

The Debt Collection Improvement Act of 1996 requires all Federal

agencies to make payments electronically after January 1, 1999, except

for Internal Revenue Service tax refunds and except as waived in 31 CFR

Part 208. The Act also requires the collection of the Taxpayer

Identifying Number (TIN) for purposes of debt collection. This circular

requires that banking information for purposes of making electronic

payments and the TIN be on an invoice unless this information has been

previously provided to the agency through other procedures.

Requirements and Responsibilities. The specific requirements and

responsibilities of Executive departments and agencies are set forth in

the implementing regulations.

Inquiries. Questions about this circular and inquiries about

payments practices or concerning problems of Executive agencies should

be directed to the Financial Management Service, Department of the

Treasury, Telephone: 1-800-266-9667. The circular, agency guidance,

answers to frequently asked questions and other general information is

available on the Internet at http://www.fms.treas.gov/prompt/

index.html. It is also available in printed form upon request to the

above telephone number.

Effective date. Unless otherwise specified, this circular is

effective 30 days after final publication.

Sunset Review Date. Three years from the date of issuance of this

circular, there will be an independent policy review to ascertain its

effectiveness.

Jacob J. Lew,

Acting Director.

Note: The following prompt payment implementing regulations are

provided in a uncodified format for comment purposes. These

regulations will be codified at the final rule stage in 5 CFR Part

1315, unless pending legislation transfers the authority for issuing

these regulations to the Department of the Treasury. In that case,

they will be codified in Title 31 of the Code of Federal

Regulations.

Prompt Payment Implementing Regulations

Table of Contents

1. Application

2. Responsibilities

3. Prompt Payment Standards and Required Notices to Vendors

4. Accelerated Payment Methods

5. Fast Payment

6. Discounts

7. Rebates

8. Required Documentation

9. Late Payment Interest Penalties

10. Additional Penalties

11. Payments Under Government Credit Card

12. Payments to Farm Producers

13. Payments Under Construction Contracts

14. Grant Recipients

15. Relationship to Other Laws

16. Reporting Requirements

17. Inquiries

18. Definitions

19. Effective Dates

1. Application

a. Procurement contracts. This regulation applies to contracts for

the procurement of goods or services awarded by:

(1) All Executive branch agencies except:

A. The Tennessee Valley Authority, which is subject to the Prompt

Payment Act, but is not covered by this regulation, and

B. Agencies specifically exempted under 5 U.S.C. 551(1).

(2) The United States Postal Service, except for the reporting

requirements. The Postmaster General is responsible for issuing

implementing procurement regulations, solicitation provisions, and

contract clauses for the United States Postal Service, and

(3) The Commodity Credit Corporation pursuant to:

A. Section 4(h) of the Act of June 29, 1948 (15 U.S.C. 714b(h))

relating to the procurement of property and services, and

B. Payments to producers on a farm under the current Farm Bill (7

U.S.C. 1421 et seq.).

b. Vendor payments. All Executive branch vendor payments and

payments to those defined as contractors or vendors (see section 18.j.)

are subject to the Prompt Payment Act with the following exceptions:

(1) Contract Financing Payments, as defined in section 18.h.; and

(2) Payments related to emergencies (as defined in the Disaster

Relief Act of 1974, P.L. 93-288, as amended (42 U.S.C. 5121 et seq.))

and military operations (as defined in 10 U.S.C. 101(a)(13)).

c. Utility payments. All utility payments, including payments for

telephone service, are subject to the Act except those under 1.b.(2).

Where state or local authorities regulate late payment rates, those

rates (e.g., tariffs) shall take precedence; however, any interest paid

is reportable. In the absence of state or local prescribed late charges

or terms, agencies will apply this regulation.

[[Page 33004]]

2. Responsibilities

Each agency head is responsible for the following:

a. Issuing internal procedures. Issuing procedures will include

provisions for monitoring the causes of late payments and any interest

penalties incurred, taking necessary corrective action, reporting in

accordance with section 16, and handling inquiries.

b. Internal control systems. Ensuring that effective internal

control systems are established and maintained as required by OMB

Circular A-123, ``Management Accountability and Control.''

Administrative activities required for payments to vendors under this

regulation are subject to Quality Control (QC) validation. QC processes

will be used to confirm that controls are effective and that processes

are efficient. Each agency head is responsible for establishing a QC

program in order to quantify payment performance and qualify corrective

actions, aid cash-management decision making, and estimate payment

performance if actual data is unavailable.

c. Financial management systems. Ensuring that financial management

systems comply with OMB Circular A-127, ``Financial Management

Systems.'' Agency financial systems shall provide standardized

information and electronic data exchange to the central management

agency. Systems shall provide complete, timely, reliable, useful and

consistent financial management information.

Payment capabilities should provide accurate and useful management

reports on payments, and produce accurate and timely reports as

required by the Prompt Payment Act.

d. Reviews. Ensuring that Inspectors General and internal auditors

review payments performance and systems accuracy, consistent with the

Chief Financial Officers (CFO) Act requirements.

e. Timely payments and interest penalties. Ensuring timely payments

and payment of interest penalties where required.

3. Prompt Payment Standards and Required Notices to Vendors

Agency business practices shall conform to the following standards:

a. Required documentation. Agencies will maintain paper or

electronic documentation as required in section 8.

b. Receipt of invoice. For the purposes of determining a payment

due date and the date on which interest will begin to accrue, an

invoice shall be deemed to be received:

(1) For invoices that are mailed, on:

A. The date a proper invoice is actually received and annotated by

the contractually designated office, or;

B. The date placed on the invoice by the vendor, when the agency

fails to annotate the invoice with a receipt date at the time of

receipt (such invoice must be a proper invoice);

(2) For invoices electronically transmitted, at the time the

transmission is received by the designated agency office; and,

(3) On the date of delivery, when contractually stipulated that the

delivery ticket may serve as an invoice.

c. Review of invoice. Agencies will use the following procedures in

reviewing invoices:

(1) Each invoice will be reviewed by the appropriate office within

7 days after receipt to determine whether the invoice is a proper

invoice as defined in section 8.b. of this regulation;

(2) When an invoice is determined improper, the agency shall return

the invoice to the vendor within 7 days of receipt (refer also 3.g.(3)

regarding vendor notification and determining the payment due date.)

The agency will identify all defects that prevent payment and specify

all reasons why the invoice is not proper and why it is being returned.

This notification to the vendor shall include a request for a corrected

invoice, to be clearly marked as such;

(3) Computer-related media which produce tangible recordings of

information in lieu of ``written'' or ``original'' paper document

equivalents should be used by agencies to expedite payment

transactions, as long as there are adequate safeguards and controls to

ensure the integrity of the data, rather than delaying processes by

requiring ``original'' paper documents.

d. Receipt of goods and services. Agencies will ensure that receipt

is properly recorded at the time of delivery of goods or completion of

services.

e. Acceptance. Agencies will ensure that acceptance is executed as

promptly as possible. Commercial items and services should not be

subject to extended acceptance periods. Acceptance reports will be

forwarded to the designated agency office by the fifth working day

after delivery. Unless other arrangements are made, acceptance reports

will be stamped or otherwise annotated with the receipt date in the

designated agency office.

f. Starting the payment period. The period available to an agency

to make timely payment of an invoice without incurring an interest

penalty shall begin on the later of:

(1) Date of receipt (as defined in 3.b.(1)) of a proper invoice (as

defined in section 8.b.), except where no invoice is required (e.g.

recurring payments (see definition at section 18.cc.); or,

(2) Date of receipt and acceptance of goods or services. In this

case, the payment period starts when either:

A. The agency has actually accepted the goods or services but no

later than the seventh day after the receipt of goods or services, or;

B. When a longer acceptance period is contractually stipulated, the

agency has actually accepted the goods or services but no later than

the last day of the extended acceptance period;

(3) Date of delivery where an agency has contractually designated

the use of the acceptance document or delivery ticket as the basis for

payment.

g. Determining the payment due date.

(1) Unless otherwise specified, the payment is due either:

A. 30 days after the start of the payment period as specified in

section 3.f.;

B. On the date(s) specified in the contract;

C. In accordance with discount terms when discounts are offered and

taken (see section 6), or;

D. In accordance with Accelerated Payment Methods (see section 4).

(2) Certain commodity payments.

A. For meat, meat food products, as defined in Section 2(a)(3) of

the Packers and Stockyard Act of 1921 (7 U.S.C. 182(3)), including any

edible fresh or frozen poultry meat, any perishable poultry meat food

product, fresh eggs, any perishable egg product, fresh or frozen fish

as defined in the Fish and Seafood Promotion Act of 1986 (16 U.S.C.

4003(3)), payment will be made no later than the seventh day after

delivery.

B. For perishable agricultural commodities, as defined in Section

1(4) of the Perishable Agricultural Commodities Act of 1930 (7 U.S.C.

499a(4)), payment will be made no later than the 10th day after

delivery, unless another payment date is specified in the contract.

C. For dairy products (as defined in section 111(e) of the Dairy

Production Stabilization Act of 1983, 7 U.S.C. 4502(e)), and including,

at a minimum, liquid milk, cheese, certain processed cheese products,

butter, yogurt, and ice cream, edible fats or oils, and food products

prepared from edible fats or oils (including, at a minimum, mayonnaise,

salad dressings and other similar products), payment will be made no

later than 10 days after the date on which a proper invoice, for the

amount due, has been received by the agency acquiring the above listed

products. Nothing in the Act permits limitation to refrigerated

products. When questions

[[Page 33005]]

arise about the coverage of a specific product, prevailing industry

practices should be followed in specifying a contractual payment due

date.

D. Mixed invoices for commodities. When an invoice is received for

items with different payment periods, agencies:

i. May pay the entire invoice on the due date for the commodity

with the earliest due date, if it is considered in the best interests

of the agency. That payment is to be considered as on time for

reporting purposes;

ii. May make split payments by the due date applicable to each

category;

iii. Should pay in accordance with the contractual payment

provisions (which may not exceed the statutory mandated periods

specified in section 3.g.(2), and;

iv. Will not require vendors to submit multiple invoices for

payment of individual orders by the agency.

(3) Notification of Improper Invoice.

When an agency fails to make notification of an improper invoice

within seven days according to 3.c.(2) of these guidelines (three days

for meat and meat food, fish and seafood products; and five days for

perishable agricultural commodities, dairy products, edible fats or

oils and food products prepared from edible fats or oils), the number

of days allowed for payment of the corrected proper invoice will be

reduced by the number of days between the seventh day, or as specified

above in this paragraph, and the day notification was transmitted to

the vendor. Calculation of interest penalties, if any, will be based on

an adjusted due date reflecting the reduced number of days allowable

for payment;

h. Payment date. Payment will be considered to be made on the

settlement date for an electronic funds transfer (EFT) payment or the

date of the check for a check payment. On a weekend, federal holiday,

or after normal working hours, payments falling due may be made on the

following business day without incurring late payment interest

penalties.

i. Late payment. When payments are made after the due date,

interest will be paid automatically in accordance with the procedures

in sections 9 through 13 of this regulation.

j. Timely payment. Unless using an accelerated payment method (see

section 4), an agency shall make payments no more than seven days prior

to the payment due date, but as close to the due date as possible,

unless the agency head or designee has determined, on a case-by-case

basis for specific payments, that earlier payment is necessary. This

authority must be used cautiously, weighing the benefits of making a

payment early against the good stewardship inherent in effective cash

management practices.

k. Payments for partial deliveries. Agencies shall pay for partial

delivery of supplies or partial performance of services after

acceptance, unless specifically prohibited by the contract. Payment is

contingent upon submission of a proper invoice if required by the

contract.

4. Accelerated Payment Methods

a. A single invoice under $2,500. Payments may be made as soon as

the contract, proper invoice, receipt and acceptance documents are

matched notwithstanding statutory authority to do otherwise. These

payments are to be considered on time for Prompt Pay reporting

purposes. Vendors shall be entitled to interest penalties if invoice

payments are made after the payment due date.

b. Small Disadvantaged Business Concern (as defined in the FAR

subpart 19.001). Agencies may pay small, disadvantaged business

concerns as quickly as possible, when all proper documentation,

including acceptance, is received in the payment office and before the

payment due date. Such payments are to be considered on time for Prompt

Pay reporting purposes, and are not subject to payment restrictions

stated elsewhere in this regulation. Vendors shall be entitled to

interest penalties if invoice payments are made after the payment due

date.

c. Payments related to emergencies and disasters (as defined in the

Robert T. Stafford Disaster Relief Act and Emergency Assistance, P.L.

93-288, as amended (42 U.S.C. 5 121 et seq.)) and military deployment.

Payments may be made as soon as the contract, proper invoice, receipt

and acceptance documents or any other agreement are matched. These

payments are to be considered on time for Prompt Pay reporting

purposes. Vendors shall be entitled to interest penalties if invoice

payments are made after the payment due date.

5. Fast Payment

Payment shall be made within 15 days of receipt of a proper invoice

without evidence that goods or services have been received. The

following standards shall be followed:

a. Criteria. The criteria in using this procedure are defined in

Federal Acquisition Regulations (FAR) Part 13, Subpart 13.3 ``Fast

Payment Procedure'' and in the 1988 Amendment to the Prompt Pay Act,

Section 11(b)(1);

b. FAR clause 52.213.1. Payments must be supported by valid

contracts having proper FAR clause 52.213.1, Fast Payment Procedure;

c. Invoice requirements. Invoices paid under ``Fast Payment''

procedures must meet the requirements of an invoice as outlined in

section 8.b. of this regulation, and be properly identified on the

invoices and in the agency financial system for subsequent statistical

sampling to ensure that goods are received;

d. Obligating documents. Invoices must be properly matched with the

obligating documents prior to authorizing the payment;

e. Certification. A vendor's certification that goods have been

shipped may be used as a basis for authorizing the payment;

f. Internal controls. Agencies must establish a system to ensure

internal controls are in place to validate that goods are received and

accepted;

g. Receiving reports. Unless otherwise specified in agency

procedures, the contracting office shall ensure that receiving reports

and payment documents are matched and that steps are taken to correct

discrepancies and collect any amounts owed for non-performance, and;

h. Inspection and Acceptance. Unless otherwise specified in agency

procedures, the receiving entity shall promptly inspect and accept

goods acquired under these procedures and notify the purchasing office

of the acceptance as quickly as possible.

6. Discounts

Agencies shall follow these guidelines in taking discounts and

determining the payment due dates when discounts are taken:

a. Economically justified discounts. If an agency is offered a

discount by a vendor, whether stipulated in the contract or offered on

an invoice, an agency may take the discount if payment is made within

the specified discount period. Discounts will be taken whenever

economically justified (see I TFM 6-8040.40) but only after acceptance

has occurred. These payments will be considered on time for reporting

purposes.

b. Discounts taken after the deadline. If an agency takes the

discount after the deadline and does not repay it before the payment

due date, the agency shall pay an interest penalty on any amount

remaining unpaid as prescribed in section 9.a.(6).

c. Payment date. When a discount is taken, payment will be made as

close as possible to, but no later than, the discount date.

d. Start date. The period for taking the discount is calculated

from the date

[[Page 33006]]

placed on the proper invoice by the vendor. If there is no invoice date

on the invoice by the vendor, the discount period will begin on the

date a proper invoice is actually received and date stamped or

otherwise annotated by the designated agency office.

7. Rebates

Agencies shall determine credit card payment dates based on an

analysis of the total costs and total benefits to the Federal

government as a whole. When calculating costs and benefits, agencies

are expected to include the cost to the government of paying early.

This cost is the interest the government would have earned, at the

Current Value of Funds rate, for each day that payment was not made.

Agencies may also factor in the benefits, from streamlining or other

efficiencies, to the agency of paying early.

8. Required Documentation

Agencies are required to ensure the following payment documentation

is established to support payment of invoices and interest penalties:

a. For a contract:

(1) Payment due date(s) as defined in 3.g.;

(2) A notation in the contract that partial payments are

prohibited, if applicable;

(3) For construction contracts, specific payment due dates for

approved progress payments or milestone payments for completed phases,

increments, or segments of the project;

(4) If applicable, a statement that the special payment provisions

of the Packers and Stockyard Act of 1921 (7 U.S.C. 182 (3)), or the

Perishable Agricultural Commodities Act of 1930 (7 U.S.C. 499a(4)), or

Fish and Seafood Promotion Act of 1986 (16 U.S.C. 4003(3)) shall apply;

(5) Where considered appropriate by the agency head, the specified

acceptance period following delivery to inspect and/or test goods

furnished or to evaluate services per formed is stated;

(6) Name (where practicable), title, telephone number, and complete

mailing address of officials of the Government's designated agency

office, and of the vendor receiving the payments;

(7) Reference to requirements under the Prompt Payment Act,

including the payment of interest penalties on late invoice payments

(including progress payments under construction contracts);

(8) Stipulation that banking information must be submitted no later

than the first request for payment as required by the Debt Collection

Improvement Act of 1996, except in situations addressed in the waiver

provisions for 31 CFR Part 208. Agencies will use the appropriate

Federal Acquisition Regulation contract clause;

(9) If using Fast Payment, the proper FAR clause stipulating Fast

Payment is required.

b. For a proper invoice:

(1) Name of vendor;

(2) Invoice date;

(3) Government contract number, or other authorization for delivery

of goods or services;

(4) Vendor invoice number/account number;

(5) Description, price, and quantity of goods and services

rendered;

(6) Shipping and payment terms (unless mutually agreed that this

information is only required in the contract);

(7) Taxpayer Identification Number (TIN), unless otherwise

previously provided to the agency in accordance with agency procedures;

(8) Banking Information, unless otherwise previously provided to

the agency in accordance with agency procedures, or except in

situations addressed in waiver provisions included in 31 CFR Part 208;

(9) Contact name (where practicable), title and telephone number;

(10) Other substantiating documentation or information required by

the contract.

c. For receiving reports, delivery tickets, and evaluated receipts:

(1) Name of vendor;

(2) Contract or other authorization number;

(3) Description of goods;

(4) Quantities received, if applicable;

(5) Date(s) goods were delivered;

(6) Date(s) goods were accepted;

(7) Signature (or electronic alternative when supported by

appropriate internal controls), printed name, telephone number, mailing

address of the receiving official, and any additional information

required by the agency, and;

(8) All requirements under section 8.c. (1)-(7), when a delivery

ticket is used as an invoice.

9. Late Payment Interest Penalties

a. Application and Calculation. Agencies will use the following

procedures in calculating interest due on late payments:

(1) Interest will be calculated and will accrue daily from the day

after the payment due date at the interest rate applicable on the day

after the due date (refer also to 3.g. Determining the payment due

date);

(2) Adjustments will be made for errors in calculating interest;

(3) When an interest penalty is owed and not paid, interest will

accrue on the unpaid principal and accrued interest until paid, except

as described in paragraph (5) below;

(4) For up to one year, interest penalties remaining unpaid at the

end of any 30 day period will be capitalized (i.e., added to the

principal), and subsequent interest penalty amounts will be computed

and accrue on the total of principal plus capitalized interest until

paid;

(5) Interest penalties under the Prompt Payment Act will not

continue to accrue:

A. After the filing of a claim for such penalties under the

Contract Disputes Act of 1978 (41 U.S.C. 601 et seq.), or;

B. For more than one year.

(6) When an agency takes a discount after the discount date and

does not repay it before the payment due date, the interest payment

will be calculated on the amount of the discount taken, for the period

beginning the day after the prompt payment due date through the payment

date;

(7) Interest penalties of less than one dollar need not be paid;

(8) If the banking information supplied by the vendor is incorrect

and/or incomplete, the invoice received will be returned as an improper

invoice and the agency is exempt from the accrual of interest as

defined in section 3.c (2) until such information is received or until

a proper invoice is submitted;

(9) Interest calculations are to be based on a 360 day year, and;

(10) The applicable interest rate may be obtained by calling the

Department of Treasury's Financial Management Service (FMS) voice

information system at 1-800-266-9667.

b. Payment. Agencies will meet the following requirements in paying

interest penalties:

(1) Interest may be paid only after acceptance has occurred except

when title of the goods passes to the government;

(2) Late payment interest penalties shall be paid without regard to

whether the vendor has requested payment of such penalty, and shall be

accompanied by a notice stating the amount of the interest penalty, the

number of days late and the rate used. Agencies should pay interest

together with the underlying principal payment;

(3) The invoice number or other agreed upon transaction reference

number assigned by the vendor should be included in the notice to

assist the vendor in reconciling the payment. Additionally, it is

optional as to whether or not an agency includes the

[[Page 33007]]

contract number in the notice to the vendor;

(4) The temporary unavailability of funds does not relieve an

agency from the obligation to pay these interest penalties or the

additional penalties required under section 10, and;

(5) Agencies shall pay any late payment interest penalties

(including any additional penalties required under section 10) under

this regulation from the funds available for the administration of the

program for which the penalty was incurred. The Prompt Payment Act does

not authorize the appropriation of additional amounts to pay penalties.

c. Penalties not due. Interest penalties are not required:

(1) When payment is delayed because of a dispute between a Federal

agency and a vendor over the amount of the payment or other issues

concerning compliance with the terms of a contract. Claims concerning

disputes, and any interest that may be payable with respect to the

period, while the dispute is being settled, will be resolved in

accordance with the provisions in the Contract Disputes Act of 1978,

(41 U.S.C. 601 et seq.), except for interest payments required under 31

U.S.C. 3902(h)(2).

(2) When payments are made solely for financing purposes or in

advance, except for interest payment required under 31 U.S.C.

3902(h)(2).

(3) For a period when amounts are withheld temporarily in

accordance with the contract.

(4) When an EFT payment is not credited to the vendor's account by

the payment due date because of the failure of the Federal Reserve or

the vendor's bank to do so.

10. Additional Penalties

a. Vendor entitlements . A vendor shall be entitled to an

additional penalty payment when the vendor is owed a late payment

interest penalty by an agency, if it:

(1) Receives a payment dated after the payment due date which does

not include the interest penalty also due to the vendor;

(2) Is not paid the interest penalty by the agency within 10 days

after the actual payment date and;

(3) Makes a written request, no later than 40 days after the

payment date, that the agency pay such an additional penalty. The

vendor request must include the following:

A. Specific assertion that late payment interest is due for a

specific invoice, and request payment of all overdue late payment

interest penalty and such additional penalty as may be required, and;

B. A copy of the invoice on which late payment interest was due but

not paid and a statement that the principal has been received, and the

date of receipt. No additional data are required;

Confirmation that the request is postmarked. To be valid the

request must be postmarked, received by facsimile, or by electronic

mail, by the 40th day after payment was made. If there is no postmark,

the request will be valid if it is received and annotated with the date

of receipt by the agency by the 40th day.

b. Maximum penalty. The additional penalty shall be equal to one

hundred (100) percent of the original late payment interest penalty but

must not exceed $5,000.

c. Minimum penalty. Regardless of the amount of the late payment

interest penalty, the additional penalty paid shall not be less than

$25.

d. Penalty basis. The penalty is based on individual invoices if

paid separately.

e. Utility payments. The additional penalty does not apply to the

payment of utility bills where late payment penalties for these bills

are determined through the tariff rate-setting process.

11. Payments Under Government Credit Card

Payment standards under government credit cards:

a. Payment date. All credit card invoices under $2,500 may be paid

at any time, but not later than 30 days after the receipt of a proper

invoice. Matching documents is not required. The payment due date for

invoices over $2,500 shall be 30 days after receipt of a proper invoice

or the date specified in the contract unless it benefits the agency and

the government (applying discount formula in I TFM 6-8040.40) to take a

rebate offered for early payment. I TFM 4-4535.10 permits payment of

the bill in full prior to verification that goods or services were

received.

b. Disputed line items. Disputed line items do not render the

entire invoice an improper invoice for compliance with this circular.

Any undisputed items must be paid in accordance with section 11.a.

12. Payments to Farm Producers

In case of a payment to which producers on a farm are entitled

under the terms of an agreement entered into under the current Farm

Bill (7 U.S.C. 1421 et seq.):

a. Payment Standards. Payments to farm producers under such

agreements shall be made as close as possible to the required payment

or loan closing date.

b. Interest penalties. An interest penalty shall be paid to the

producers if the payment has not been made by the required payment or

loan closing date. The interest penalty shall be paid:

(1) On the amount of payment or loan due;

(2) For the period beginning on the first day beginning after the

required payment or loan closing date and ending on the date the amount

is paid or loaned, and;

(3) Out of funds available under section 8 of the Act of June 29,

1948 (15 U.S.C. 714f).

c. Contract Disputes Act of 1978. Provisions relating to the

Contract Disputes Act of 1978 (41 U.S.C. 601 et seq.) in section

9.a.(5)A and section 16a. do not apply.

13. Payments Under Construction Contracts

a. Payment Standards. Agencies shall follow these standards when

making progress payments under construction contracts:

(1) An agency may approve a request for progress payment if the

application meets the requirements specified in the section b below;

(2) The certification by the prime vendor as defined in section

13.b.(2) is not to be construed as final acceptance of the

subcontractor's performance;

(3) The agency shall return any such payment request which is

defective to the vendor within seven days after receipt, with a

statement identifying the defect(s), or if the notification is done

electronically, it is not necessary to return the improper invoice;

(4) A vendor is obligated to pay interest to the Government on

unearned amounts in its possession from:

A. The eighth day after receipt of funds from the agency until the

date the vendor notifies the agency that the performance deficiency has

been corrected, or the date the vendor reduces the amount of any

subsequent payment request by an amount equal to the unearned amount in

its possession, when the vendor discovers that all or a portion of a

payment received from the agency constitutes a payment for the vendor's

performance that fails to conform to the specifications, terms, and

conditions of its contract with the agency, under 31 U.S.C. 3905(a),

or;

B. The eighth day after the receipt of funds from the agency until

the date the performance deficiency of a subcontractor is corrected, or

the date the vendor reduces the amount of any subsequent payment

request by an amount equal to the unearned amount

[[Page 33008]]

in its possession, when the vendor discovers that all or a portion of a

payment received from the agency would constitute a payment for the

subcontractor's performance that fails to conform to the subcontract

agreement and may be withheld, under 31 U.S.C. 3905(e).

(5) Interest payment on unearned amounts to the government under 31

U.S.C. 3905(a)(2) or 3905(e)(6), shall:

A. Be computed on the basis of the average bond equivalent rates of

91-day Treasury bills auctioned at the most recent auction of such

bills prior to the date the vendor received the unearned amount;

B. Be deducted from the next available payment to the vendor, and;

C. Revert to the Treasury.

b. Required Documentation:

(1) Substantiation of the amount(s) requested shall include:

A. An itemization of the amounts requested related to the various

elements of work specified in the contract;

B. A listing of the amount included for work performed by each

subcontractor under the contract;

C. A listing of the total amount for each subcontract under the

contract;

D. A listing of the amounts previously paid to each subcontractor

under the contract, and;

E. Additional supporting data and detail in a form required by the

contracting officer.

(2) Certification by the prime vendor is required, to the best of

the vendor's knowledge and belief, that:

A. The amounts requested are only for performance in accordance

with the specifications, terms, and conditions of the contract;

B. Payments to subcontractors and suppliers have been made from

previous payments received under the contract, and timely payments will

be made from the proceeds of the payment covered by the certification,

in accordance with their subcontract agreements and the requirements of

Chapter 39, title 31, U.S.C., and;

C. The application does not include any amounts which the prime

vendor intends to withhold or retain from a subcontractor or supplier,

in accordance with the terms and conditions of their subcontract.

c. Interest Penalties. Agencies will pay interest on:

(1) A progress payment request (including a monthly percentage-of-

completion progress payment or milestone payments for completed phases,

increments, or segments of any project) that is approved as payable by

the agency pursuant to section b. above, and remains unpaid for:

A. A period of more than 14 days after receipt of the payment

request by the designated agency office, or;

B. A longer period specified in the solicitation and/or contract if

required, to afford the Government a practicable opportunity to

adequately inspect the work and to determine the adequacy of the

vendor's performance under the contract.

(2) Any amounts that the agency has retained pursuant to a prime

contract clause providing for retaining a percentage of progress

payments otherwise due to a vendor and that are approved for release to

the vendor, if such retained amounts are not paid to the vendor by a

date specified in the contract, or, in the absence of such a specified

date, by the 30th day after final acceptance;

(3) Final payments, based on completion and acceptance of all work

(including any retained amounts), and payments for partial performances

that have been accepted by the agency, if such payments are made after

the later of:

A. The 30th day after the date on which the designated agency

office receives a proper invoice, or;

B. The 30th day after agency acceptance of the completed work or

services. Acceptance shall be deemed to have occurred on the effective

date of contract settlement on a final invoice where the payment amount

is subject to contract settlement actions. For the purpose of computing

interest penalties, acceptance shall be deemed to have occurred on the

seventh day after work or services have been completed in accordance

with the terms of the contract.

14. Grant Recipients

Recipients of Federal assistance may pay interest penalties if so

specified in their contracts with contractors. However, obligations to

pay such interest penalties will not be obligations of the United

States. Federal funds may not be used for this purpose, nor may

interest penalties be used to meet matching requirements of federally

assisted programs.

15. Relationship to Other Laws

a. Contract Disputes Act of 1978 (41 U.S.C. 605).

(1) A claim for an interest penalty (including the additional

penalty for non-payment of interest if the vendor has complied with the

requirements of section 9 of this regulation) not paid under this

regulation may be filed under section 6 of the Contract Disputes Act.

(2) An interest penalty under this regulation does not continue to

accrue after a claim for a penalty is filed under the Contract Disputes

Act or for more than one year. This does not prevent an interest

penalty from accruing under section 13 of the Contract Disputes Act

after a penalty stops accruing under this regulation. Such penalty may

accrue on an unpaid contract payment and on the unpaid penalty under

this regulation.

(3) This regulation does not require an interest penalty on a

payment that is not made because of a dispute between the head of an

agency and a vendor over the amount of payment or compliance with the

contract. A claim related to such a dispute and interest payable for

the period during which the dispute is being resolved is subject to the

Contract Disputes Act.

b. Small Business Act (15 U.S.C. 644(k)). This Act has been amended

to require that any agency with an Office of Small and Disadvantaged

Business Utilization must assist small business concerns to obtain

payments, late payment interest penalties, additional penalties, or

information due to the concerns.

16. Reporting Requirements

a. Content. Agency reports shall contain the following information

for the prior fiscal year:

(1) Invoices subject to the Prompt Payment Act:

A. Dollar amount of invoices

B. Number of invoices

(2) Invoices paid after due date:

A. Dollar amount of invoices

B. Number of invoices

C. Percent of Invoices paid late. The percentage of invoices paid

late is computed in the following manner: [(2)B/(1)B]

D. Dollar amount of late payment interest and other penalties paid

E. Reasons why interest or other late payment penalties were

incurred. Rank from highest to lowest, according to frequency of

occurrence.

i. Delay in agency's receipt of:

a. Receiving report

b. Purchase order or contract

c. Other

ii. Delay or error by designated agency office in:

a. Taking discount

b. Notifying vendor of improper invoice

c. Computer or other system processing

d. Other

F. Interest and other late payment penalties which were due but not

paid:

i. Interest amount

ii. Number

(3) Invoices paid eight days or more before due date, except where

cash discounts were taken, an accelerated

[[Page 33009]]

payment method was used, or payments were made early to earn rebates;

or invoices where early payment is determined on a case-by-case basis

to be necessary:

A. Dollar amount of invoices

B. Number of invoices

C. Percent of early payments made [(3)B/(1)B]

(4) Progress Made. Describe specific achievements and problems

during the fiscal year in implementing the provisions of the Prompt

Payment Act and OMB Circular A-125. Include a description of any agency

experience in determining the most appropriate timing for release of

payment authorization so that invoices are paid as close as possible to

the due date without exceeding it.

b. Certification. Agency annual reports to FMS must be certified by

the agency Chief Financial Officer (or equivalent).

c. Submission. Federal agencies subject to the Chief Financial

Officers Act of 1990 and the United States Information Agency are

required to submit an annual Prompt Payment Report to the Commissioner,

Financial Management Service (FMS), Department of the Treasury, by the

60th day after the end of each fiscal year.

17. Inquiries

a. Regulation. Inquiries concerning this regulation may be directed

in writing to the Department of the Treasury, Financial Management

Service (FMS), Cash Management Directorate, 401 14th Street, S.W.

Washington, D.C. 20227, or by calling 1-800-266-9667.

b. Applicable interest rate. The rate is published semiannually in

the Federal Register on or about January 1 and July 1. The rate also

may be obtained from the Department of Treasury's Financial Management

Service (FMS) at 1-800-266-9667. This information is also available at

the FMS Prompt Pay Web Site at http://www.fms.treas.gov/prompt/

index.html.

c. Agency payments. Questions concerning delinquent payments should

be directed to the designated agency office. Questions about

disagreements over payment amount or timing should be directed to the

contracting officer for resolution. Small business concerns may obtain

additional assistance on payment issues by contacting the agency's

Office of Small and Disadvantaged Business Utilization.

18. Definitions

For the purposes of this regulation, the following definitions

apply:

a. Accelerated Payment--a payment made prior to the due date and

considered on time for prompt payment reporting purposes (see

discussion in section 4).

b. Acceptance--an acknowledgment by the Government that goods

received and services rendered conform with the contract requirements.

Acceptance also applies to partial deliveries.

c. Agency--as defined in Section 551(1) of Title 5, United States

Code, includes each authority of the United States Government, whether

or not it is within or subject to review by another agency, excluding

the Congress, the United States courts, governments of territories or

possessions, the District of Columbia government, courts martial,

military commissions, and military authority exercised in the field in

time of war or in occupied territory. Agency also includes any entity

(1) that is operated exclusively as an instrumentality of such an

agency for the purpose of administering one or more programs of that

agency, and (2) that is so identified for this purpose by the head of

such agency. The term agency includes military post and base exchanges

and commissaries.

d. Applicable interest rate--the interest rate established by the

Secretary of the Treasury for interest payments under Section 12 of the

Contract Disputes Act of 1978 (41 U.S.C. 611) which is in effect on the

day after the due date, except where the interest penalty is prescribed

by other governmental authority (e.g., tariffs). The rate established

under the Contract Disputes Act is referred to as the ``Renegotiation

Board Interest Rate,'' the ``Contract Disputes Act Interest Rate,'' and

the ``Prompt Payment Act Interest Rate,'' and is published semiannually

in the Federal Register on or about January 1 and July 1.

e. Automated Clearing House (ACH)--a network that performs

interbank clearing of electronic debit and credit entries for

participating financial institutions.

f. Banking Information--information necessary to facilitate an EFT

payment, including the vendor's bank account number, and their bank's

routing number.

g. Contract--any enforceable agreement, including rental and lease

agreements, purchase orders, delivery orders (including obligations

under Federal Supply Schedule contracts), requirements-type (open-

ended) service contracts, and blanket purchases agreements between an

agency and a vendor for the acquisition of goods or services and

agreements entered into under the Agricultural Act of 1949 (7 U.S.C.

1421 et seq). Contracts must meet the requirements of Section 8.a. of

this regulation.

h. Contract Financing Payments--authorized disbursement of monies

prior to acceptance of goods or services including advance payments,

progress payments based on cost, progress payments (other than under

construction contracts) based on a percentage or stage of completion,

payments on performance-based contracts and interim payments on cost-

type contracts. Contract financing payments do not include invoice

payments, payments for partial deliveries, or lease and rental

payments.

i. Contracting Office--any entity issuing a contract or purchase

order or issuing a contract modification or termination.

j. Contractor (see Vendor).

k. Day--a calendar day including weekend and holiday, unless

otherwise indicated.

l. Delivery Ticket--vendor document supplied at the time of

delivery which indicates the items delivered, can serve as a proper

invoice based on contractual agreement.

m. Designated Agency Office--the office designated by the purchase

order, agreement, or contract to first receive invoices. This office

can be contractually designated as the receiving entity. This office

may be different from the office actually issuing the payment.

n. Discount--an invoice payment reduction offered by the vendor for

early payment.

o. Discount date--the date by which a specified invoice payment

reduction, or a discount, can be taken.

p. Due date--the date on which Federal payment should be made.

Determination of such dates is discussed in Section 3.g. of this

regulation.

q. Electronic Commerce (EC)--the end to end electronic exchange of

business information using electronic data interchange (EDI),

electronic mail, electronic bulletin boards, electronic funds transfer

(EFT) and similar technologies.

r. Electronic Data Interchange (EDI)--the computer to computer

exchange of routine business information in a standard format. The

standard formats are developed and maintained by the Accredited

Standards Committee (ASC) of the American National Standards Institute.

s. Electronic Funds Transfer--A system using electronic means to

transfer payment data and funds from an originator to a recipient's

account at a receiving financial institution.

[[Page 33010]]

t. Emergency Payment--emergency includes hurricane, tornado, storm,

flood, high water, wind-driven water, tidal wave, tsunami, earthquake,

volcanic eruption, landslide, mud slide, snowstorm, drought, fire,

explosion, or other catastrophe which requires Federal emergency

assistance to supplement State and local efforts to save lives and

property, and ensure public health and safety.

u. Evaluated Receipts--contractually designated use of the

acceptance document and the contract as the basis for payment without

requiring a separate invoice.

v. Fast Payment--under the Federal Acquisition Regulation (FAR)

13.3, the Fast Payment procedure allows payment under limited

conditions to a vendor prior to the Government's verification that

supplies have been received and accepted.

w. Federal Acquisition Regulation (FAR)--the regulation that

governs most Federal acquisition and related payment issues. Agencies

may also have supplements prescribing unique agency policies.

x. Government Credit Card--internationally accepted credit card

available to all Federal agencies under a General Services

Administration contract for the purpose of making simplified

acquisitions of up to $100,000.

y. Invoice--a bill, written document or electronic transmission,

provided by a vendor requesting payment for property received or

services rendered. A proper invoice must meet the requirements of

section 8.b of this regulation. The term invoice can include receiving

reports and delivery tickets contractually designated as invoices.

z. Payment Date--the date on which a check for payment is dated or

the date of an electronic fund transfer (EFT) payment (settlement

date).

aa. Receiving Office--the entity which physically receives the

goods or services, may be separate from the accepting entity.

bb. Receiving Report--written or electronic evidence of receipt of

goods or services by a Government official. Receiving reports must meet

the requirements of section 5.g. of this regulation.

cc. Recurring Payments--Fixed Amounts--payments for services of a

recurring nature, such as rents, building maintenance, transportation

services, parking, leases, and maintenance for equipment, pagers and

cellular phones, etc., which are performed under agency-vendor

agreements providing for payments of definite amounts at fixed periodic

intervals.

dd. Taxpayer Identification Number (TIN)--nine digit Employer

Identification Number or Social Security Number as defined in section

6109 of the Internal Revenue Code of 1986 (26 U.S.C. 6109).

ee. Utilities and Telephones--contractual or non-contractual

purchase of electricity, water, sewage services, telephone services,

and natural gas. Utilities can be regulated, unregulated, or under

contract.

ff. Vendor--any person, organization, or business concern engaged

in a profession, trade, or business and any not-for-profit entity

operating as a vendor (including State and local governments and

foreign entities and foreign governments, but excluding Federal

entities).

19. Effective Dates

This regulation will be effective 30 days after final publication.

For payments under contracts or purchase orders solicited on or after

July 26, 1996, the requirement to collect banking information, for

purposes of making an EFT payment pursuant to 31 U.S.C. 3332, as

amended, will be effective 30 days after final publication. For

payments under contracts or purchase orders solicited before July 26,

1996, the requirement to collect banking information is effective

January 2, 1999.

[FR Doc. 98-15397 Filed 6-16-98; 8:45 am]

BILLING CODE 3110-01-P