Chapter 1

Introduction to the Prompt Payment Act

Although the Prompt Payment Act has been in effect for more than 25 years, agencies continue to misapply many of its provisions, as evidenced by repeated audit reports documenting both failure to understand and implement the requirements of the act and a lack of adequate internal controls to ensure compliance.

Reasons vary. The rules are often arcane and difficult to apply in practice, and agencies are naturally reluctant to pay interest penalties that are due because such interest penalties directly reduce the program funds avail able to the agency.

This book is designed to serve as a guide for government personnel, including program managers, contracting personnel, entitlement and certifying officials in paying offices, and auditors responsible for reviewing payments for compliance with the law. It should also be useful to private sector vendors and contractors who receive payments from federal agencies for goods and services provided. Such vendors and contractors will be able to better understand their rights and entitlements under the Prompt Payment Act.

The book is designed as a reference, enabling the reader to find answers to specific questions. It is not designed to be read cover to cover. However, certain issues require several questions and answers to fully explore the topic. Care has been taken to group questions that are dependent on each other in a logical flow. The reader is cautioned to read the entire section devoted to the issue at hand to get a complete answer.

While the questions and answers have been thoroughly researched and are as accurate and current as possible, do not rely on this book as a legal reference. Consult both your agency internal regulations and your legal counsel about specific issues. Furthermore, Congress from time to time passes legislation that benefits a particular agency. Except where noted, the questions and answers within are based upon generic laws and rules. It is possible that your agency has specific statutory authority not covered in the book. While the Prompt Payment Act and the Final Rule implementing it have not changed recently, you should check to see if any changes have been made since the book was published. Also, because the Federal Acquisition Regulation is a major player in many of the procedures concerning Prompt Payment, changes to the FAR should also be researched.