federal register

Wednesday

September 29, 1999

Part II

Office of

Management and

Budget

5 CFR Part 1315

Prompt Payment; Final Rule
52580 Federal Register / Vol. 64, No. 188 /Wednesday, September 29, 1999 /Rules and Regulations

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.

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 ThomasMitchell, 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 § 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 § 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,
Federal Register / Vol. 64, No. 188 /Wednesday, September 29, 1999 /Rules and Regulations 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

§ 1315.1(c) has been revised

accordingly.

Finally, the paragraph at final

§ 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 § 1315.2(b).

The definition of ‘‘Applicable interest

rate,’’ at § 1315.2(d) has been revised to

reflect the change in the ‘‘Utility

Payments’’ in § 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 § 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 § 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 § 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 § 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 § 1315.2(t).

OMB has changed the FAR subpart

reference in the definition of ‘‘Fast

Payment’’ at § 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 § 1315.2(x) have been

revised to reflect changes (that are

discussed below) to § 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 § 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 § 1315.2(gg).

C. Section 1315.3—Responsibilities

(Proposed Section 2)

The discussion on ‘‘Internal control

systems’’ (§ 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 ‘‘computerrelated 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
52582 Federal Register / Vol. 64, No. 188 /Wednesday, September 29, 1999 /Rules and Regulations

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

§ 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

§ 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 § 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 § 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

§ 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 invoicereturn requirement at § 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 § 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

§ 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 § 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
Federal Register / Vol. 64, No. 188 /Wednesday, September 29, 1999 /Rules and Regulations 52583

payments are necessary (as final

§ 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 § 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

§ 1315.9(a)(6).

The language in § 1315.9(a)(8),

regarding banking information required

by the Debt Collection Improvement

Act, has been reworded to parallel the

language in § 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 § 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,
52584 Federal Register / Vol. 64, No. 188 /Wednesday, September 29, 1999 /Rules and Regulations

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 § 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

§ 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 § 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 § 1315.9(c)(8) so that it

refers to § 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 § 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 § 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 § 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 § 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

§ 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

§ 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 § 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.
Federal Register / Vol. 64, No. 188 /Wednesday, September 29, 1999 /Rules and Regulations 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

§ 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 § 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 § 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, § 1315.12 has been

revised to instruct agencies to determine

payment due dates in accordance with

§ 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 § 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.
52586 Federal Register / Vol. 64, No. 188 /Wednesday, September 29, 1999 /Rules and Regulations

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.
Federal Register / Vol. 64, No. 188 /Wednesday, September 29, 1999 /Rules and Regulations 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.

§ 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 § 1315.2(hh)) are subject to

the Prompt Payment Act with the

following exceptions:

(1) Contract Financing Payments, as

defined in § 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 generallyapplicable 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.

§ 1315.2 Definitions.

(a) Accelerated Payment means a

payment made prior to the due date (see

discussion in § 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 § 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 costtype 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 § 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,
52588 Federal Register / Vol. 64, No. 188 /Wednesday, September 29, 1999 /Rules and Regulations

1For availability of OMB circulars, see 5 CFR

1310.3. 2See footnote 1 in § 1315.3(b).

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 internationallyaccepted 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

§ 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 § 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 agencyvendor 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).

§ 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.

(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.

(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.

§ 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 § 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
Federal Register / Vol. 64, No. 188 /Wednesday, September 29, 1999 /Rules and Regulations 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 § 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

§ 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 § 1315.7);

(iii) In accordance with Accelerated

Payment Methods (see § 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 § 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.
52590 Federal Register / Vol. 64, No. 188 /Wednesday, September 29, 1999 /Rules and Regulations

3The 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.

Payment is contingent upon submission

of a proper invoice if required by the

contract.

§ 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.

§ 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-bycase 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.

§ 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.

(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

§ 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.

§ 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 § 1315.17 and at

the Prompt Payment website at

www.fms.treas.gov/prompt/index.html.

§ 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

§ 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
Federal Register / Vol. 64, No. 188 /Wednesday, September 29, 1999 /Rules and Regulations 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.

§ 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 § 1315.11; and

(5) Agencies shall pay any late

payment interest penalties (including

any additional penalties required under

§ 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.

§ 1315.11 Additional penalties.

(a) Vendor entitlements. A vendor

shall be entitled to an additional penalty

payment when the vendor is owed a late
52592 Federal Register / Vol. 64, No. 188 /Wednesday, September 29, 1999 /Rules and Regulations

4See footnote 3 in § 1315.7(a).

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.

§ 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 § 1315.8. I TFM 4–

4535.10 4 permits payment of the bill in

full prior to verification that goods or

services were received.

(b) Disputed line items. Disputed line

items do not render the entire invoice

an improper invoice for compliance

with this proposed regulation. Any

undisputed items must be paid in

accordance with paragraph (a) of this

section.

§ 1315.13 Commodity Credit Corporation

payments.

As provided in § 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 § 1315.10(a)(5)(i) and

§ 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.

§ 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:
Federal Register / Vol. 64, No. 188 /Wednesday, September 29, 1999 /Rules and Regulations 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-ofcompletion 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.

§ 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.

§ 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 § 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.

§ 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,
52594 Federal Register / Vol. 64, No. 188 /Wednesday, September 29, 1999 /Rules and Regulations

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 § 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

§ 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.

§ 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