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Prompt Payments


[Federal Register: September 29, 1999 (Volume 64, Number 188)]
[Rules and Regulations]
[Page 52579-52594]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr29se99-21]

[[Page 52579]]

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Part II

Office of Management and Budget

_______________________________________________________________________

5 CFR Part 1315

Prompt Payment; Final Rule

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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: Final rule on, and codification of, Prompt Payment Act
regulations.

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SUMMARY: OMB is issuing final revisions to its rules on the Prompt
Payment Act, which have been found in Circular A-125. The revisions
address the increased use of electronic commercial financial systems;
promote the use of government credit cards and accelerated payment
methods; reflect new requirements of the Debt Collection Improvement
Act of 1996 and the recent repeal of the annual agency Prompt Payment
reporting requirement; clarify and simplify language; and announce a
toll-free number and internet website for Prompt Payment Act
information. Finally, in addition to revising the Prompt Payment rules,
OMB is also adopting them as codified regulations in the Code of
Federal Regulations. OMB's issuance of codified regulations has the
effect of superceding and rescinding Circular A-125 (``Prompt
Payment'').

DATES: Effective Date: The regulations are effective October 29, 1999.

ADDRESSES: Copies of the regulation and other information are available
from the Prompt Payment web site at http://www.fms.treas.gov/prompt/
index.html. Copies are also available from the Financial Management
Service, Cash Management Policy and Planning Division, 401 14th Street,
SW., Washington, DC 20227.

FOR FURTHER INFORMATION CONTACT: Sally Phillips, Senior Financial
Program Specialist on (202) 874-7106; Matthew Helfrich, Financial
Program Specialist, (202) 874-6749; Martha Thomas-Mitchell, Financial
Program Specialist on (202) 874-6757; or Cynthia Johnson, Director,
Cash Management Policy and Planning Division on (202) 874-6590.

SUPPLEMENTARY INFORMATION:

I. Background

    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).
    On June 17, 1998, OMB requested public comment on proposed
revisions to Circular A-125 (63 FR 33000). As the preamble to that
document explained (at 33000), the Circular is being updated to reflect
the increased use of electronic commerce in the Federal government and
in the private sector, including electronic financial systems and
electronic funds transfer. The value of electronic commerce as a means
of streamlining government and saving taxpayer dollars was emphasized
by President Clinton in his memorandum to agencies of October 26, 1993,
and by the National Performance Review, headed by Vice President Al
Gore, in its call for an ``all electronic Treasury.'' In addition, the
document explained (at 33001) that revisions to the Circular were being
proposed to reflect the Debt Collection Improvement Act of 1996
(``DCIA''; Pub. L. 104-134). Finally, the document indicated (at 33003)
that, upon the issuance of final revisions, the Circular's provisions
would be codified in the Code of Federal Regulations.
    The current rule responds to the comments that were received on the
proposed revisions, issues final revisions to OMB's Prompt Payment
regulations, and codifies these regulations at a new part 1315 of title
5 of the Code of Federal Regulations. With the incorporation of the
Prompt Payment rules into 5 CFR part 1315, OMB is rescinding Circular
A-125.
    As the next part of this preamble explains, OMB has made a number
of changes to the Prompt Payment rules in response to public and agency
comments on the proposal. In addition, one change has been made in
response to subsequent legislative action--the elimination of the
requirement for agencies to report annually on their Prompt Payment
activities. This requirement (found in Section 14 of the Circular) had
implemented the statutory reporting requirement in Section 3906 of the
Prompt Payment Act, but Congress repealed Section 3906 last fall, in
Section 1301(c) of the Federal Reports Elimination Act of 1998 (Pub. L.
105-362). As a result, agencies are no longer required to submit any
Prompt Payment statistics to the Financial Management Service.
    Finally, in an effort to further reduce any delays relating to
payment, the Department of Treasury is establishing an interagency
group, including the Department of Defense and other agencies, to
examine any ongoing problems. The group will explore causes of any
identified delay and develop options for corrective action as
necessary.
    As codified at Part 1315, the Prompt Payment rules generally follow
the organization of the proposal. However, the section on
``Definitions'' has been moved from near the end of the proposal
(Section 18) to near the beginning of the final rule (Section 1315.2).
Also, as noted above, the ``Reporting Requirements'' section (Section
16 of the proposal) has been deleted.

II. Comments on, and Changes to, the Proposed Rule

    Comments were received from 21 entities: 15 Federal agencies, 5
vendors and organizations representing vendors, and one university.
Most of the comments addressed particular provisions in the proposed
Prompt Payment rules. These are discussed below on a section-by-section
basis, along with the changes that have been made to the proposed rule.
Other, more general, comments on the proposal are discussed at the end
of this part of the preamble.

A. Section 1315.1--Application (Proposed Section 1)

    The Commodity Credit Corporation (CCC) commented that CCC payments
made to farm producers are not considered to be procurement payments
and as such CCC payments should not be covered in proposed Section
1.a., ``Application.'' A separate paragraph at final Sec. 1315.1(d) has
been added to indicate the scope of the coverage of the Prompt Payment
Act with respect to CCC payments (CCC payments are also addressed in
Sec. 1315.13).
    In proposed Section 1.c, ``Utility payments,'' an agency commented
that the section should be revised to clarify that the referenced
``tariffs,'' which may override the Prompt Payment interest, are
utility tariffs only. This was the intent of the proposed section, as
with Section 2.b of the Circular, because the section addresses only
utility services. The section has been revised to make this point
clearer.
    One agency, with worldwide operations, recommended that proposed
Section 1.c (``Utility payments'') should be amended to provide that,
when late payment rates for utility services are established by foreign
governments,

[[Page 52581]]

such rates (in addition to the late payment rates established by state
or local governments) will take precedence over the rates that would
otherwise apply under this part. OMB agrees that foreign late payment
rates for utility services should be treated comparably to state or
local rates. In both situations, the Federal government should pay the
local rate that is generally charged to utility customers, rather than
the Prompt Payment Act rate. Final Sec. 1315.1(c) has been revised
accordingly.
    Finally, the paragraph at final Sec. 1315.1(b)(2) has been amended
to include the word ``contingency'' when describing payments made
during military operations. This parallels the language in the
referenced provision at 10 U.S.C. 101(a)(13).

B. Section 1315.2--Definitions (Proposed Section 18)

    An agency suggested that the definition of ``Acceptance'' be
revised to clarify that only an authorized government official may
accept goods or services. OMB agrees and has made the change at
Sec. 1315.2(b).
    The definition of ``Applicable interest rate,'' at Sec. 1315.2(d)
has been revised to reflect the change in the ``Utility Payments'' in
Sec. 1315.1(c), which clarifies that utility tariffs take precedence
over the Prompt Payment interest rate when governmental authorities
(including foreign governments) regulate late payment rates.
    Based on a comment from an agency, OMB has made a clarifying
revision to the definition of ``Banking information'' at
Sec. 1315.2(f), so that it refers to ``vendor financial institution's''
rather than ``their bank's'' in connection with the routing number of
the vendor's financial institution.
    Several comments were received from agencies and from organizations
representing Federal vendors regarding the definition of ``Contract
financing payments,'' which in the final rule is found at
Sec. 1315.2(h). One commenter expressed the view that OMB should revise
the rules to expand the application of Prompt Payment Act interest
penalties to include contract financing payments. Contract financing
payments were not subject to interest penalties under the Circular and
the final rule retains this position. Under Circular A-125, the
obligation to pay interest penalties for late payments has been
conditioned upon the agency's acceptance of the supplies or services.
Contract financing payments, by contrast, are the ``authorized
disbursement of monies prior to acceptance of supplies or services.''
Circular A-125, section 1.f (54 FR 52707); see 54 FR 52701 (discussion
of contract financing payments). As part of its activities to examine
potential ongoing problems with payment delays, the Treasury
Department's interagency workgroup (discussed above) will assess the
agencies' practices with respect to contract financing payments.
    The definition of ``Designated Agency Office'' at Sec. 1315.2(m)
has been revised, based on a comment, to make clear that the office
first designated to ``receive'' an invoice must also ``review'' it to
determine if it is proper.
    An agency suggested that the definition of ``Electronic Funds
Transfer'' (EFT) include electronic transmission of payment data. In
light of the DCIA and requirement that federal payments be made
electronically, the definition of EFT at Sec. 1315.2(s) has been
modified to more closely reflect the definition found at 31 CFR part
208, Managing Federal Agency Disbursements. An agency responsible for
cleaning hazardous waste sites commented that the definition for
``Emergency Payment'' should be modified to include the release or
threatened release of hazardous substances as defined in Section 106 of
the Comprehensive Environmental Response Compensation and Liability Act
of 1980. OMB has made this change at Sec. 1315.2(t).
    OMB has changed the FAR subpart reference in the definition of
``Fast Payment'' at Sec. 1315.2(v) to reflect new FAR numbering.
    The term ``Government Credit Card'' has been changed to
``Governmentwide Commercial Purchase Cards,'' and the definition at
Sec. 1315.2(x) have been revised to reflect changes (that are discussed
below) to Sec. 1315.12, ``Payments to Governmentwide Commercial
Purchase Card Issuers.'' The definition was also revised to remove the
reference to the current simplified acquisition threshold of $100,000
(because the threshold may change periodically), and to describe the
types of payments for which the card may be used.
    Several agencies requested definitions for ``rebate'' and
``settlement date.'' Definitions for these terms have been added, at
Sec. 1315.2(aa), (ee).
    An agency suggested that the phrase ``contractual or
noncontractual'' in the definition of ``Utilities and Telephones'' be
removed since the Prompt Payment Act only applies to payments made as
the result of a contract. OMB agrees, and the phrase has been removed
from the definition at Sec. 1315.2(gg).

C. Section 1315.3--Responsibilities (Proposed Section 2)

    The discussion on ``Internal control systems'' (Sec. 1315.3(b)) has
been modified to clarify that an agency's Quality Control program must
include Quality Control validation at least once annually.

D. Section 1315.4--Prompt Payment Standards and Required Notices to
Vendors (Proposed Section 3)

    We received several comments concerning the use of non-paper
documentation. An agency requested that OMB revise the ``Required
documentation'' subsection to state that documentation stored in an
imaged format is an example of the electronic documentation that is
required. In the same vein, an agency commented that facsimiles should
be included among the ``computer-related media'' that, under the
``Receipt of invoice'' subsection, may be used in lieu of ``written''
or ``original'' paper documents. Finally, an agency, which said it has
experienced problems with non-paper media, recommended that OMB delete
the provision that allows computer-related media to be used.
    OMB agrees that an imaged format would be acceptable for electronic
documentation purposes. Similarly, facsimiles are one example of an
acceptable substitute for paper documents. OMB, though, does not
believe that it is necessary (or advisable, given the evolving nature
of electronic technology) for the rule to offer specific examples of
acceptable formats for electronic documentation. Any legible electronic
format may be used in lieu of paper documentation (to clarify this
point, the reference to ``computer-related media'' in the proposal has
been changed to ``any media'' in the final rule). OMB does not agree
with the recommendation to delete the provision on computer-related
media. In order to prevent delays in payment and subsequent late
payment interest penalties, this provision strongly encourages agencies
to use non-paper documentation with adequate internal controls to
prevent duplicate payments. Agencies not having internal controls which
are adequate for preventing duplication of payments are strongly
encouraged to adopt such controls and to use non-paper documentation
once those controls are in place.
    Several agencies were critical of the proposed subsections on
``Receipt of invoice'' and ``Starting the payment period,'' which were
significantly revised versions of the Circular's provisions on those
subjects (Sections

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1.n and 4.d of the Circular). The agencies stated that the proposed
revisions did not provide useful clarification to the discussion of
when an invoice is received for purposes of starting the payment period
in accordance with the Prompt Payment Act (31 U.S.C. 3901(a)(4)). Based
on these comments, the final rule makes only minor revisions to the
Circular's provisions on ``Receipt of invoice'' and ``Starting the
payment period''; the final rule's provisions are found at
Sec. 1315.4(b), (f). In response to an agency comment, the final rule
clarifies that an electronically-received invoice is deemed to be
received on the date the invoice is received unless it is received
after normal working hours, in which case the invoice is deemed to be
received the next business day.
    OMB received a number of comments on the proposed subsection on
``Review of invoice.'' With respect to the requirement in Section
3.c(1) of the proposal for the agency to review the invoice to
determine if it is improper, an agency commented that the phrase
``appropriate office'' did not correctly capture the intention of the
1988 amendments to the Act that the office first designated to receive
an invoice must review it to determine if it is proper. In the final
rule, at Sec. 1315.4(c)(1), OMB has replaced the term ``appropriate
office'' with the term ``designated agency office'' and (as discussed
above) has revised the definition of that term in Sec. 1315.2(m) to
reflect the fact that this office is expected to review invoices.
    A trade organization commented that the maximum time allowed an
agency to review an invoice and return an invoice as improper should be
reduced from seven days to three days. The seven-day period is
established by the Prompt Payment Act, which provides that (except in
the case of certain specified types of contracts, for which a different
maximum period is set) ``each invoice be reviewed as soon as
practicable after receipt'' and ``any invoice determined not to be such
a proper invoice suitable for payment shall be returned as soon as
practicable, but not later than 7 days, after receipt, specifying the
reasons that the invoice is not a proper invoice.'' 31 U.S.C.
3903(a)(7)(A), (B). The Circular has reiterated the Act's requirement,
by stating in Section 4.b(2), (3) that an invoice ``will be reviewed as
soon as practicable after receipt'' and, if determined to be improper,
``shall be returned as soon as practicable, but not later than seven
days'' after receipt. The proposed rule at Section 3.c(1), (2) also
stated that the invoice shall be reviewed and, if determined to be
improper, be returned within seven days after receipt. However, as
another trade organization noted, the proposal failed to specify that
the invoice shall be reviewed and (if determined to be improper)
returned ``as soon as practicable'' after receipt.
    In accordance with the Act, and the pre-existing Circular, the
final rule states in Sec. 1315.4(c)(1), (2) that an agency shall review
the invoice ``as soon as practicable after receipt'' and shall return
an improper invoice ``as soon as practicable after receipt, but no
later than 7 days after receipt.'' In addition, as did the proposal,
the final rule provides that the agency ``will identify all defects
that prevent payment and specify all reasons why the invoice is not
proper and why is it being returned.'' As a result, if it is
``practicable'' for an agency to review and return an improper invoice
in three days, then--under the Act and the final rule--the agency is
required to return the invoice in three days. However, if it is not
``practicable'' for an agency to review and return an improper invoice
in three days, then the Act and the final rule provide that the agency
has additional time (up to seven days) in which to do so. Given the
statutory standard, we do not believe it would be appropriate for the
final rule to require an agency to return an improper invoice in less
than seven days where it would not be ``practicable'' for the agency to
do so.
    An agency commented that the proposed provision at Section 3.c(2),
regarding the notification requirement when returning an improper
invoice, should be consistent with proposed Section 13.a.(3) which
stated that, for construction contracts, an agency need not return an
improper invoice if the agency notifies the vendor electronically that
the invoice is improper. Another agency, however, noted that the Prompt
Payment Act, at 31 U.S.C. 3903(a)(7)(B), provides that improper
invoices ``shall be returned.'' In the final rule, at
Sec. 1315.14(a)(3), OMB has dropped the language concerning electronic
notification of improper invoices for construction contracts. As a
result, that provision is consistent with the invoice-return
requirement at Sec. 1315.4(c)(2).
    A trade organization commented that additional language should be
added which says that the number of days available to an agency to make
the payment is reduced by the number of days by which an agency exceeds
the time period during which it is required to return the improper
invoice. OMB does not believe that additional language is necessary.
The Circular in Section 4.b(4) has already provided for such a
reduction in the payment period. That language was in the proposed rule
at Section 3.g(3), and is found in the final rule at Sec. 1315.4(g)(4).
    Two agencies commented on the provision on ``Acceptance'' in
Section 3.e of the proposal. As has the Circular (at Section 4.c), the
proposal required agencies to ensure that acceptance is ``executed as
promptly as possible,'' and that commercial items and services ``should
not be subject to extended acceptance periods.'' One agency commented
that a specific time period should be established (e.g., seven days)
within which acceptance is required to occur, unless a longer
acceptance period is agreed upon. OMB does not believe that a specific
time period should be set for acceptance, but rather that acceptance
should occur ``as promptly as possible.'' Therefore, the final rule at
Sec. 1315.4(e) retains the language from the Circular and the proposal
on this point. Another agency commented that the language in the
proposal that acceptance reports should be forwarded to the designated
agency office ``by the fifth working day after delivery'' should be
amended to say the fifth working day ``after acceptance'' (which would
parallel the language in the Circular at Section 4.c). OMB agrees with
the comment and has made the change.
    With respect to the ``Payment date'' provision at Section 3.h of
the proposal, an agency commented that there would be no instance where
a payment would fall due ``after normal working hours.'' OMB agrees,
and the phrase has been deleted in Sec. 1315.4(h). Finally, the text of
the provision has been revised for clarity.

E. Section 1315.5--Accelerated Payment Methods (Proposed Section 4)

    Two agencies questioned whether the Prompt Payment Act provides the
statutory latitude to permit payment by accelerated methods after the
matching of documents is completed. OMB believes that accelerated
payment methods are consistent with the Prompt Payment Act, and that
they further substantial policy interests. The Act, at 31 U.S.C.
3903(a)(8), provides that OMB shall prescribe regulations that ``permit
an agency to make payment up to 7 days prior to the required payment,
or earlier as determined by the agency to be necessary on a case-by-
case basis.'' OMB believes that, as the government moves steadily into
the electronic commerce mainstream, agencies are increasingly likely to
realize efficiencies and cost savings if agencies are allowed to pay
early when it benefits the government to do so. Therefore, agencies may
use the accelerated payment methods when they determine that such
earlier

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payments are necessary (as final Sec. 1315.4(j) provides). When making
these decisions, agencies should consider the cost of funds to the
government of paying early. Prompt Payment late payment interest
penalties apply if the payment is not made by the payment due date.
    An agency questioned whether the matching requirements for the
accelerated payment methods would apply to payments made by agencies
which do not use a 100 percent prepayment examination process but
instead rely on statistical sampling in accordance with 31 U.S.C. 3521.
This agency was concerned that only those payments chosen for the
sample would be eligible for accelerated payments methods. OMB does not
intend for the accelerated payment methods to be available only for
those payments where 100 percent prepayment examinations are conducted,
but may also be used by agencies that rely on statistical sampling, if
such sampling reveals no unacceptable levels of problems encountered.
    An agency recommended that the proposed provision on ``A single
invoice under $2,500'' clarify that payments of credit card invoices
under $2,500 may be made without verification that goods have been
received (see Treasury Financial Manual 4-4500, Government Purchase
Cards). OMB agrees and has made this change.
    An agency commented that accelerated payments to small businesses,
under the proposed provision on ``Small Disadvantaged Business
Concern,'' should be mandated rather than simply authorized. However,
under 31 U.S.C. 3903(a)(8), an agency needs to determine that such
earlier payments are necessary. Thus, OMB does not agree that the rule
should mandate the use of the accelerated payment methods. Another
agency commented that accelerated payments should be made to all small
businesses rather than (as under the proposal) only to small
disadvantaged business concerns ``as defined in the FAR Part 19.001.''
OMB agrees that accelerated payments may be made to any small business
(as defined in FAR Part 19.001) if the agency determines that such
early payments are necessary. The final rule at Section 1315.b has been
revised accordingly.

F. Section 1315.6--Payment Without Evidence That Supplies Have Been
Received (Fast Payment) (Proposed Section 5)

    Several agencies commented on proposed Section 5, ``Fast Payment''
(the title of this section has been changed in the final rule). Several
agencies commented that the FAR citation at Part 13 was no longer
subpart 13.3, but is now subpart 13.4. This change has been made. An
agency commented that proposed sections 5.b and 5.d (on ``FAR clause
52.213.1'' and ``Obligation documents'') were not within the scope of
this regulation and should be deleted. Based on the comments, OMB has
decided to retain much of the language from Section 12 of the existing
Circular (54 FR 52712). The conditions under which a fast payment
procedure is warranted and the requirements of a fast pay contract
remain unchanged.

G. Section 1315.7--Discounts (Proposed Section 6)

    With respect to proposed Section 6.a (``Economically justified
discounts''), an agency commented that its first two sentences should
be combined for clarity. In addition, another agency commented that
agencies should be encouraged to include discount terms in the contract
at the time of award. This would provide agencies the opportunity to
include discount terms in their accounting systems, which could then be
automatically evaluated to determine if they are economically justified
and will give agencies enough time to evaluate and take the discount,
when indicated. This agency also commented that the term ``deadline''
in proposed 6.b (``Discounts taken after the deadline'') should be
replaced by the term ``discount date'' to more accurately reflect the
date by which agencies may take a discount. OMB agrees with these
comments and has revised the section accordingly.

H. Section 1315.8--Rebates (Proposed Section 7)

    An agency commented that a rebate formula would be useful to
agencies in implementing this section. OMB agrees and has included a
rebate formulate in the final rule, at Sec. 1315.17 (``Formulas''). The
``Rebates'' section has been revised to clarify that the payment due
date may be calculated using the rebate formula provided, unless the
payment due date has been determined in the contract.

I. Section 1315.9--Required Documentation (Proposed Section 8)

    An agency making payments overseas to foreign landlords said that
late payment interest penalties should not be required when routine
lease contract renewal payments cannot be made because a foreign
landlord no longer lives in the area where the leased property is
located. OMB agrees that Prompt Payment interest penalties are not
required to be paid if the vendor does not submit a corrected
remittance address as required by final Sec. 1315.9(a)(6).
    The language in Sec. 1315.9(a)(8), regarding banking information
required by the Debt Collection Improvement Act, has been reworded to
parallel the language in Sec. 1315.9(a)(7), regarding interest
penalties under the Prompt Payment Act. The requirements of these
subsections are unchanged.
    Two agencies commented that proposed Section 8.a(8), requiring that
banking information be submitted no later than the first request for
payment, is inconsistent with the proposed Federal Acquisition
Regulation (FAR Case 91-118) which required the submission of banking
information no later than 15 days before the submission of the first
request for payment. One of the agencies commented that coordination on
this point was required to ensure consistency. This issue has been
resolved by the publication of the final FAR rule on March 4, 1999 (64
FR 10530, 10538). Unlike the proposed FAR rule, the final FAR rule does
not require receipt of EFT information 15 days prior to the invoice.
    An agency requested clarification on whether purchase orders used
as invoices would be in compliance with proposed Section 8.b(4) if an
invoice number was not provided on the purchase order. An agency
commenting on proposed Section 8.b(6) stated that the rule should not
require payment and shipping terms on an invoice, but rather these
terms should be specified either by agency policy or on individual
orders or contracts. The requirements of this section are intended to
allow an agency to require the information it needs to make a timely
payment. The final rule at Sec. 1315.9(b)(4), (6) provides agencies
with discretion as to whether to require this information; as these
provisions state, the contract may specify which information is
required.
    Several comments were received concerning the proposed rule's
treatment in Section 8.b(7)-(8) of the collection of banking
information and Taxpayer Identifying Numbers (TINs). Subsequent to the
issuance of the proposal, the Treasury Department issued regulations on
the Debt Collection Improvement Act of 1996 (DCIA) that are found in 31
CFR Part 208 (63 FR 51490, September 25, 1998). The DCIA regulations
require the collection of banking information in order to make an
electronic funds transfer (EFT) payment as required by the DCIA unless
the payment is waived under 31 CFR Part 208. The regulations also
require the collection of the TIN,

[[Page 52584]]

which the DCIA requires 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. See Treasury Financial
Manual, TFM Bulletin 99-02.
    The proposed rule in Section 8.b(7)-(8) required the collection of
banking information and TINs on the invoice unless previously collected
by the agency. Several agencies interpreted these provisions to mean
that an agency could not require that this information be on the
invoice if the information had already been provided. These agencies
commented that they would need to require the information on the
invoice even if it had been previously provided. One agency commented
that payment offices are not always notified in a timely manner when
financial institutions merge and when vendors change financial
institutions. Another agency commented that it requires the flexibility
to require TINs on every invoice because many companies have multiple
branches or subsidiaries, which often have their own individual TINs.
According to the agency, if the vendor is not required to provide the
TIN on each invoice, then the agency is forced to make a determination
as to which TIN is associated with the invoice. OMB recognizes that
some agencies need the flexibility to require banking information and
TINs on invoices in addition to collecting the information sooner in
the payment process. The final rule has been revised at
Sec. 1315.9(b)(7)-(8) to state that banking information and TINs are
required on the invoice unless agency procedures provide otherwise.
    An agency requested clarification that payments to vendors may be
withheld pending submission of a proper invoice that includes banking
information. The agency requested the clarification because a June 25,
1998 press release issued by Treasury stated that no payments would be
withheld as a result of the DCIA EFT requirement. OMB has been informed
by Treasury that the payments referred to in the press release are
payments to individuals (such as recipients of Federal salary, wage,
benefit or retirement payments), not payments to vendors. The final
rule at Sec. 1315.9(b)(8) requires a vendor to provide banking
information, as part of a proper invoice, so that an electronic payment
can be made. The invoice is not deemed proper unless the banking
information is provided to the agency by the time the invoice is
submitted. The payment period does not begin, and thus agencies are not
required to pay late payment interest penalties, until after the
banking information has been received.
    Two agencies that make payments overseas commented that proposed
Section 8.b(7) should be amended to specifically exclude the
requirement that TINs be provided for overseas payments, in the case of
overseas vendors who do not have a TIN. The DCIA does not provide
agencies the authority to waive the requirements to collect the TIN for
purposes of offsetting Federal payments to collect debt owed the
government. However, the Treasury Department acknowledges that there
are some situations where it may not be possible to collect a TIN.
Treasury has proposed a TIN implementation report from each agency to
identify those situations where the TIN cannot be collected. (See
Treasury Financial Manual, TFM Bulletin 99-02.)
    One agency suggested that the regulation emphasize that the
collection of TINs is required for 1099 tax reporting purposes and that
agencies must have systems which can distinguish between payments for
services and payment for products because only payments for services
are required to be reported to the Internal Revenue Service (IRS). OMB
believes this discussion is beyond the scope of the regulation and
defers such discussion to IRS regulations.
    An agency commented that proposed Sections 8.c.(3), (5), and (6)
should include references to services, since receiving reports can
apply to services as well as goods. OMB agrees and has made the change
at Sec. 1315.9(c)(3), (5), and (6) of the final rule. The same agency
commented that proposed language at 8.c.(8) incorrectly referenced
Section 8.c(1)-(7) rather than Section 8.b. OMB agrees, and has
corrected the reference in Sec. 1315.9(c)(8) so that it refers to
Sec. 1315.9(b). Also, this provision has been revised so that the
additional information required for a delivery ticket (when it is used
as an invoice) will be set forth in agency procedures, which may (but
are not required to) include the information in Sec. 1315.9(b).

J. Section 1315.10--Late Payment Interest Penalties (Proposed Section
9)

    A trade organization commented that language should be included in
this section, which would state that the number of days available to an
agency to make a payment is reduced by the number of days that the
notification of an improper invoice is late. As explained above, this
language is already found in Sec. 1315.4(g)(4) (``Notification of
Improper Invoice''), which discusses how to calculate the payment due
dates when a notification of an improper invoice is late.
    The language in final Sec. 1315.10(a)(1) has been revised to
clarify that the time period during which interest will accrue begins
on the day after the payment due date and ends on the payment date, and
interest will accrue at the rate in effect on the day after the payment
due date.
    An agency commented that proposed Section 9.a.(3) should be amended
to say that interest will accrue on the ``unpaid amount'' instead of
``the unpaid principle and accrued interest'' because the latter
language assumes that the principal amount has not been paid and such
is not necessarily the case. The agency also commented that this
paragraph be placed after proposed 9.a.(4). Two agencies commented that
the word ``capitalized'' in proposed 9.a.(4) should be replaced with
``compounded'' because compounded is a more easily understood term and
reflects the same meaning. OMB agrees with these comments and the
changes are made in Sec. 1315.10(a).
    Several agencies requested clarification on proposed Section 9.a(6)
regarding the date through which interest accrues on discounts
improperly taken. The final rule at Sec. 1315.10(a)(6) has been revised
to clarify that interest is calculated beginning on the date after the
discount date through the date of payment of the discount erroneously
taken.
    An agency commented that the one dollar threshold in proposed
9.a.(7) should be increased. The one dollar threshold is specified in
the Prompt Payment Act, 31 U.S.C. 3902(c)(1), and is therefore retained
in the final rule at Sec. 1315.10(a)(7).
    Proposed 9.a(8) addressed when interest penalties would begin to
accrue when a vendor has supplied the agency with incorrect banking
information. Several agencies expressed the concern that an agency
would not know that the vendor had supplied incorrect banking
information until the agency's payment is rejected. As a result, it
would be very difficult and in some cases impossible for the agency to
return the invoice as improper (due to the incorrect banking
information) within the seven days that is allowed for returning an
improper invoice. In response to these comments, the final rule at
Sec. 1315.10(a)(8) provides that, if the vendor has supplied incorrect
banking information, interest will not accrue until seven days after
the agency receives correct information.

[[Page 52585]]

This is intended to give agencies adequate time to prepare and initiate
a payment using the correct information, and is similar to the
provision at Section 7.a(10) of the Circular.
    An agency commented that interest should be calculated based on a
365-day year, rather than the 360-day year in proposed Section 9.a(9).
The 360-day year, which has been used in Section 7.a(11) of the
Circular, is a standard business practice, and it is used in other
calculations such as the calculation for the rebate formula and the
discount formula used to determine when to take discounts. Accordingly,
the final rule at Sec. 1315.10(a)(9) retains the 360-day year.
    Two agencies commented that the phrase ``except when title of the
goods passes to the government'' in proposed Section 9.b(1) should be
deleted because its purpose was unclear. The exception was intended to
address the situation where, under the Fast Payment procedure, the
passing of title substitutes for acceptance for purposes of determining
whether late payment interest penalties may be paid. Language has been
added in final Sec. 1315.10(b)(1) to clarify that, in these
circumstances, interest may be paid only after the government receives
title for goods.
    An agency requested clarification on whether the delay of the
passage of an appropriations bill is an example of ``the temporary
unavailability of funds'' under proposed Section 9.b(4). That is indeed
the situation addressed by this provision, which has been found in
Section 7.b(3) of the Circular. The provision is taken from the Prompt
Payment Act, at 31 U.S.C. 3902(d). Under the Act, the fact that an
appropriation has not yet been enacted from which payments to vendors
can be made does not relieve the agency of the obligation to pay
interest for late payments.

K. Section 1315.11--Additional Penalties (Proposed Section 10)

    An agency commented that proposed Section 10.a should be amended to
say that a vendor shall be entitled to interest ``of $1.00 or more,''
so as to clarify that interest under $1.00 need not be paid. The agency
commented that proposed Section 10.c should be similarly amended by
adding that no additional penalty is owed if the amount of the interest
penalty is less than $1.00. An agency recommended that proposed Section
10.a(3)B be amended to include the situation where a postmark is
illegible (in addition to where there is no postmark), while another
agency commented that the proposed language on confirmation of postmark
should be moved to the beginning of Section 10.a(3). This agency
commented that proposed Section 10.a(3)B should clarify that the ``date
of receipt'' refers to receipt of the principal amount. The agency also
commented that the proposed Section 10.d was confusing and would be
clarified by replacing ``if paid separately'' with language that states
that penalty determinations are made separately for each invoice when
payments are consolidated. OMB agrees with these comments, and the
changes are made in Sec. 1315.11.

L. Section 1315.12--Payments to Governmentwide Commercial Purchase Card
Issuers (Proposed Section 11)

    Two agencies commented that the requirements of proposed Section 11
(``Payments Under Government Credit Card.'') were inconsistent with the
requirements of proposed Section 7 (``Rebates''). OMB agrees that the
requirements for determining credit card invoice payment dates in these
proposed sections were not consistent. In the final rule, Sec. 1315.12
has been revised to instruct agencies to determine payment due dates in
accordance with Sec. 1315.8.
    Two agencies commented that this section should reference the
rebate formula and should replace the reference to the discount
formula. A reference to the rebate formula has been added to this
section. Several agencies commented that the terms used in the
regulation for the credit card program should be the same as those used
in the FAR. OMB has changed the reference to Governmentwide Commercial
Purchase Card which is the term used in the FAR and has changed the
title of the section to ``Payments to Governmentwide Commercial
Purchase Card Issuers'' to reflect the new term and to reflect the new
program's use of multiple card issuers.
    Two agencies requested clarification on whether the accelerated
payment due dates for purchase card invoices under $2500 applied to
individual invoices or to consolidated invoices. One of the agencies
also requested clarification on whether purchase card invoices referred
to invoices from vendors which would be paid by purchase card or
invoices from purchase card issuers. A purchase card invoice means a
single invoice submitted by a purchase card issuer for reimbursement of
funds already paid to the vendor by the card issuer. Any single invoice
under $2500 may be paid in accordance with this section, however a
consolidated invoice may only be paid in accordance with this section
and Sec. 1315.5, ``Accelerated Payment Methods'' if the total amount of
the consolidated invoice is under $2500.
    Two agencies sought clarification on whether matching documents was
required for purchase card invoice payments under $2500. OMB has added
language to clarify that matching documentation under this payment
method is not required to be performed before payment.

M. Section 1315.13--Commodity Credit Corporation Payments (Proposed
Section 12)

    Based on comments from the Commodity Credit Corporation (CCC),
proposed Section 12 (``Payments to Farm Producers'') has been modified
to clarify payment standards and to include language which insures that
the CCC may still exercise or implement, under authorities applicable
directly to the Corporation, whatever discretion or obligation it may
possess to deal with lawful claims, including, if appropriate, payment
of interest penalties beyond the time provided elsewhere in the
regulation. The title of the section has been modified to more
accurately reflect the scope of CCC payments covered by the Prompt
Payment Act.

N. Section 1315.14--Payments Under Construction Contracts (Proposed
Section 13)

    As discussed above, OMB agrees with the agency comment that the
language in proposed Section 13.a.(3), which stated that it is not
necessary for an agency to return an improper invoice when it notifies
the vendor electronically that the invoice is improper, was
inconsistent with the return requirement in proposed Section 3.c(2) and
in the Prompt Payment Act at 31 U.S.C. 3903(a)(7)(B). The language has
therefore been deleted.

O. Section 1315.15--Grant Recipients (Proposed Section 14)

    No comments were received on this section. The final rule contains
the proposed text.

P. Section 1315.16--Relationship to Other Laws (Proposed Section 15)

    An agency commented that proposed Section 15.a.(2) ``Relationship
to Other Laws'' should include language which clarifies that once a
claim is filed under the Contract Disputes Act, Prompt Payment interest
penalties will never accrue on the disputed amount after the date the
claim was filed. OMB agrees and has added clarifying language.

[[Page 52586]]

Q. Proposed Section 16--Reporting Requirements

    As explained above, Congress in Section 1301(c) of the Federal
Reports Elimination Act of 1998 repealed the Prompt Payment Act's
reporting requirements at 31 U.S.C. 3906. Accordingly, the final rule
does not adopt the reporting requirements in proposed Section 16.

R. Section 1315.17--Formulas

    As explained above, an agency suggested that a formula be provided
for calculating rebates, and one is provided in this section. An agency
also commented that the Prompt Payment internet website should include
formulas for computing interest penalties. Formulas for computing
monthly compounded interest and daily simple interest have been added
to this section and to the website. In addition, the website now
includes a spreadsheet which can be used to determine when to pay a
purchase card invoice. This section also includes a formula for
manually calculating when to pay a credit card invoice so as to either
maximize savings or minimize costs.

S. Section 1315.18--Inquiries (Proposed Section 17)

    A trade association representing construction subcontractors
commented that the Prompt Payment website should include a link to the
Prompt Payment Act of 1988 and to the Federal Acquisition Regulation
Prompt Payment clause. The Financial Management Service has added both
links to the Prompt Payment website. The address for the website is
www.fms.treas.gov/prompt/index.html.

T. Section 1315.19--Regulatory References to OMB Circular A-125 (New
Section)

    This section was added to make clear that regulatory references to
OMB Circular A-125 shall be construed as referring to the Part until
revised to reflect this codification. This would include references to
A-125 contained in the FAR. (During the coming months, additional
technical conforming changes will be made to FAR provisions and clauses
as necessary.)

U. Interagency Payments

    At the end of Part II of the Supplementary Information section of
the proposed rule's preamble, OMB sought comment on how the Federal
government should address the problem of Federal agencies making late
payments to other Federal agencies. Six agencies commented that
Treasury's Online Payments and Collections system (OPAC) or Treasury's
Electronic Data Interchange Payments and Collections system (EDIPAC)
should be required to be used by all Federal agencies for interagency
payments. One agency commented that the availability of interagency
payment mechanisms such as OPAC/EDIPAC, credit cards and other programs
would assist agencies in improving interagency payment efficiency.
Another agency commented that Interagency Agreements could include
terms which provide for billing in advance. This agency commented
further that agencies should have a limit of one year to bill, because
some agencies have taken much longer than a year to bill. Two agencies
commented that Prompt Payment late payment interest penalties should be
applied to interagency payments. Three agencies commented that there
should be no application of Prompt Payment penalties for interagency
payments. One agency commented that Prompt Payment was not the
appropriate context for discussing interagency payments.
    The Prompt Payment Act does not provide for the application to
interagency payments of the Prompt Payment rules, in particular the
interest penalties. However, in light of the electronic fund transfer
(EFT) requirements of the Debt Collection Improvement Act and the costs
that agencies incur to collect overdue amounts from other agencies, OMB
strongly encourages agencies to choose an electronic payment method for
making interagency payments. OMB also strongly encourages agencies to
include advance billing and other payment terms in Interagency
Agreements to facilitate timely payments. Agencies wishing to know more
about available electronic payment methods for interagency payments
should contact the Department of Treasury, Financial Management
Service, Card Technology Division, (202) 874-6550.

III. Regulatory Flexibility Act, Unfunded Mandates Reform Act,
Congressional Review Act, and Executive Orders 12866 and 12875

    This final rule 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 12866 and 12875, the final rule
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.
Finally, the final rule is not a ``major rule'' under 5 U.S.C. Chapter
8; the rule will not have any of the effects set forth in 5 U.S.C.
804(2).

IV. Paperwork Reduction Act

    The collections of information necessary for carrying out the
Prompt Pay Act have previously been reviewed and approved by the Office
of Management and Budget (OMB) under section 3507(d) of the Paperwork
Reduction Act of 1995 (44 U.S.C. Chapter 35) as follows: The collection
of banking information required to make payments electronically has
been approved by OMB under Control Number 1510-0066. The collection of
Taxpayer Identification Numbers (TINs) for contracts governed by the
Federal Acquisition Regulation for commercial and non-commercial
contracts has been approved by OMB under Control Numbers 9000-0097 and
9000-0136, respectively. Collections covered under these three control
numbers are part of the implementation of the Debt Collection
Improvement Act of 1996 (the DCIA). The DCIA requires that all Federal
payments be made electronically after January 1, 1999 and that TINs be
collected for the purposes of collecting debt owed the Federal
government. Collections in this rule relating to the submission and
payment of invoices are approved under OMB Control Numbers 9000-0070
and 0102, which govern the submission of adequate documentation to
support contractor requests for payment.

List of Subjects in 5 CFR Part 1315

    Administrative practice and procedure, Government contracts,
Penalties, Reporting and recordkeeping requirements.

    Dated: September 15, 1999.
Jacob J. Lew,
Director.

Authority and Issuance

    For reasons set out in the preamble, OMB adds part 1315 to 5 CFR
chapter III to read as follows:

PART 1315--PROMPT PAYMENT

Sec.
1315.1  Application.
1315.2  Definitions.
1315.3  Responsibilities.
1315.4  Prompt payment standards and required notices to vendors.
1315.5  Accelerated payment methods.

[[Page 52587]]

1315.6  Payment without evidence that supplies have been received
(Fast Payment).
1315.7  Discounts.
1315.8  Rebates.
1315.9  Required documentation.
1315.10  Late payment interest penalties.
1315.11  Additional penalties.
1315.12  Payments to governmentwide commercial purchase card
issuers.
1315.13  Commodity Credit Corporation payments.
1315.14  Payments under construction contracts.
1315.15  Grant recipients.
1315.16  Relationship to other laws.
1315.17  Formulas.
1315.18  Inquiries.
1315.19  Regulatory references to OMB Circular A-125.

    Authority: 31 U.S.C. chapter 39.

Sec. 1315.1  Application.

    (a) Procurement contracts. This part applies to contracts for the
procurement of goods or services awarded by:
    (1) All Executive branch agencies except:
    (i) The Tennessee Valley Authority, which is subject to the Prompt
Payment Act (31 U.S.C. chapter 39), but is not covered by this part;
and
    (ii) Agencies specifically exempted under 5 U.S.C. 551(1); and
    (2) The United States Postal Service. The Postmaster General is
responsible for issuing implementing procurement regulations,
solicitation provisions, and contract clauses for the United States
Postal Service.
    (b) Vendor payments. All Executive branch vendor payments and
payments to those defined as contractors or vendors (see
Sec. 1315.2(hh)) are subject to the Prompt Payment Act with the
following exceptions:
    (1) Contract Financing Payments, as defined in Sec. 1315.2(h); and
    (2) Payments related to emergencies (as defined in the Disaster
Relief Act of 1974, Public Law 93-288, as amended (42 U.S.C. 5121 et
seq.)); military contingency operations (as defined in 10 U.S.C. 101
(a)(13)); and the release or threatened release of hazardous substances
(as defined in 4 U.S.C. 9606, Section 106).
    (c) Utility payments. All utility payments, including payments for
telephone service, are subject to the Act except those under paragraph
(b)(2) of this section. Where state, local or foreign authorities
impose generally-applicable late payment rates for utility payments,
those rates shall take precedence. In the absence of such rates, this
part will apply.
    (d) Commodity Credit Corporation payments. Payments made pursuant
to Section 4(h) of the Act of June 29, 1948 (15 U.S.C. 714b(h)) (``CCC
Charter Act'') relating to the procurement of property and services,
and payments to which producers on a farm are entitled under the terms
of an agreement entered into under the Agricultural Act of 1949 (7
U.S.C. 1421 et seq.) are subject to this part.

Sec. 1315.2  Definitions.

    (a) Accelerated Payment means a payment made prior to the due date
(see discussion in Sec. 1315.5).
    (b) Acceptance means an acknowledgment by an authorized Government
official that goods received and services rendered conform with the
contract requirements. Acceptance also applies to partial deliveries.
    (c) Agency includes, as defined in 5 U.S.C. 551(1), 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 that is operated exclusively
as an instrumentality of such an agency for the purpose of
administering one or more programs of that agency, and 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 means 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., utility 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 by the Fiscal Service, Department of Treasury,
in the Federal Register on or about January 1 and July 1.
    (e) Automated Clearing House (ACH) means a network that performs
interbank clearing of electronic debit and credit entries for
participating financial institutions.
    (f) Banking Information means information necessary to facilitate
an EFT payment, including the vendor's bank account number, and the
vendor financial institution's routing number.
    (g) Contract means 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
Sec. 1315.9(a).
    (h) Contract Financing Payments means an 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 means any entity issuing a contract or
purchase order or issuing a contract modification or termination.
    (j) Contractor (see Vendor).
    (k) Day means a calendar day including weekend and holiday, unless
otherwise indicated.
    (l) Delivery Ticket means a 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 means the office designated by the
purchase order, agreement, or contract to first receive and review
invoices. This office can be contractually designated as the receiving
entity. This office may be different from the office issuing the
payment.
    (n) Discount means an invoice payment reduction offered by the
vendor for early payment.
    (o) Discount date means the date by which a specified invoice
payment reduction, or a discount, can be taken.
    (p) Due date means the date on which Federal payment should be
made. Determination of such dates is discussed in Sec. 1315.4(g).
    (q) Electronic Commerce means the end to end electronic exchange of
business information using electronic data interchange, electronic
mail, electronic bulletin boards, electronic funds transfer (EFT) and
similar technologies.
    (r) Electronic Data Interchange means 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 of the American National Standards Institute,

[[Page 52588]]

11 West 42d Street, New York, NY 10036.
    (s) Electronic Funds Transfer (EFT) means any transfer of funds,
other than a transaction originated by cash, check, or similar paper
instrument, that is initiated through an electronic terminal,
telephone, computer, or magnetic tape, for the purpose of ordering,
instructing, or authorizing a financial institution to debit or credit
an account. The term includes, but is not limited to, Automated
Clearing House and Fedwire transfers.
    (t) Emergency Payment means a payment made under an emergency
defined as a 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; and the release or threatened release of hazardous substances.
    (u) Evaluated Receipts means contractually designated use of the
acceptance document and the contract as the basis for payment without
requiring a separate invoice.
    (v) Fast Payment means a payment procedure under the Federal
Acquisition Regulation at Part 13.4 which 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) means the regulation (48
CFR chapter 1) that governs most Federal acquisition and related
payment issues. Agencies may also have supplements prescribing unique
agency policies.
    (x) Governmentwide Commercial Purchase Cards means internationally-
accepted purchase cards available to all Federal agencies under a
General Services Administration contract for the purpose of making
simplified acquisitions of up to the threshold set by the Federal
Acquisition Regulation or for travel expenses or payment, for purchases
of fuel, or other purposes as authorized by the contract.
    (y) Invoice means 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 Sec. 1315.9(b). The term invoice can include receiving
reports and delivery tickets when contractually designated as invoices.
    (z) Payment Date means the date on which a check for payment is
dated or the date of an electronic fund transfer (EFT) payment
(settlement date).
    (aa) Rebate means a monetary incentive offered to the Government by
Governmentwide commercial purchase card issuers to pay purchase card
invoices early.
    (bb) Receiving Office means the entity which physically receives
the goods or services, and may be separate from the accepting entity.
    (cc) Receiving Report means written or electronic evidence of
receipt of goods or services by a Government official. Receiving
reports must meet the requirements of Sec. 1315.9(c).
    (dd) Recurring Payments means 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.
    (ee) Settlement Date means the date on which an EFT payment is
credited to the vendor's financial institution.
    (ff) Taxpayer Identifying Number (TIN) means the nine digit
Employer Identifying Number or Social Security Number as defined in
Section 6109 of the Internal Revenue Code of 1986 (26 U.S.C. 6109).
    (gg) Utilities and Telephones means electricity, water, sewage
services, telephone services, and natural gas. Utilities can be
regulated, unregulated, or under contract.
    (hh) Vendor means 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).

Sec. 1315.3  Responsibilities.

    Each agency head is responsible for the following:
    (a) Issuing internal procedures. Ensuring that internal procedures
will include provisions for monitoring the causes of late payments and
any interest penalties incurred, taking necessary corrective action,
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.'' 1
Administrative activities required for payments to vendors under this
part are subject to periodic quality control validation to be conducted
no less frequently than once annually. Quality control processes will
be used to confirm that controls are effective and that processes are
efficient. Each agency head is responsible for establishing a quality
control 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.
---------------------------------------------------------------------------

    \1\ For availability of OMB circulars, see 5 CFR 1310.3.
---------------------------------------------------------------------------

    (c) Financial management systems. Ensuring that financial
management systems comply with OMB Circular A-127, ``Financial
Management Systems.'' 2 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.
---------------------------------------------------------------------------

    \2\ See footnote 1 in Sec. 1315.3(b).
---------------------------------------------------------------------------

    (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.

Sec. 1315.4  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 Sec. 1315.9.
    (b) Receipt of invoice. For the purposes of determining a payment
due date and the date on which interest will begin to accrue if a
payment is late, an invoice shall be deemed to be received:
    (1) On the later of:
    (i) For invoices that are mailed, the date a proper invoice is
actually received by the designated agency office if the agency
annotates the invoice with date of receipt at the time of receipt. For
invoices electronically transmitted, the date a readable transmission
is received by the designated agency office, or the next business day
if received after normal working hours; or
    (ii) The seventh day after the date on which the property is
actually delivered or performance of the services is actually
completed; unless--
    (A) The agency has actually accepted the property or services
before the

[[Page 52589]]

seventh day in which case the acceptance date shall substitute for the
seventh day after the delivery date; or
    (B) A longer acceptance period is specified in the contract, in
which case the date of actual acceptance or the date on which such
longer acceptance period ends shall substitute for the seventh day
after the delivery date;
    (2) On the date placed on the invoice by the contractor, when the
agency fails to annotate the invoice with date of receipt of the
invoice at the time of receipt (such invoice must be a proper invoice);
or
    (3) On the date of delivery, when the contract specifies 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 designated agency office
as soon as practicable after receipt to determine whether the invoice
is a proper invoice as defined in Sec. 1315.9(b);
    (2) When an invoice is determined to be improper, the agency shall
return the invoice to the vendor as soon as practicable after receipt,
but no later than 7 days after receipt (refer also to paragraph (g)(4)
of this section 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) Any media which produce tangible recordings of information in
lieu of ``written'' or ``original'' paper document equivalents should
be used by agencies to expedite the payment process, rather than
delaying the process by requiring ``original'' paper documents.
Agencies should ensure adequate safeguards and controls to ensure the
integrity of the data and to prevent duplicate processing.
    (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 acceptance. 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 date of receipt of a proper invoice (see
paragraph (b) of this section) except where no invoice is required
(e.g., for some recurring payments as defined in Sec. 1315.2(dd)).
    (g) Determining the payment due date. (1) Unless otherwise
specified, the payment is due either:
    (i) On the date(s) specified in the contract;
    (ii) In accordance with discount terms when discounts are offered
and taken (see Sec. 1315.7);
    (iii) In accordance with Accelerated Payment Methods (see
Sec. 1315.5); or
    (iv) 30 days after the start of the payment period as specified in
paragraph (f) of this section, if not specified in the contract, if
discounts are not taken, and if accelerated payment methods are not
used.
    (2) Certain commodity payments. (i) 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.
    (ii) For perishable agricultural commodities, as defined in Section
1(4) of the Perishable Agricultural Commodities Act of 1930 (7 U.S.C.
499 a(4)), payment will be made no later than the 10th day after
delivery, unless another payment date is specified in the contract.
    (iii) 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 arise about the coverage of a specific
product, prevailing industry practices should be followed in specifying
a contractual payment due date.
    (3) 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;
    (ii) May make split payments by the due date applicable to each
category;
    (iii) Shall pay in accordance with the contractual payment
provisions (which may not exceed the statutory mandated periods
specified in paragraph (g)(2) of this section); and
    (iv) Shall not require vendors to submit multiple invoices for
payment of individual orders by the agency.
    (4) Notification of improper invoice. When an agency fails to make
notification of an improper invoice within seven days according to
paragraph (c)(2) of this section (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 the third or fifth day, as
otherwise specified in this paragraph (g)(4)) 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. Payments falling due on a
weekend or federal holiday 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
provided in this part.
    (j) Timely payment. 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. An agency may use the
``accelerated payment methods'' in Sec. 1315.5 when it determines that
such earlier payment is necessary.
    (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.

[[Page 52590]]

Payment is contingent upon submission of a proper invoice if required
by the contract.

Sec. 1315.5  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 except where statutory authority prescribes otherwise and
except where otherwise contractually stipulated (e.g., governmentwide
commercial purchase card.) Vendors shall be entitled to interest
penalties if invoice payments are made after the payment due date.
    (b) Small Business (as defined in FAR 19.001 (48 CFR 19.001)).
Agencies may pay a small business 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 not subject
to payment restrictions stated elsewhere in this part. Vendors shall be
entitled to interest penalties if invoice payments are made after the
payment due date.
    (c) Emergency payments. Payments related to emergencies and
disasters (as defined in the Robert T. Stafford Disaster Relief Act and
Emergency Assistance, Pub. L. 93-288, as amended (42 U.S.C. 5 121 et
seq.); payments related to the release or threatened release of
hazardous substances (as defined in the Comprehensive Environmental
Response Compensation and Liability Act of 1980, Pub. L. 96-510, 42
U.S.C. 9606); and payments made under a military contingency (as
defined in 10 U.S.C. 101(a)(13)) may be made as soon as the contract,
proper invoice, receipt and acceptance documents or any other agreement
are matched. Vendors shall be entitled to interest penalties if invoice
payments are made after the payment due date.

Sec. 1315.6  Payment without evidence that supplies have been received
(Fast Payment).

    (a) In limited situations, payment may be made without evidence
that supplies have been received. Instead, a contractor certification
that supplies have been shipped may be used as the basis for
authorizing payment. Payment may be made within 15 days after the date
of receipt of the invoice. This payment procedure may be employed only
when all of the following conditions are present:
    (1) Individual orders do not exceed $25,000 (except where agency
heads permits a higher amount on a case-by-case basis);
    (2) Deliveries of supplies are to occur where there is both a
geographical separation and a lack of adequate communications
facilities between Government receiving and disbursing activities that
make it impracticable to make timely payments based on evidence of
Federal acceptance;
    (3) Title to supplies will vest in the Government upon delivery to
a post office or common carrier for mailing or shipment to destination
or upon receipt by the Government if the shipment is by means other
than the Postal Service or a common carrier; and
    (4) The contractor agrees to replace, repair, or correct supplies
not received at destination, damaged in transit, or not conforming to
purchase requirements.
    (b) Agencies shall promptly inspect and accept supplies acquired
under these procedures and shall ensure that receiving reports and
payment documents are matched and steps are taken to correct
discrepancies.
    (c) Agencies shall ensure that specific internal controls are in
place to assure that supplies paid for are received.
    (d) As authorized by the 1988 Amendment to the Prompt Payment Act
(Section 11(b)(1)(C)), a contract clause at 48 CFR 52.213-1 is provided
in the Federal Acquisition Regulations (FAR) at 48 CFR part 13, subpart
13.4 ``Fast Payment Procedure,'' for use when using this fast payment
procedure.

Sec. 1315.7  Discounts.

    Agencies shall follow these procedures 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 economically justified
(see discount formula in Treasury Financial Manual (TFM) 6-8040.40)
3 but only after acceptance has occurred. Agencies are
encouraged to include discount terms in a contract to give agencies
adequate time to take the discount if it is determined to be
economically justified.
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    \3\ The Treasury Financial Manual is available by calling the
Prompt Payment Hotline at 800-266-9667 or the Prompt Payment web
site at http://www.fms.treas.gov/prompt/index.html.
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    (b) Discounts taken after the discount date. If an agency takes the
discount after the deadline, the agency shall pay an interest penalty
on any amount remaining unpaid as prescribed in Sec. 1315.10(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 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.

Sec. 1315.8  Rebates.

    Agencies shall determine governmentwide commercial purchase card
payment dates based on an analysis of the total costs and total
benefits to the Federal government as a whole, unless specified in a
contract. 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 factor
in benefits gained from paying early due to, for example, streamlining
the payment process or other efficiencies. A rebate formula is provided
in Sec. 1315.17 and at the Prompt Payment website at www.fms.treas.gov/
prompt/index.html.

Sec. 1315.9  Required documentation.

    Agencies are required to ensure the following payment documentation
is established to support payment of invoices and interest penalties:
    (a) The following information from the contract is required as
payment documentation:
    (1) Payment due date(s) as defined in Sec. 1315.4(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 performed 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

[[Page 52591]]

invoice payments (including progress payments under construction
contracts);
    (8) Reference to requirements under the Debt Collection Improvement
Act (Pub. L. 104-134, 110 Stat. 1321), including the requirement that
payments must be made electronically except in situations where the EFT
requirement is waived under 31 CFR 208.4. Where electronic payment is
required, the contract will stipulate that banking information must be
submitted no later than the first request for payment;
    (9) If using Fast Payment, the proper FAR clause stipulating Fast
Payment is required.
    (b) The following correct information constitutes a proper invoice
and is required as payment documentation:
    (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, and/or any other
identifying number agreed to by contract;
    (5) Description (including, for example, contract line/subline
number), 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 Identifying Number (TIN), unless agency procedures
provide otherwise;
    (8) Banking information, unless agency procedures provide
otherwise, or except in situations where the EFT requirement is waived
under 31 CFR 208.4;
    (9) Contact name (where practicable), title and telephone number;
    (10) Other substantiating documentation or information required by
the contract.
    (c) The following information from receiving reports, delivery
tickets, and evaluated receipts is required as payment documentation:
    (1) Name of vendor;
    (2) Contract or other authorization number;
    (3) Description of goods or services;
    (4) Quantities received, if applicable;
    (5) Date(s) goods were delivered or services were provided;
    (6) Date(s) goods or services 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.
    (d) When a delivery ticket is used as an invoice, it must contain
information required by agency procedures. The requirements in
paragraph (b) of this section do not apply except as provided by agency
procedures.

Sec. 1315.10  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 from the day after the payment due
date through the payment date at the interest rate in effect on the day
after the payment due date;
    (2) Adjustments will be made for errors in calculating interest;
    (3) For up to one year, interest penalties remaining unpaid at the
end of any 30 day period will be added to the principal and subsequent
interest penalties will accrue on that amount until paid;
    (4) When an interest penalty is owed and not paid, interest will
accrue on the unpaid amount until paid, except as described in
paragraph (a)(5) of this section;
    (5) Interest penalties under the Prompt Payment Act will not
continue to accrue:
    (i) After the filing of a claim for such penalties under the
Contract Disputes Act of 1978 (41 U.S.C. 601 et seq.); or
    (ii) For more than one year;
    (6) When an agency takes a discount after the discount date,
interest will be paid on the amount of the discount taken. Interest
will be calculated for the period beginning the day after the specified
discount date through the date of payment of the discount erroneously
taken;
    (7) Interest penalties of less than one dollar need not be paid;
    (8) If the banking information supplied by the vendor is incorrect,
interest under this regulation will not accrue until seven days after
such correct information is received (provided that the vendor has been
given notice of the incorrect banking information within seven days
after the agency is notified that the information is incorrect);
    (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) Prompt
Payment help line 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 or when
title passes to the government in a fast payment contract when title
passing to the government constitutes acceptance for purposes of
determining when interest may be paid;
    (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;
    (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 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 Sec. 1315.11; and
    (5) Agencies shall pay any late payment interest penalties
(including any additional penalties required under Sec. 1315.11) under
this part 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; or
    (5) When the interest penalty is less than $1.00.

Sec. 1315.11  Additional penalties.

    (a) Vendor entitlements. A vendor shall be entitled to an
additional penalty payment when the vendor is owed a late

[[Page 52592]]

payment interest penalty by an agency of $1.00 or more, 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 that the agency pay such an additional
penalty. Such request must be postmarked, received by facsimile, or by
electronic mail, by the 40th day after payment was made. If there is no
postmark or if it is illegible, the request will be valid if it is
received and annotated with the date of receipt by the agency by the
40th day. The written request must include the following:
    (i) 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
    (ii) 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 of the principle.
    (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. No additional penalty is owed, however, if the amount of the
interest penalty is less than $1.00.
    (d) Penalty basis. The penalty is based on individual invoices.
Where payments are consolidated for disbursing purposes, the penalty
determinations shall be made separately for each invoice therein.
    (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.

Sec. 1315.12  Payments to governmentwide commercial purchase card
issuers.

    Standards for payments to government wide commercial purchase card
issuers follow:
    (a) Payment date. All individual purchase 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 before
payment. The payment due date for invoices in the amount of $2,500 or
more shall be determined in accordance with Sec. 1315.8. I TFM 4-
4535.10 4 permits payment of the bill in full prior to
verification that goods or services were received.
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    \4\ See footnote 3 in Sec. 1315.7(a).
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    (b) Disputed line items. Disputed line items do not render the
entire invoice an improper invoice for compliance with this proposed
regulation. Any undisputed items must be paid in accordance with
paragraph (a) of this section.

Sec. 1315.13  Commodity Credit Corporation payments.

    As provided in Sec. 1315.1(d), the provisions of this part apply to
payments relating to the procurement of property and services made by
the Commodity Credit Corporation (CCC) pursuant to Section 4(h) of the
Act of June 29, 1948 (15 U.S.C. 714b(h)) (``CCC Charter Act'') and
payments to which producers on a farm are entitled under the terms of
an agreement entered into pursuant to the Agricultural Act of 1949 (7
U.S.C. 1421 et seq.) (``1949 Act''.) Such payments shall be subject to
the following provisions:
    (a) Payment standards. Payments to producers on a farm under
agreements entered into under the 1949 Act and payments to vendors
providing property and services under the CCC Charter Act, shall be
made as close as possible to the required payment date or loan closing
date.
    (b) Interest penalties. An interest penalty shall be paid to
vendors or 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, except as determined
appropriate by the CCC consistent with applicable law, ending on the
date the amount is paid or loaned; and
    (3) Out of funds available under Section 8 of the CCC Charter Act
(15 U.S.C. 714f).
    (c) Contract Disputes Act of 1978. Insofar as covered CCC payments
are concerned, provisions relating to the Contract Disputes Act of 1978
(41 U.S.C. 601 et seq.) in Sec. 1315.10(a)(5)(i) and Sec. 1315.6(a) do
not apply.
    (d) Extended periods for payment. Notwithstanding other provisions
of this part, the CCC may allow claims for such periods of time as are
consistent with authorities applicable to its operations.

Sec. 1315.14  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 paragraph (b) of this
section;
    (2) The certification by the prime vendor as defined in paragraph
(b)(2) of this section 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);
    (4) A vendor is obligated to pay interest to the Government on
unearned amounts in its possession from:
    (i) 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
    (ii) 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 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:
    (i) 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;
    (ii) Be deducted from the next available payment to the vendor; and
    (iii) Revert to the Treasury.
    (b) Required Documentation. (1) Substantiation of the amount(s)
requested shall include:

[[Page 52593]]

    (i) An itemization of the amounts requested related to the various
elements of work specified in the contract;
    (ii) A listing of the amount included for work performed by each
subcontractor under the contract;
    (iii) A listing of the total amount for each subcontract under the
contract;
    (iv) A listing of the amounts previously paid to each subcontractor
under the contract; and
    (v) 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:
    (i) The amounts requested are only for performance in accordance
with the specifications, terms, and conditions of the contract;
    (ii) 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
31 U.S.C. chapter 39; and
    (iii) 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. (1) Agencies will pay interest on:
    (i) 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 paragraph (b) of this section, 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;
    (ii) 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;
    (iii) 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.
    (2) 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.

Sec. 1315.15  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.

Sec. 1315.16  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
Sec. 1315.9) not paid under this part may be filed under Section 6 of
the Contract Disputes Act.
    (2) An interest penalty under this part does not continue to accrue
after a claim for a penalty is filed under the Contract Disputes Act or
for more than one year. Once a claim is filed under the Contract
Disputes Act interest penalties under this part will never accrue on
the amounts of the claim, for any period after the date the claim was
filed. This does not prevent an interest penalty from accruing under
Section 13 of the Contract Disputes Act after a penalty stops accruing
under this part. Such penalty may accrue on an unpaid contract payment
and on the unpaid penalty under this part.
    (3) This part 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.

Sec. 1315.17  Formulas.

    (a) Rebate formula. (1) Agencies shall determine credit card
payment dates based on an analysis of the total benefits to the Federal
government as a whole. Specifically, agencies should compare daily
basis points offered by the card issuer with the corresponding daily
basis points of the government's Current Value of Funds (CVF) rate. If
the basis points offered by the card issuer are greater than the daily
basis points of the government'' funds, the government will maximize
savings by paying on the earliest possible date. If the basis points
offered by the card issuer are less than the daily basis points of the
government'' funds, the government will minimize costs by paying on the
Prompt Payment due date or the date specified in the contract.
    (2) Agencies may use a rebate spreadsheet which automatically
calculates the net savings to the government and whether the agency
should pay early or late. The only variables required for input to this
spreadsheet are the CVF rate, the Maximum Discount Rate, that is, the
rate from which daily basis points offered by the card issuer are
derived, and the amount of debt. This spreadsheet is available for use
on the prompt payment website at www.fms.treas.gov/prompt/index/.html.
    (3) If agencies chose not to use the spreadsheet, the following may
be used to determine whether to pay early or late. To calculate whether
to pay early or late, agencies must first determine the respective
basis points. To obtain Daily Basis Points offered by card issuer,
refer to the agency's contract with the card issuer. Use the following
formula to calculate the average daily basis points of the CVF rate:

(CVF/360) * 100

    (4) For example: The daily basis points offered to agency X by card
issuer Y are 1.5 basis points. That is, for every day the agency delays
paying the card issuer the agency loses 1.5 basis points in savings. At
a CVF of 5 percent, the daily basis points of the Current Value of
Funds Rate are 1.4 basis points. That is, every day the agency delays
paying,

[[Page 52594]]

the government earns 1.4 basis points. The basis points were calculated
using the formula:

(CVF/360) * 100
(5/360) * 100 = 1.4

    (5) Because 1.5 is greater than 1.4, the agency should pay as early
as possible. If the basis points offered by the card issuer are less
than the daily basis points of the government'' funds (if for instance
the rebate equaled 1.3 basis points and the CVF was still 1.4 basis
points or if the rebate equaled 1.5 but the CVF equaled 1.6), the
government will minimize costs by paying as late as possible, but by
the payment due date.
    (b) Daily simple interest formula. (1) To calculate daily simple
interest the following formula may be used:

P(r/360*d)

Where:
P is the amount of principle or invoice amount;
r equals the Prompt Payment interest rate; and
d equals the numbers of days for which interest is being calculated.

    (2) For example, if a payment is due on April 1 and the payment is
not made until April 11, a simple interest calculation will determine
the amount of interest owed the vendor for the late payment. Using the
formula above, at an invoice amount of $1,500 paid 10 days late and an
interest rate of 6.5%, the amount of interest owed is calculated as
follows:

$1,500 (.065/360*10) = $2.71

    (c) Monthly compounding interest formula. (1) To calculate interest
as required in Sec. 1315.10(a)(3), the following formula may be used:

P(1+r/12) n*(1+(r/360*d))-P

Where:

P equals the principle or invoice amount;
r equals the interest rate;
n equals the number of months; and
d equals the number of days for which interest is being calculated.

    (2) The first part of the equation calculates compounded monthly
interest. The second part of the equation calculates simple interest on
any additional days beyond a monthly increment.
    (3) For example, if the amount owed is $1,500, the payment due date
is April 1, the agency does not pay until June 15 and the applicable
interest rate is 6 percent, interest is calculated as follows:

$ 1,500(1+.06/12)\2\ *(1+(0.06/360*15))-$1,500 = $18.83

Sec. 1315.18  Inquiries.

    (a) Regulation. Inquiries concerning this part may be directed in
writing to the Department of the Treasury, Financial Management Service
(FMS), Cash Management Policy and Planning Division, 401 14th Street,
S.W. Washington, D.C. 20227, (202) 874-6590, or by calling the Prompt
Payment help line at 1-800-266-9667, by emailing questions to FMS at
prompt.inquiries@fms.sprint.com, or by completing a Prompt Payment
inquiry form available at www.fms.treas.gov/prompt/inquiries.html.
    (b) Applicable interest rate. The rate is published by the Fiscal
Service, Department of the Treasury, 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 Payment 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, or the office
responsible for issuing the payment if different from 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.

Sec. 1315.19  Regulatory references to OMB Circular A-125.

    This part supercedes OMB Circular A-125 (``Prompt Payment''). Until
revised to reflect the codification in this part, regulatory references
to Circular A-125 shall be construed as referring to this part.
[FR Doc. 99-24713 Filed 9-28-99; 8:45 am]
BILLING CODE 3110-01-P




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