This section of the FEDERAL REGISTER

contains notices to the public of the proposed

issuance of rules and regulations. The

purpose of these notices is to give interested

persons an opportunity to participate in the

rule making prior to the adoption of the final

rules.

Proposed Rules Federal Register

33000

Vol. 63, No. 116

Wednesday, June 17, 1998

OFFICE OF MANAGEMENT AND

BUDGET

5 CFR Part 1315

RIN 0348–AB47

Prompt Payment

AGENCY: Office of Management and

Budget, Executive Office of the

President.

ACTION: Proposed rule.

SUMMARY: This document requests

comment on proposed regulations

which will revise and replace Office of

Management and Budget (OMB)

Circular No. A–125, ‘‘Prompt Payment.’’

This proposal is being made to reflect

requirements of the Debt Collection

Improvement Act of 1996 as well as an

increasingly electronic commercial

financial systems environment; to

promote the use of government credit

cards and accelerated payment methods;

to clarify and simplify current language;

and to announce a new toll-free number

and internet website for Prompt

Payment Act information. The prompt

payment implementing regulations are

provided in a uncodified format for

comment purposes. These regulations

will be codified at the final rule stage in

5 CFR Part 1315, unless pending

legislation transfers the authority for

issuing these regulations to the

Department of the Treasury. In that case,

they will be codified in Title 31 of the

Code of Federal Regulations.

DATES: Comments must be received by

August 17, 1998. The prompt payment

regulations are proposed to be effective

30 days after final publication of the

final rule. For payments under contracts

or purchase orders solicited on or after

July 26, 1996, the requirement to collect

banking information, for purposes of

making an EFT payment pursuant to 31

U.S.C. 3332, as amended, is proposed to

be effective 30 days after publication of

the final rule. For payments under

contracts or purchase orders solicited

before July 26, 1996, the requirement to

collect banking information is proposed

to be effective January 2, 1999.

ADDRESSES: All comments should be

addressed to Cynthia L. Johnson,

Director, Cash Management Policy and

Planning Division, Financial

Management Service, U.S. Department

of the Treasury, Room 420, 401 14th

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

Copies of the current and proposed

circulars and other information are

available from the Prompt Pay website

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

index.html or from the Treasury

Department, Financial Management

Service website at the following

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

Copies of the current and proposed

circulars are also available from the

Executive Office of the President’s

Publications Office, Room 2200 New

Executive Office Building, 725 17th

Street NW, Washington, D.C. 20503,

phone (202) 395–7332, and via fax-ondemand at (202) 395–9068.

FOR FURTHER INFORMATION CONTACT:

Martha Thomas-Mitchell, Financial

Program Specialist on (202) 874–6757;

Diana Shevlin, Financial Program

Specialist on (202) 874–7032; Sally

Phillips, Senior Financial Program

Specialist on (202) 874–6749; or,

Cynthia Johnson, Director, Cash

Management Policy and Planning

Division on (202) 874–6657.

SUPPLEMENTARY INFORMATION:

I. Introduction

In 1982, Congress enacted the Prompt

Payment Act (‘‘Act’’; Pub. L. 97–177) to

require Federal agencies to pay their

bills on a timely basis, to pay interest

penalties when payments are made late,

and to take discounts only when

payments are made by the discount

date. The Act, as amended, is found at

31 U.S.C. Chapter 39. To implement the

Act, and pursuant to 31 U.S.C. 3903(a),

OMB issued Circular A–125 (‘‘Prompt

Payment’’) in August 1982 (47 FR

37321, August 25, 1982). In response to

changes to the Act that Congress made

in the Prompt Payment Act

Amendments of 1988 (Pub. L. 100–496),

OMB revised Circular A–125 in

December 1989 (54 FR 52700, December

21, 1989).

The increased use of electronic

commerce, in the Federal government

and in the private sector, including

electronic financial systems and

electronic funds transfer, require that

Circular A–125 be updated in light of

current practices. The use of electronic

commerce is a priority in the current

administration. In a memorandum to

agencies dated October 26, 1993,

President Clinton emphasized the need

for and importance of electronic

commerce as a means for streamlining

government and saving taxpayer dollars.

3 CFR 791 (1993 Comp.). The National

Performance Review (NPR), headed by

Vice President Al Gore, recommended

examining government practices to

streamline regulations and processes

and, in particular, called for an ‘‘all

electronic Treasury.’’ The president’s

directive and the NPR recommendations

resulted in the establishment of an interagency workgroup to revise the current

circular to reflect the changing

commercial environment while

streamlining the Federal payment

function through the increased use of

electronic commerce. The Department

of Treasury’s Financial Management

Service (‘‘FMS’’) led the revision effort

on behalf of the Office of Management

and Budget. (Under proposed legislation

pending in Congress, responsibility for

regulations and reporting under the Act

would be transferred from OMB to the

Treasury Department.)

II. Proposed Revisions to Circular A–

125

In this proposed revision to the

circular, its provisions have been

reorganized. For example, in most cases

the requirements for certain types of

payment have been consolidated in the

section on that payment. Thus, whereas

determining the payment due date for

discounts and determining whether to

take a discount are discussed separately

in the current circular (see Sections 4.i.

and 4.m.), they are found together in the

proposed circular in Section 6 entitled

‘‘Discounts.’’ In addition, several

provisions have been added to the

revised circular. For example, the

revised circular is expanded (see

Section 5) to include options for making

payments before 30 days if doing so is

in the best interests of the government

and promotes electronic payments. The

circular has also been revised to clarify

and simplify current language. Finally,

the circular announces a new toll-free

number, 1–800–266–9667, for questions

about Prompt Pay policy, reporting

requirements and previous and current

Prompt Pay interest rates. The circular
Federal Register / Vol. 63, No. 116 /Wednesday, June 17, 1998 / Proposed Rules 33001

also announces a Prompt Pay website at

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

index.html. The website will contain,

among other things, rate information,

frequently asked questions, copies of

current circulars and links to other

related websites. The website may also

be accessed through FMS’ website at

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

The following describes how the

Circular has been reorganized, and it

explains the more significant changes

and clarifications.

A. Proposed Revisions Implementing the

Debt Collection Improvement Act

On April 26, 1996, the president

signed into law the Debt Collection

Improvement Act of 1996 (‘‘DCIA’’; Pub.

L. 104–134) requiring that, in the first

phase, all new Federal payments,

including vendor payments, be made

electronically on or after July 26, 1996.

Treasury Department regulations

implementing this phase of the DCIA

(31 CFR 208, Management of Federal

Agency Disbursements, Interim Rule)

define a new Federal vendor payment as

one which must be paid by EFT if ‘‘the

payment is made under a contract or

purchase order resulting from a

solicitation issued on or after July 26,

1996.’’ All vendor payments must be

made electronically after January 1,

1999. Treasury Department regulations

implementing this phase of the DCIA

are scheduled to be published in the

summer of 1998.

The revised circular (Section 8.b(8))

requires the collection of banking

information in order to make an EFT

payment as required by the DCIA unless

the payment is waived under 31 C.F.R.

Part 208. The circular (Section 8.b.(7))

also requires the collection of the

Taxpayer Identifying Number (TIN). The

TIN is required under DCIA for debt

collection and under the Internal

Revenue Code for vendor income

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

U.S.C. 6109. The Treasury Department

requires each agency to prepare a TIN

implementation plan to document

agency strategies for achieving

compliance with the TIN provisions of

the DCIA, and to identify barriers to

collecting and providing TINs.

B. Other Proposed Revisions

1. The ‘‘Definitions’’ section (Section

1 of the current circular) has been

moved to the end of the regulation

(Section 18). In addition, the term

‘‘contractor’’ has been replaced with the

term ‘‘vendor,’’ and the terms ‘‘paying

office’’ and ‘‘billing office’’ have been

changed to ‘‘designated agency office.’’

2. The ‘‘Application’’ section (Section

2 of the current circular) has been

redesignated Section 1. The section

includes one additional exception to the

Prompt Payment Act requirements. This

exception is for payments related to

certain specified emergencies and

military operations (Section 1.b(2)).

3. The ‘‘Responsibilities’’ section

(Section 3 of the current circular) has

been redesignated Section 2. Specific

guidance on establishing a quality

control program (Section 3.e. of the

current circular) has been replaced with

general guidance on implementing a

quality control process (Section 2.b.).

Quality Control (QC) systems are

required by OMB Circular A–123,

‘‘Management Accountability and

Control.’’

In addition, Section 2.c of the revised

circular provides standards for agencies’

financial management systems to ensure

that they are in compliance with OMB

Circular A–127, ‘‘Financial Management

Systems.’’

4. The ‘‘Standards for Prompt

Payment’’ section (Section 4 of the

current circular) has been redesignated

Section 3 and retitled ‘‘Prompt Payment

Standards and Required Notice to

Vendors.’’ Several changes have been

made to this section.

The revised circular (Section 3.b)

clarifies when an invoice is deemed to

be received for invoices that are mailed

or received electronically, or when a

delivery ticket serves as the invoice.

The revised circular (Section 3.c(3))

provides that agencies may use

computer-related media in place of

paper documents to expedite payment

transactions, as long as there are

adequate safeguards and controls to

ensure the integrity of the data.

‘‘Starting the Payment Period’’

(Section 3.f.) has been reorganized to

include all discussion related to

calculating the start of the payment

period. Section 3.f. combines the

discussions found in the current

circular ‘‘Receipt of invoice’’ (Section

1.n.) and ‘‘Starting the Payment Period’’

(Section 4.d.). This provision also

includes the addition of an acceptance

document or delivery ticket as the basis

for starting the payment period.

‘‘Determining the payment due date’’

(Section 3.g(1)) has been expanded to

include payments due when discounts

are taken and when accelerated

payment methods are used.

‘‘Mixed invoices for commodities’’

(Section 3.g(2)D) now includes the

provision that the entire invoice may be

paid on the due date for the commodity

with the earliest due date, if it is

considered in the best interests of the

agency.

Guidance on notification for an

improper invoice (Section 4.b(3) of the

current circular) has been moved to the

section on ‘‘Review of Invoice’’ (Section

3.c(2)).

5. Section 4 of the proposed

regulation, ‘‘Accelerated Payment

Methods,’’ has been added. It includes

a provision which allows agencies to

make payments for invoices under

$2,500 after matching documents. This

section also provides for early payment

for small, disadvantaged businesses, and

for payments related to emergencies and

disasters, as well as for military

deployments.

6. Section 5 of the proposed

regulation, ‘‘Fast Payment,’’ replaces

Section 12 of the current circular. The

section on ‘‘Fast Payment’’ requires that

payment be made within 15 days of

receipt of a proper invoice without

evidence that goods or services have

been received. References to Federal

Acquisition Regulation (FAR) clauses

for Fast Payment are included.

7. Section 6 of the proposed

regulation, ‘‘Discounts,’’ has been added

and consolidates the requirements

related to discounts. The reference to

the discount formula found in the

Treasury Financial Manual has been

updated.

8. Section 7 of the proposed

regulation, ‘‘Rebates,’’ has been added to

the circular. The section instructs

agencies to determine credit card

payment dates based on an analysis of

the total costs and total benefits to the

Federal government as a whole. When

calculating costs and benefits, agencies

are expected to include the cost to the

government of paying early. This cost is

the interest the government would have

earned, at the Current Value of Funds

rate, for each day that payment was not

made. Agencies may also factor in the

benefits, from streamlining or other

efficiencies, to the agency of paying

early. Treasury will publish a rebate

formula in the Treasury Financial

Manual (TFM) which can be used to

determine when a credit card invoice

should be paid. The Current Value of

Funds rate is available by the toll-free

number and internet website listed

above.

9. The ‘‘Required Documentation’’

section (Section 5 of the current

circular) has been redesignated Section

8.

Agencies are required (Section 8.a.(8))

to stipulate that banking information

must be submitted no later than the first

request for payment in order to make

payments electronically as required by

the Debt Collection Improvement Act of

1996, except in situations addressed in

the waiver provisions for 31 CFR Part

208. Agencies will use the appropriate
33002 Federal Register / Vol. 63, No. 116 /Wednesday, June 17, 1998 / Proposed Rules

Federal Acquisition Regulation

electronic funds transfer contract clause.

In order for an invoice to be a proper

invoice, banking information and TINs

are required to be collected on the

invoice unless previously collected in

another manner (Section 8.b(7)–(8)).

This requirement ensures that payment

will be made by EFT, unless waived by

the Secretary of the Treasury in 31 CFR

208. This requirement also ensures

compliance with collecting TINs. This

requirement gives agencies flexibility in

determining how banking information

and TINs will be collected. Agencies are

encouraged to collect this information at

the earliest possible date, including as a

condition of awarding a contract. The

Central Contractor Registry (CCR)

requires this information as a condition

of awarding a contract. The CCR is a

mandatory contractor enrollment system

for the Department of Defense. Although

not mandatory for civilian agencies,

some civilian agencies are voluntarily

using the CCR.

10. Section 6 of the current circular,

‘‘Required notices to vendors,’’ has been

removed. The notice of interest

penalties is discussed in Section 9,

‘‘Late payment interest penalties.’’ The

notice of defective invoice is discussed

in Section 3.c, ‘‘Review of Invoice.’’

11. The ‘‘Late Payment Interest

Penalties’’ section (Section 7 of the

current circular) has been redesignated

Section 9. Several changes have been

made to this section.

Agencies are exempt from paying late

interest penalties if banking information

supplied by the vendor is incorrect and/

or incomplete (Section 9.a(8)).

In the notice to vendors on late

payment interest penalties, the contract

number is optional (Section 9.b(3)).

However, the invoice number or other

agreed upon transaction reference

number is required to assist the vendor

in reconciling the payment.

Interest penalties are not required

when an EFT payment is not credited to

the vendor’s account by the payment

due date because of the failure of the

Federal Reserve or the vendor’s bank to

do so (Section 9.c(4)).

12. The ‘‘Additional Penalties’’

section (Section 8 of the current

circular) has been redesignated Section

10. The maximum allowable additional

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

13. Section 11 of the proposed

regulation, ‘‘Payments under

Government Credit Card,’’ has been

added and allows agencies to pay credit

card invoices under $2,500 without

matching documents and without

applying the discount formula in I TFM

6–8040.40. Undisputed items must be

paid on time.

14. Section 9 of the current circular,

‘‘Interest Penalties Due Farm

Producers,’’ has been redesignated

Section 12 and retitled ‘‘Payment to

Farm Producers.’’ The section has been

reorganized to follow the same format as

other sections. The list of loan and

closing dates for payments made under

various agricultural programs has been

removed because these programs

periodically change. Accordingly,

Section 12 refers the reader to the

current Farm Bill (7 U.S.C. 1421 et seq.)

which lists loan and closing dates for

payments made under current Farm Bill

programs.

15. Section 10 of the current circular,

‘‘Interest Penalties under Construction

Contracts,’’ has been redesignated

Section 13 and retitled ‘‘Payments

under Construction Contracts.’’ The

section has been reorganized to follow

the same format as other sections. In

addition, the discussion in current

circular 5.d. related to required

documentation for construction

contracts is moved to this section.

16. Section 11 of the current circular,

‘‘Grant Recipients,’’ has been

redesignated Section 14.

17. As noted above, Section 12 of the

current circular, ‘‘Payment without

evidence that supplies have been

received,’’ has been replaced by Section

5.

18. The ‘‘Relationship to other laws’’

section (Section 13 of the current

circular) has been redesignated Section

15.

19. The ‘‘Reporting Requirements’’

section (Section 14 of the current

circular) has been redesignated Section

16, and its reporting requirements have

been reduced. Information concerning

the relative frequency and frequency

distribution of penalties (see Section

14.b(3)–(4) of the current circular) is no

longer required. An ‘‘other’’ category

has been added to the provision

requiring reasons why interest penalties

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

20. The ‘‘Inquiries’’ section (Section

16 of the current circular) has been

redesignated Section 17. As noted

above, this section announces a new

toll-free number, 1–800–266–9667, for

questions about Prompt Pay policy,

reporting requirements and previous

and current Prompt Pay interest rates.

This section also announces a Prompt

Pay website at http://

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

The website will contain, among other

things, rate information, frequently

asked questions, copies of current

circulars and links to other related

websites. The website may also be

accessed through FMS’’ website at http:/

/www.fms.treas.gov/.

21. As noted above, the ‘‘Definitions’’

section has been moved from Section 1

of the current circular to Section 18 of

the proposed regulation.

22. The ‘‘Effective Dates’’ section

(Section 15 of the current circular) has

been redesignated Section 19. Except as

otherwise provided in Section 19, the

proposed regulation is effective 30 days

after final publication.

Finally, OMB seeks comment on how

the Federal government can address the

problem of one Federal agency making

a late payment to another Federal

agency for goods or services.

Interagency payments have historically

been problematic for the Federal

government because some Federal

agencies make late payments to other

Federal agencies for goods and services,

and because there is not one standard

method available to make these

payments. These late payments

sometimes result in costs to agencies in

collecting overdue amounts. OMB seeks

comment on the nature and magnitude

of this problem, and requests

recommendations on how the problem

could be addressed (e.g., through a

provision in the interagency agreements

themselves, the application of some

existing provision of law, or the

enactment of new legal remedies).

Regulatory Flexibility Act, Unfunded

Mandates Reform Act, and Executive

Orders 12866 and 12875

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

provisions of the proposed revision and

replacement of Circular A–125

constitute regulations. For purposes of

the Regulatory Flexibility Act (5 U.S.C.

601 et seq.), the proposed regulations

will not have a significant economic

effect on a substantial number of small

entities; the regulations implement the

Prompt Payment Act, which requires

Federal agencies to pay their bills on a

timely basis, to pay interest penalties

when payments are made late, and to

take discounts only when payments are

made by the discount date. For purposes

of the Unfunded Mandates Reform Act

of 1995 (Pub. L. 104–4), as well as

Executive Orders No. 12866 and 12875,

the proposed regulations will not

significantly or uniquely affect small

governments, and will not result in

increased expenditures by State, local,

and tribal governments, or by the

private sector, of $100 million or more.

OMB requests comments on the

proposed revisions discussed above, as

well on all other parts of the revised

circular.
Federal Register / Vol. 63, No. 116 /Wednesday, June 17, 1998 / Proposed Rules 33003

List of Subjects in 5 CFR Part 1315

Administrative practice and

procedure, Government contracts,

Penalties.

Jacob J. Lew,

Acting Director.

OMB proposes that Circular A–125 be

revised to read as follows:

Attachment—OMB Circular No. A–125

(Revised)

To: The Heads of Executive

Departments and Establishments

Subject: Prompt Payment

Purpose. Circular A–125 (2nd

Revision) prescribes policy for the

Executive departments and agencies in

paying for goods and services pursuant

to the Prompt Payment Act of 1982 as

amended. It is the intent of this Circular

and implementing regulations that the

Federal Government pay commercial

obligations accurately and timely using

financial cash management tools.

Background. The Prompt Payment

Act was enacted as P.L. 97–177 on May

21, 1982, and amended on October 17,

1988, as P.L. 100–496. The Prompt

Payment Act (the Act), as amended,

requires Executive departments and

agencies to pay commercial obligations

within specific discrete time periods

and to pay interest penalties when those

time constraints are not met. Circular

A–125 also provides policy direction for

payment of entitlements due under the

current Farm Bill.

Policy. Agencies are to maintain

payment practices consistent with this

Circular and the implementing

procedures attached to the Circular.

Agencies must make payments for

commercial obligations on properly

submitted invoices on payment due

dates set by the attached implementing

procedures. Unless otherwise specified

in this Circular or agency regulations,

payments cannot be made until proper

invoices have been received for goods or

services that have been received and

accepted by the agency and contract

terms have been satisfactorily performed

or fulfilled. Payments under certain

accelerated payment methods may be

made before the specified due date.

Payments made later than the payment

due date or later than the discount due

date if a discount is taken, may be

subject to interest penalties and possibly

additional penalties. Valid interest

penalties will be paid by the agency

automatically and additional penalties

will be paid after receiving a written

request from the vendor. These

penalties will be paid from funds

available for the administration of the

program for which the penalty was

incurred. Agency implementation must

be consistent with sound cash

management practices, related Treasury

regulations (Treasury Financial Manual,

I TFM 6–8000, section 8040), and the

Federal Acquisition Regulation (48 CFR

subpart 32.9 and FAR Clause 52.232) or

appropriate agency regulations.

The Debt Collection Improvement Act

of 1996 requires all Federal agencies to

make payments electronically after

January 1, 1999, except for Internal

Revenue Service tax refunds and except

as waived in 31 CFR Part 208. The Act

also requires the collection of the

Taxpayer Identifying Number (TIN) for

purposes of debt collection. This

circular requires that banking

information for purposes of making

electronic payments and the TIN be on

an invoice unless this information has

been previously provided to the agency

through other procedures.

Requirements and Responsibilities.

The specific requirements and

responsibilities of Executive

departments and agencies are set forth

in the implementing regulations.

Inquiries. Questions about this

circular and inquiries about payments

practices or concerning problems of

Executive agencies should be directed to

the Financial Management Service,

Department of the Treasury, Telephone:

1–800–266–9667. The circular, agency

guidance, answers to frequently asked

questions and other general information

is available on the Internet at http://

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

It is also available in printed form upon

request to the above telephone number.

Effective date. Unless otherwise

specified, this circular is effective 30

days after final publication.

Sunset Review Date. Three years from

the date of issuance of this circular,

there will be an independent policy

review to ascertain its effectiveness.

Jacob J. Lew,

Acting Director.

Note: The following prompt payment

implementing regulations are provided in a

uncodified format for comment purposes.

These regulations will be codified at the final

rule stage in 5 CFR Part 1315, unless pending

legislation transfers the authority for issuing

these regulations to the Department of the

Treasury. In that case, they will be codified

in Title 31 of the Code of Federal

Regulations.

Prompt Payment Implementing

Regulations

Table of Contents

1. Application

2. Responsibilities

3. Prompt Payment Standards and Required

Notices to Vendors

4. Accelerated Payment Methods

5. Fast Payment

6. Discounts

7. Rebates

8. Required Documentation

9. Late Payment Interest Penalties

10. Additional Penalties

11. Payments Under Government Credit Card

12. Payments to Farm Producers

13. Payments Under Construction Contracts

14. Grant Recipients

15. Relationship to Other Laws

16. Reporting Requirements

17. Inquiries

18. Definitions

19. Effective Dates

1. Application

a. Procurement contracts. This

regulation applies to contracts for the

procurement of goods or services

awarded by:

(1) All Executive branch agencies

except:

A. The Tennessee Valley Authority,

which is subject to the Prompt Payment

Act, but is not covered by this

regulation, and

B. Agencies specifically exempted

under 5 U.S.C. 551(1).

(2) The United States Postal Service,

except for the reporting requirements.

The Postmaster General is responsible

for issuing implementing procurement

regulations, solicitation provisions, and

contract clauses for the United States

Postal Service, and

(3) The Commodity Credit

Corporation pursuant to:

A. Section 4(h) of the Act of June 29,

1948 (15 U.S.C. 714b(h)) relating to the

procurement of property and services,

and

B. Payments to producers on a farm

under the current Farm Bill (7 U.S.C.

1421 et seq.).

b. Vendor payments. All Executive

branch vendor payments and payments

to those defined as contractors or

vendors (see section 18.j.) are subject to

the Prompt Payment Act with the

following exceptions:

(1) Contract Financing Payments, as

defined in section 18.h.; and

(2) Payments related to emergencies

(as defined in the Disaster Relief Act of

1974, P.L. 93–288, as amended (42

U.S.C. 5121 et seq.)) and military

operations (as defined in 10 U.S.C.

101(a)(13)).

c. Utility payments. All utility

payments, including payments for

telephone service, are subject to the Act

except those under 1.b.(2). Where state

or local authorities regulate late

payment rates, those rates (e.g., tariffs)

shall take precedence; however, any

interest paid is reportable. In the

absence of state or local prescribed late

charges or terms, agencies will apply

this regulation.
33004 Federal Register / Vol. 63, No. 116 /Wednesday, June 17, 1998 / Proposed Rules

2. Responsibilities

Each agency head is responsible for

the following:

a. Issuing internal procedures. Issuing

procedures will include provisions for

monitoring the causes of late payments

and any interest penalties incurred,

taking necessary corrective action,

reporting in accordance with section 16,

and handling inquiries.

b. Internal control systems. Ensuring

that effective internal control systems

are established and maintained as

required by OMB Circular A–123,

‘‘Management Accountability and

Control.’’ Administrative activities

required for payments to vendors under

this regulation are subject to Quality

Control (QC) validation. QC processes

will be used to confirm that controls are

effective and that processes are efficient.

Each agency head is responsible for

establishing a QC program in order to

quantify payment performance and

qualify corrective actions, aid cashmanagement decision making, and

estimate payment performance if actual

data is unavailable.

c. Financial management systems.

Ensuring that financial management

systems comply with OMB Circular A–

127, ‘‘Financial Management Systems.’’

Agency financial systems shall provide

standardized information and electronic

data exchange to the central

management agency. Systems shall

provide complete, timely, reliable,

useful and consistent financial

management information.

Payment capabilities should provide

accurate and useful management reports

on payments, and produce accurate and

timely reports as required by the Prompt

Payment Act.

d. Reviews. Ensuring that Inspectors

General and internal auditors review

payments performance and systems

accuracy, consistent with the Chief

Financial Officers (CFO) Act

requirements.

e. Timely payments and interest

penalties. Ensuring timely payments

and payment of interest penalties where

required.

3. Prompt Payment Standards and

Required Notices to Vendors

Agency business practices shall

conform to the following standards:

a. Required documentation. Agencies

will maintain paper or electronic

documentation as required in section 8.

b. Receipt of invoice. For the purposes

of determining a payment due date and

the date on which interest will begin to

accrue, an invoice shall be deemed to be

received:

(1) For invoices that are mailed, on:

A. The date a proper invoice is

actually received and annotated by the

contractually designated office, or;

B. The date placed on the invoice by

the vendor, when the agency fails to

annotate the invoice with a receipt date

at the time of receipt (such invoice must

be a proper invoice);

(2) For invoices electronically

transmitted, at the time the transmission

is received by the designated agency

office; and,

(3) On the date of delivery, when

contractually stipulated that the

delivery ticket may serve as an invoice.

c. Review of invoice. Agencies will

use the following procedures in

reviewing invoices:

(1) Each invoice will be reviewed by

the appropriate office within 7 days

after receipt to determine whether the

invoice is a proper invoice as defined in

section 8.b. of this regulation;

(2) When an invoice is determined

improper, the agency shall return the

invoice to the vendor within 7 days of

receipt (refer also 3.g.(3) regarding

vendor notification and determining the

payment due date.) The agency will

identify all defects that prevent payment

and specify all reasons why the invoice

is not proper and why it is being

returned. This notification to the vendor

shall include a request for a corrected

invoice, to be clearly marked as such;

(3) Computer-related media which

produce tangible recordings of

information in lieu of ‘‘written’’ or

‘‘original’’ paper document equivalents

should be used by agencies to expedite

payment transactions, as long as there

are adequate safeguards and controls to

ensure the integrity of the data, rather

than delaying processes by requiring

‘‘original’’ paper documents.

d. Receipt of goods and services.

Agencies will ensure that receipt is

properly recorded at the time of delivery

of goods or completion of services.

e. Acceptance. Agencies will ensure

that acceptance is executed as promptly

as possible. Commercial items and

services should not be subject to

extended acceptance periods.

Acceptance reports will be forwarded to

the designated agency office by the fifth

working day after delivery. Unless other

arrangements are made, acceptance

reports will be stamped or otherwise

annotated with the receipt date in the

designated agency office.

f. Starting the payment period. The

period available to an agency to make

timely payment of an invoice without

incurring an interest penalty shall begin

on the later of:

(1) Date of receipt (as defined in

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

in section 8.b.), except where no invoice

is required (e.g. recurring payments (see

definition at section 18.cc.); or,

(2) Date of receipt and acceptance of

goods or services. In this case, the

payment period starts when either:

A. The agency has actually accepted

the goods or services but no later than

the seventh day after the receipt of

goods or services, or;

B. When a longer acceptance period is

contractually stipulated, the agency has

actually accepted the goods or services

but no later than the last day of the

extended acceptance period;

(3) Date of delivery where an agency

has contractually designated the use of

the acceptance document or delivery

ticket as the basis for payment.

g. Determining the payment due date.

(1) Unless otherwise specified, the

payment is due either:

A. 30 days after the start of the

payment period as specified in section

3.f.;

B. On the date(s) specified in the

contract;

C. In accordance with discount terms

when discounts are offered and taken

(see section 6), or;

D. In accordance with Accelerated

Payment Methods (see section 4).

(2) Certain commodity payments.

A. For meat, meat food products, as

defined in Section 2(a)(3) of the Packers

and Stockyard Act of 1921 (7 U.S.C.

182(3)), including any edible fresh or

frozen poultry meat, any perishable

poultry meat food product, fresh eggs,

any perishable egg product, fresh or

frozen fish as defined in the Fish and

Seafood Promotion Act of 1986 (16

U.S.C. 4003(3)), payment will be made

no later than the seventh day after

delivery.

B. For perishable agricultural

commodities, as defined in Section 1(4)

of the Perishable Agricultural

Commodities Act of 1930 (7 U.S.C.

499a(4)), payment will be made no later

than the 10th day after delivery, unless

another payment date is specified in the

contract.

C. For dairy products (as defined in

section 111(e) of the Dairy Production

Stabilization Act of 1983, 7 U.S.C.

4502(e)), and including, at a minimum,

liquid milk, cheese, certain processed

cheese products, butter, yogurt, and ice

cream, edible fats or oils, and food

products prepared from edible fats or

oils (including, at a minimum,

mayonnaise, salad dressings and other

similar products), payment will be made

no later than 10 days after the date on

which a proper invoice, for the amount

due, has been received by the agency

acquiring the above listed products.

Nothing in the Act permits limitation to

refrigerated products. When questions
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arise about the coverage of a specific

product, prevailing industry practices

should be followed in specifying a

contractual payment due date.

D. Mixed invoices for commodities.

When an invoice is received for items

with different payment periods,

agencies:

i. May pay the entire invoice on the

due date for the commodity with the

earliest due date, if it is considered in

the best interests of the agency. That

payment is to be considered as on time

for reporting purposes;

ii. May make split payments by the

due date applicable to each category;

iii. Should pay in accordance with the

contractual payment provisions (which

may not exceed the statutory mandated

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

iv. Will not require vendors to submit

multiple invoices for payment of

individual orders by the agency.

(3) Notification of Improper Invoice.

When an agency fails to make

notification of an improper invoice

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

these guidelines (three days for meat

and meat food, fish and seafood

products; and five days for perishable

agricultural commodities, dairy

products, edible fats or oils and food

products prepared from edible fats or

oils), the number of days allowed for

payment of the corrected proper invoice

will be reduced by the number of days

between the seventh day, or as specified

above in this paragraph, and the day

notification was transmitted to the

vendor. Calculation of interest penalties,

if any, will be based on an adjusted due

date reflecting the reduced number of

days allowable for payment;

h. Payment date. Payment will be

considered to be made on the settlement

date for an electronic funds transfer

(EFT) payment or the date of the check

for a check payment. On a weekend,

federal holiday, or after normal working

hours, payments falling due may be

made on the following business day

without incurring late payment interest

penalties.

i. Late payment. When payments are

made after the due date, interest will be

paid automatically in accordance with

the procedures in sections 9 through 13

of this regulation.

j. Timely payment. Unless using an

accelerated payment method (see

section 4), an agency shall make

payments no more than seven days prior

to the payment due date, but as close to

the due date as possible, unless the

agency head or designee has

determined, on a case-by-case basis for

specific payments, that earlier payment

is necessary. This authority must be

used cautiously, weighing the benefits

of making a payment early against the

good stewardship inherent in effective

cash management practices.

k. Payments for partial deliveries.

Agencies shall pay for partial delivery of

supplies or partial performance of

services after acceptance, unless

specifically prohibited by the contract.

Payment is contingent upon submission

of a proper invoice if required by the

contract.

4. Accelerated Payment Methods

a. A single invoice under $2,500.

Payments may be made as soon as the

contract, proper invoice, receipt and

acceptance documents are matched

notwithstanding statutory authority to

do otherwise. These payments are to be

considered on time for Prompt Pay

reporting purposes. Vendors shall be

entitled to interest penalties if invoice

payments are made after the payment

due date.

b. Small Disadvantaged Business

Concern (as defined in the FAR subpart

19.001). Agencies may pay small,

disadvantaged business concerns as

quickly as possible, when all proper

documentation, including acceptance, is

received in the payment office and

before the payment due date. Such

payments are to be considered on time

for Prompt Pay reporting purposes, and

are not subject to payment restrictions

stated elsewhere in this regulation.

Vendors shall be entitled to interest

penalties if invoice payments are made

after the payment due date.

c. Payments related to emergencies

and disasters (as defined in the Robert

T. Stafford Disaster Relief Act and

Emergency Assistance, P.L. 93–288, as

amended (42 U.S.C. 5 121 et seq.)) and

military deployment. Payments may be

made as soon as the contract, proper

invoice, receipt and acceptance

documents or any other agreement are

matched. These payments are to be

considered on time for Prompt Pay

reporting purposes. Vendors shall be

entitled to interest penalties if invoice

payments are made after the payment

due date.

5. Fast Payment

Payment shall be made within 15

days of receipt of a proper invoice

without evidence that goods or services

have been received. The following

standards shall be followed:

a. Criteria. The criteria in using this

procedure are defined in Federal

Acquisition Regulations (FAR) Part 13,

Subpart 13.3 ‘‘Fast Payment Procedure’’

and in the 1988 Amendment to the

Prompt Pay Act, Section 11(b)(1);

b. FAR clause 52.213.1. Payments

must be supported by valid contracts

having proper FAR clause 52.213.1, Fast

Payment Procedure;

c. Invoice requirements. Invoices paid

under ‘‘Fast Payment’’ procedures must

meet the requirements of an invoice as

outlined in section 8.b. of this

regulation, and be properly identified

on the invoices and in the agency

financial system for subsequent

statistical sampling to ensure that goods

are received;

d. Obligating documents. Invoices

must be properly matched with the

obligating documents prior to

authorizing the payment;

e. Certification. A vendor’s

certification that goods have been

shipped may be used as a basis for

authorizing the payment;

f. Internal controls. Agencies must

establish a system to ensure internal

controls are in place to validate that

goods are received and accepted;

g. Receiving reports. Unless otherwise

specified in agency procedures, the

contracting office shall ensure that

receiving reports and payment

documents are matched and that steps

are taken to correct discrepancies and

collect any amounts owed for nonperformance, and;

h. Inspection and Acceptance. Unless

otherwise specified in agency

procedures, the receiving entity shall

promptly inspect and accept goods

acquired under these procedures and

notify the purchasing office of the

acceptance as quickly as possible.

6. Discounts

Agencies shall follow these guidelines

in taking discounts and determining the

payment due dates when discounts are

taken:

a. Economically justified discounts. If

an agency is offered a discount by a

vendor, whether stipulated in the

contract or offered on an invoice, an

agency may take the discount if

payment is made within the specified

discount period. Discounts will be taken

whenever economically justified (see I

TFM 6–8040.40) but only after

acceptance has occurred. These

payments will be considered on time for

reporting purposes.

b. Discounts taken after the deadline.

If an agency takes the discount after the

deadline and does not repay it before

the payment due date, the agency shall

pay an interest penalty on any amount

remaining unpaid as prescribed in

section 9.a.(6).

c. Payment date. When a discount is

taken, payment will be made as close as

possible to, but no later than, the

discount date.

d. Start date. The period for taking the

discount is calculated from the date
33006 Federal Register / Vol. 63, No. 116 /Wednesday, June 17, 1998 / Proposed Rules

placed on the proper invoice by the

vendor. If there is no invoice date on the

invoice by the vendor, the discount

period will begin on the date a proper

invoice is actually received and date

stamped or otherwise annotated by the

designated agency office.

7. Rebates

Agencies shall determine credit card

payment dates based on an analysis of

the total costs and total benefits to the

Federal government as a whole. When

calculating costs and benefits, agencies

are expected to include the cost to the

government of paying early. This cost is

the interest the government would have

earned, at the Current Value of Funds

rate, for each day that payment was not

made. Agencies may also factor in the

benefits, from streamlining or other

efficiencies, to the agency of paying

early.

8. Required Documentation

Agencies are required to ensure the

following payment documentation is

established to support payment of

invoices and interest penalties:

a. For a contract:

(1) Payment due date(s) as defined in

3.g.;

(2) A notation in the contract that

partial payments are prohibited, if

applicable;

(3) For construction contracts, specific

payment due dates for approved

progress payments or milestone

payments for completed phases,

increments, or segments of the project;

(4) If applicable, a statement that the

special payment provisions of the

Packers and Stockyard Act of 1921 (7

U.S.C. 182 (3)), or the Perishable

Agricultural Commodities Act of 1930

(7 U.S.C. 499a(4)), or Fish and Seafood

Promotion Act of 1986 (16 U.S.C.

4003(3)) shall apply;

(5) Where considered appropriate by

the agency head, the specified

acceptance period following delivery to

inspect and/or test goods furnished or to

evaluate services per formed is stated;

(6) Name (where practicable), title,

telephone number, and complete

mailing address of officials of the

Government’s designated agency office,

and of the vendor receiving the

payments;

(7) Reference to requirements under

the Prompt Payment Act, including the

payment of interest penalties on late

invoice payments (including progress

payments under construction contracts);

(8) Stipulation that banking

information must be submitted no later

than the first request for payment as

required by the Debt Collection

Improvement Act of 1996, except in

situations addressed in the waiver

provisions for 31 CFR Part 208.

Agencies will use the appropriate

Federal Acquisition Regulation contract

clause;

(9) If using Fast Payment, the proper

FAR clause stipulating Fast Payment is

required.

b. For a proper invoice:

(1) Name of vendor;

(2) Invoice date;

(3) Government contract number, or

other authorization for delivery of goods

or services;

(4) Vendor invoice number/account

number;

(5) Description, price, and quantity of

goods and services rendered;

(6) Shipping and payment terms

(unless mutually agreed that this

information is only required in the

contract);

(7) Taxpayer Identification Number

(TIN), unless otherwise previously

provided to the agency in accordance

with agency procedures;

(8) Banking Information, unless

otherwise previously provided to the

agency in accordance with agency

procedures, or except in situations

addressed in waiver provisions

included in 31 CFR Part 208;

(9) Contact name (where practicable),

title and telephone number;

(10) Other substantiating

documentation or information required

by the contract.

c. For receiving reports, delivery

tickets, and evaluated receipts:

(1) Name of vendor;

(2) Contract or other authorization

number;

(3) Description of goods;

(4) Quantities received, if applicable;

(5) Date(s) goods were delivered;

(6) Date(s) goods were accepted;

(7) Signature (or electronic alternative

when supported by appropriate internal

controls), printed name, telephone

number, mailing address of the

receiving official, and any additional

information required by the agency,

and;

(8) All requirements under section

8.c. (1)–(7), when a delivery ticket is

used as an invoice.

9. Late Payment Interest Penalties

a. Application and Calculation.

Agencies will use the following

procedures in calculating interest due

on late payments:

(1) Interest will be calculated and will

accrue daily from the day after the

payment due date at the interest rate

applicable on the day after the due date

(refer also to 3.g. Determining the

payment due date);

(2) Adjustments will be made for

errors in calculating interest;

(3) When an interest penalty is owed

and not paid, interest will accrue on the

unpaid principal and accrued interest

until paid, except as described in

paragraph (5) below;

(4) For up to one year, interest

penalties remaining unpaid at the end of

any 30 day period will be capitalized

(i.e., added to the principal), and

subsequent interest penalty amounts

will be computed and accrue on the

total of principal plus capitalized

interest until paid;

(5) Interest penalties under the

Prompt Payment Act will not continue

to accrue:

A. After the filing of a claim for such

penalties under the Contract Disputes

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

B. For more than one year.

(6) When an agency takes a discount

after the discount date and does not

repay it before the payment due date,

the interest payment will be calculated

on the amount of the discount taken, for

the period beginning the day after the

prompt payment due date through the

payment date;

(7) Interest penalties of less than one

dollar need not be paid;

(8) If the banking information

supplied by the vendor is incorrect and/

or incomplete, the invoice received will

be returned as an improper invoice and

the agency is exempt from the accrual

of interest as defined in section 3.c (2)

until such information is received or

until a proper invoice is submitted;

(9) Interest calculations are to be

based on a 360 day year, and;

(10) The applicable interest rate may

be obtained by calling the Department of

Treasury’s Financial Management

Service (FMS) voice information system

at 1–800–266–9667.

b. Payment. Agencies will meet the

following requirements in paying

interest penalties:

(1) Interest may be paid only after

acceptance has occurred except when

title of the goods passes to the

government;

(2) Late payment interest penalties

shall be paid without regard to whether

the vendor has requested payment of

such penalty, and shall be accompanied

by a notice stating the amount of the

interest penalty, the number of days late

and the rate used. Agencies should pay

interest together with the underlying

principal payment;

(3) The invoice number or other

agreed upon transaction reference

number assigned by the vendor should

be included in the notice to assist the

vendor in reconciling the payment.

Additionally, it is optional as to

whether or not an agency includes the
Federal Register / Vol. 63, No. 116 /Wednesday, June 17, 1998 / Proposed Rules 33007

contract number in the notice to the

vendor;

(4) The temporary unavailability of

funds does not relieve an agency from

the obligation to pay these interest

penalties or the additional penalties

required under section 10, and;

(5) Agencies shall pay any late

payment interest penalties (including

any additional penalties required under

section 10) under this regulation from

the funds available for the

administration of the program for which

the penalty was incurred. The Prompt

Payment Act does not authorize the

appropriation of additional amounts to

pay penalties.

c. Penalties not due. Interest penalties

are not required:

(1) When payment is delayed because

of a dispute between a Federal agency

and a vendor over the amount of the

payment or other issues concerning

compliance with the terms of a contract.

Claims concerning disputes, and any

interest that may be payable with

respect to the period, while the dispute

is being settled, will be resolved in

accordance with the provisions in the

Contract Disputes Act of 1978, (41

U.S.C. 601 et seq.), except for interest

payments required under 31 U.S.C.

3902(h)(2).

(2) When payments are made solely

for financing purposes or in advance,

except for interest payment required

under 31 U.S.C. 3902(h)(2).

(3) For a period when amounts are

withheld temporarily in accordance

with the contract.

(4) When an EFT payment is not

credited to the vendor’s account by the

payment due date because of the failure

of the Federal Reserve or the vendor’s

bank to do so.

10. Additional Penalties

a. Vendor entitlements . A vendor

shall be entitled to an additional penalty

payment when the vendor is owed a late

payment interest penalty by an agency,

if it:

(1) Receives a payment dated after the

payment due date which does not

include the interest penalty also due to

the vendor;

(2) Is not paid the interest penalty by

the agency within 10 days after the

actual payment date and;

(3) Makes a written request, no later

than 40 days after the payment date,

that the agency pay such an additional

penalty. The vendor request must

include the following:

A. Specific assertion that late

payment interest is due for a specific

invoice, and request payment of all

overdue late payment interest penalty

and such additional penalty as may be

required, and;

B. A copy of the invoice on which late

payment interest was due but not paid

and a statement that the principal has

been received, and the date of receipt.

No additional data are required;

Confirmation that the request is

postmarked. To be valid the request

must be postmarked, received by

facsimile, or by electronic mail, by the

40th day after payment was made. If

there is no postmark, the request will be

valid if it is received and annotated with

the date of receipt by the agency by the

40th day.

b. Maximum penalty. The additional

penalty shall be equal to one hundred

(100) percent of the original late

payment interest penalty but must not

exceed $5,000.

c. Minimum penalty. Regardless of

the amount of the late payment interest

penalty, the additional penalty paid

shall not be less than $25.

d. Penalty basis. The penalty is based

on individual invoices if paid

separately.

e. Utility payments. The additional

penalty does not apply to the payment

of utility bills where late payment

penalties for these bills are determined

through the tariff rate-setting process.

11. Payments Under Government Credit

Card

Payment standards under government

credit cards:

a. Payment date. All credit card

invoices under $2,500 may be paid at

any time, but not later than 30 days after

the receipt of a proper invoice.

Matching documents is not required.

The payment due date for invoices over

$2,500 shall be 30 days after receipt of

a proper invoice or the date specified in

the contract unless it benefits the agency

and the government (applying discount

formula in I TFM 6–8040.40) to take a

rebate offered for early payment. I TFM

4–4535.10 permits payment of the bill

in full prior to verification that goods or

services were received.

b. Disputed line items. Disputed line

items do not render the entire invoice

an improper invoice for compliance

with this circular. Any undisputed

items must be paid in accordance with

section 11.a.

12. Payments to Farm Producers

In case of a payment to which

producers on a farm are entitled under

the terms of an agreement entered into

under the current Farm Bill (7 U.S.C.

1421 et seq.):

a. Payment Standards. Payments to

farm producers under such agreements

shall be made as close as possible to the

required payment or loan closing date.

b. Interest penalties. An interest

penalty shall be paid to the producers

if the payment has not been made by the

required payment or loan closing date.

The interest penalty shall be paid:

(1) On the amount of payment or loan

due;

(2) For the period beginning on the

first day beginning after the required

payment or loan closing date and

ending on the date the amount is paid

or loaned, and;

(3) Out of funds available under

section 8 of the Act of June 29, 1948 (15

U.S.C. 714f).

c. Contract Disputes Act of 1978.

Provisions relating to the Contract

Disputes Act of 1978 (41 U.S.C. 601 et

seq.) in section 9.a.(5)A and section 16a.

do not apply.

13. Payments Under Construction

Contracts

a. Payment Standards. Agencies shall

follow these standards when making

progress payments under construction

contracts:

(1) An agency may approve a request

for progress payment if the application

meets the requirements specified in the

section b below;

(2) The certification by the prime

vendor as defined in section 13.b.(2) is

not to be construed as final acceptance

of the subcontractor’s performance;

(3) The agency shall return any such

payment request which is defective to

the vendor within seven days after

receipt, with a statement identifying the

defect(s), or if the notification is done

electronically, it is not necessary to

return the improper invoice;

(4) A vendor is obligated to pay

interest to the Government on unearned

amounts in its possession from:

A. The eighth day after receipt of

funds from the agency until the date the

vendor notifies the agency that the

performance deficiency has been

corrected, or the date the vendor

reduces the amount of any subsequent

payment request by an amount equal to

the unearned amount in its possession,

when the vendor discovers that all or a

portion of a payment received from the

agency constitutes a payment for the

vendor’s performance that fails to

conform to the specifications, terms,

and conditions of its contract with the

agency, under 31 U.S.C. 3905(a), or;

B. The eighth day after the receipt of

funds from the agency until the date the

performance deficiency of a

subcontractor is corrected, or the date

the vendor reduces the amount of any

subsequent payment request by an

amount equal to the unearned amount
33008 Federal Register / Vol. 63, No. 116 /Wednesday, June 17, 1998 / Proposed Rules

in its possession, when the vendor

discovers that all or a portion of a

payment received from the agency

would constitute a payment for the

subcontractor’s performance that fails to

conform to the subcontract agreement

and may be withheld, under 31 U.S.C.

3905(e).

(5) Interest payment on unearned

amounts to the government under 31

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

A. Be computed on the basis of the

average bond equivalent rates of 91-day

Treasury bills auctioned at the most

recent auction of such bills prior to the

date the vendor received the unearned

amount;

B. Be deducted from the next

available payment to the vendor, and;

C. Revert to the Treasury.

b. Required Documentation:

(1) Substantiation of the amount(s)

requested shall include:

A. An itemization of the amounts

requested related to the various

elements of work specified in the

contract;

B. A listing of the amount included

for work performed by each

subcontractor under the contract;

C. A listing of the total amount for

each subcontract under the contract;

D. A listing of the amounts previously

paid to each subcontractor under the

contract, and;

E. Additional supporting data and

detail in a form required by the

contracting officer.

(2) Certification by the prime vendor

is required, to the best of the vendor’s

knowledge and belief, that:

A. The amounts requested are only for

performance in accordance with the

specifications, terms, and conditions of

the contract;

B. Payments to subcontractors and

suppliers have been made from previous

payments received under the contract,

and timely payments will be made from

the proceeds of the payment covered by

the certification, in accordance with

their subcontract agreements and the

requirements of Chapter 39, title 31,

U.S.C., and;

C. The application does not include

any amounts which the prime vendor

intends to withhold or retain from a

subcontractor or supplier, in accordance

with the terms and conditions of their

subcontract.

c. Interest Penalties. Agencies will

pay interest on:

(1) A progress payment request

(including a monthly percentage-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 section b. above,

and remains unpaid for:

A. A period of more than 14 days after

receipt of the payment request by the

designated agency office, or;

B. A longer period specified in the

solicitation and/or contract if required,

to afford the Government a practicable

opportunity to adequately inspect the

work and to determine the adequacy of

the vendor’s performance under the

contract.

(2) Any amounts that the agency has

retained pursuant to a prime contract

clause providing for retaining a

percentage of progress payments

otherwise due to a vendor and that are

approved for release to the vendor, if

such retained amounts are not paid to

the vendor by a date specified in the

contract, or, in the absence of such a

specified date, by the 30th day after

final acceptance;

(3) Final payments, based on

completion and acceptance of all work

(including any retained amounts), and

payments for partial performances that

have been accepted by the agency, if

such payments are made after the later

of:

A. The 30th day after the date on

which the designated agency office

receives a proper invoice, or;

B. The 30th day after agency

acceptance of the completed work or

services. Acceptance shall be deemed to

have occurred on the effective date of

contract settlement on a final invoice

where the payment amount is subject to

contract settlement actions. For the

purpose of computing interest penalties,

acceptance shall be deemed to have

occurred on the seventh day after work

or services have been completed in

accordance with the terms of the

contract.

14. Grant Recipients

Recipients of Federal assistance may

pay interest penalties if so specified in

their contracts with contractors.

However, obligations to pay such

interest penalties will not be obligations

of the United States. Federal funds may

not be used for this purpose, nor may

interest penalties be used to meet

matching requirements of federally

assisted programs.

15. Relationship to Other Laws

a. Contract Disputes Act of 1978 (41

U.S.C. 605).

(1) A claim for an interest penalty

(including the additional penalty for

non-payment of interest if the vendor

has complied with the requirements of

section 9 of this regulation) not paid

under this regulation may be filed under

section 6 of the Contract Disputes Act.

(2) An interest penalty under this

regulation does not continue to accrue

after a claim for a penalty is filed under

the Contract Disputes Act or for more

than one year. This does not prevent an

interest penalty from accruing under

section 13 of the Contract Disputes Act

after a penalty stops accruing under this

regulation. Such penalty may accrue on

an unpaid contract payment and on the

unpaid penalty under this regulation.

(3) This regulation does not require an

interest penalty on a payment that is not

made because of a dispute between the

head of an agency and a vendor over the

amount of payment or compliance with

the contract. A claim related to such a

dispute and interest payable for the

period during which the dispute is

being resolved is subject to the Contract

Disputes Act.

b. Small Business Act (15 U.S.C.

644(k)). This Act has been amended to

require that any agency with an Office

of Small and Disadvantaged Business

Utilization must assist small business

concerns to obtain payments, late

payment interest penalties, additional

penalties, or information due to the

concerns.

16. Reporting Requirements

a. Content. Agency reports shall

contain the following information for

the prior fiscal year:

(1) Invoices subject to the Prompt

Payment Act:

A. Dollar amount of invoices

B. Number of invoices

(2) Invoices paid after due date:

A. Dollar amount of invoices

B. Number of invoices

C. Percent of Invoices paid late. The

percentage of invoices paid late is

computed in the following manner:

[(2)B/(1)B]

D. Dollar amount of late payment

interest and other penalties paid

E. Reasons why interest or other late

payment penalties were incurred. Rank

from highest to lowest, according to

frequency of occurrence.

i. Delay in agency’s receipt of:

a. Receiving report

b. Purchase order or contract

c. Other

ii. Delay or error by designated agency

office in:

a. Taking discount

b. Notifying vendor of improper

invoice

c. Computer or other system

processing

d. Other

F. Interest and other late payment

penalties which were due but not paid:

i. Interest amount

ii. Number

(3) Invoices paid eight days or more

before due date, except where cash

discounts were taken, an accelerated
Federal Register / Vol. 63, No. 116 /Wednesday, June 17, 1998 / Proposed Rules 33009

payment method was used, or payments

were made early to earn rebates; or

invoices where early payment is

determined on a case-by-case basis to be

necessary:

A. Dollar amount of invoices

B. Number of invoices

C. Percent of early payments made

[(3)B/(1)B]

(4) Progress Made. Describe specific

achievements and problems during the

fiscal year in implementing the

provisions of the Prompt Payment Act

and OMB Circular A–125. Include a

description of any agency experience in

determining the most appropriate

timing for release of payment

authorization so that invoices are paid

as close as possible to the due date

without exceeding it.

b. Certification. Agency annual

reports to FMS must be certified by the

agency Chief Financial Officer (or

equivalent).

c. Submission. Federal agencies

subject to the Chief Financial Officers

Act of 1990 and the United States

Information Agency are required to

submit an annual Prompt Payment

Report to the Commissioner, Financial

Management Service (FMS), Department

of the Treasury, by the 60th day after the

end of each fiscal year.

17. Inquiries

a. Regulation. Inquiries concerning

this regulation may be directed in

writing to the Department of the

Treasury, Financial Management

Service (FMS), Cash Management

Directorate, 401 14th Street, S.W.

Washington, D.C. 20227, or by calling

1–800–266–9667.

b. Applicable interest rate. The rate is

published semiannually in the Federal

Register on or about January 1 and July

1. The rate also may be obtained from

the Department of Treasury’s Financial

Management Service (FMS) at 1–800–

266–9667. This information is also

available at the FMS Prompt Pay Web

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

prompt/index.html.

c. Agency payments. Questions

concerning delinquent payments should

be directed to the designated agency

office. Questions about disagreements

over payment amount or timing should

be directed to the contracting officer for

resolution. Small business concerns

may obtain additional assistance on

payment issues by contacting the

agency’s Office of Small and

Disadvantaged Business Utilization.

18. Definitions

For the purposes of this regulation,

the following definitions apply:

a. Accelerated Payment—a payment

made prior to the due date and

considered on time for prompt payment

reporting purposes (see discussion in

section 4).

b. Acceptance—an acknowledgment

by the Government that goods received

and services rendered conform with the

contract requirements. Acceptance also

applies to partial deliveries.

c. Agency—as defined in Section

551(1) of Title 5, United States Code,

includes each authority of the United

States Government, whether or not it is

within or subject to review by another

agency, excluding the Congress, the

United States courts, governments of

territories or possessions, the District of

Columbia government, courts martial,

military commissions, and military

authority exercised in the field in time

of war or in occupied territory. Agency

also includes any entity (1) that is

operated exclusively as an

instrumentality of such an agency for

the purpose of administering one or

more programs of that agency, and (2)

that is so identified for this purpose by

the head of such agency. The term

agency includes military post and base

exchanges and commissaries.

d. Applicable interest rate—the

interest rate established by the Secretary

of the Treasury for interest payments

under Section 12 of the Contract

Disputes Act of 1978 (41 U.S.C. 611)

which is in effect on the day after the

due date, except where the interest

penalty is prescribed by other

governmental authority (e.g., tariffs).

The rate established under the Contract

Disputes Act is referred to as the

‘‘Renegotiation Board Interest Rate,’’ the

‘‘Contract Disputes Act Interest Rate,’’

and the ‘‘Prompt Payment Act Interest

Rate,’’ and is published semiannually in

the Federal Register on or about January

1 and July 1.

e. Automated Clearing House (ACH)—

a network that performs interbank

clearing of electronic debit and credit

entries for participating financial

institutions.

f. Banking Information—information

necessary to facilitate an EFT payment,

including the vendor’s bank account

number, and their bank’s routing

number.

g. Contract—any enforceable

agreement, including rental and lease

agreements, purchase orders, delivery

orders (including obligations under

Federal Supply Schedule contracts),

requirements-type (open-ended) service

contracts, and blanket purchases

agreements between an agency and a

vendor for the acquisition of goods or

services and agreements entered into

under the Agricultural Act of 1949 (7

U.S.C. 1421 et seq). Contracts must meet

the requirements of Section 8.a. of this

regulation.

h. Contract Financing Payments—

authorized disbursement of monies

prior to acceptance of goods or services

including advance payments, progress

payments based on cost, progress

payments (other than under

construction contracts) based on a

percentage or stage of completion,

payments on performance-based

contracts and interim payments on costtype contracts. Contract financing

payments do not include invoice

payments, payments for partial

deliveries, or lease and rental payments.

i. Contracting Office—any entity

issuing a contract or purchase order or

issuing a contract modification or

termination.

j. Contractor (see Vendor).

k. Day—a calendar day including

weekend and holiday, unless otherwise

indicated.

l. Delivery Ticket—vendor document

supplied at the time of delivery which

indicates the items delivered, can serve

as a proper invoice based on contractual

agreement.

m. Designated Agency Office—the

office designated by the purchase order,

agreement, or contract to first receive

invoices. This office can be

contractually designated as the

receiving entity. This office may be

different from the office actually issuing

the payment.

n. Discount—an invoice payment

reduction offered by the vendor for early

payment.

o. Discount date—the date by which

a specified invoice payment reduction,

or a discount, can be taken.

p. Due date—the date on which

Federal payment should be made.

Determination of such dates is

discussed in Section 3.g. of this

regulation.

q. Electronic Commerce (EC)—the end

to end electronic exchange of business

information using electronic data

interchange (EDI), electronic mail,

electronic bulletin boards, electronic

funds transfer (EFT) and similar

technologies.

r. Electronic Data Interchange (EDI)—

the computer to computer exchange of

routine business information in a

standard format. The standard formats

are developed and maintained by the

Accredited Standards Committee (ASC)

of the American National Standards

Institute.

s. Electronic Funds Transfer—A

system using electronic means to

transfer payment data and funds from

an originator to a recipient’s account at

a receiving financial institution.
33010 Federal Register / Vol. 63, No. 116 /Wednesday, June 17, 1998 / Proposed Rules

t. Emergency Payment—emergency

includes hurricane, tornado, storm,

flood, high water, wind-driven water,

tidal wave, tsunami, earthquake,

volcanic eruption, landslide, mud slide,

snowstorm, drought, fire, explosion, or

other catastrophe which requires

Federal emergency assistance to

supplement State and local efforts to

save lives and property, and ensure

public health and safety.

u. Evaluated Receipts—contractually

designated use of the acceptance

document and the contract as the basis

for payment without requiring a

separate invoice.

v. Fast Payment—under the Federal

Acquisition Regulation (FAR) 13.3, the

Fast Payment procedure allows payment

under limited conditions to a vendor

prior to the Government’s verification

that supplies have been received and

accepted.

w. Federal Acquisition Regulation

(FAR)—the regulation that governs most

Federal acquisition and related payment

issues. Agencies may also have

supplements prescribing unique agency

policies.

x. Government Credit Card—

internationally accepted credit card

available to all Federal agencies under

a General Services Administration

contract for the purpose of making

simplified acquisitions of up to

$100,000.

y. Invoice—a bill, written document

or electronic transmission, provided by

a vendor requesting payment for

property received or services rendered.

A proper invoice must meet the

requirements of section 8.b of this

regulation. The term invoice can

include receiving reports and delivery

tickets contractually designated as

invoices.

z. Payment Date—the date on which

a check for payment is dated or the date

of an electronic fund transfer (EFT)

payment (settlement date).

aa. Receiving Office—the entity which

physically receives the goods or

services, may be separate from the

accepting entity.

bb. Receiving Report—written or

electronic evidence of receipt of goods

or services by a Government official.

Receiving reports must meet the

requirements of section 5.g. of this

regulation.

cc. Recurring Payments—Fixed

Amounts—payments for services of a

recurring nature, such as rents, building

maintenance, transportation services,

parking, leases, and maintenance for

equipment, pagers and cellular phones,

etc., which are performed under agencyvendor agreements providing for

payments of definite amounts at fixed

periodic intervals.

dd. Taxpayer Identification Number

(TIN)—nine digit Employer

Identification Number or Social Security

Number as defined in section 6109 of

the Internal Revenue Code of 1986 (26

U.S.C. 6109).

ee. Utilities and Telephones—

contractual or non-contractual purchase

of electricity, water, sewage services,

telephone services, and natural gas.

Utilities can be regulated, unregulated,

or under contract.

ff. Vendor—any person, organization,

or business concern engaged in a

profession, trade, or business and any

not-for-profit entity operating as a

vendor (including State and local

governments and foreign entities and

foreign governments, but excluding

Federal entities).

19. Effective Dates

This regulation will be effective 30

days after final publication. For

payments under contracts or purchase

orders solicited on or after July 26, 1996,

the requirement to collect banking

information, for purposes of making an

EFT payment pursuant to 31 U.S.C.

3332, as amended, will be effective 30

days after final publication. For

payments under contracts or purchase

orders solicited before July 26, 1996, the

requirement to collect banking

information is effective January 2, 1999.

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

BILLING CODE 3110–01–P

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 981

[Docket No. FV98–981–1 PR]

Almonds Grown in California; Revision

of Requirements Regarding Quality

Control Program

AGENCY: Agricultural Marketing Service,

USDA.

ACTION: Proposed rule.

SUMMARY: This rule invites comments

on a revision to the administrative rules

and regulations of the California almond

marketing order (order) pertaining to the

quality control program. The order

regulates the handling of almonds

grown in California, and is administered

locally by the Almond Board of

California (Board). Under the terms of

the order, handlers are required to

obtain inspection on almonds received

from growers to determine the percent

of inedible almonds in each lot of any

variety. Handlers are then required to

dispose of a quantity of almonds in

excess of 1 percent of the weight of

almonds reported as inedible to

accepted users of such product.

Accepted users are approved annually

by the Board. This rule would clarify

conditions upon which accepted users’

status may be denied or revoked by the

Board. This rule would help to ensure

that inedible almonds are removed from

human consumption channels, thereby

maintaining the integrity of the quality

control provisions of the order.

DATES: Comments must be received by

July 17, 1998.

ADDRESSES: Interested persons are

invited to submit written comments

concerning this proposal. Comments

must be sent to the Docket Clerk, Fruit

and Vegetable Programs, AMS, USDA,

room 2525–S, P.O. Box 96456,

Washington, DC 20090–6456; Fax: (202)

205–6632. All comments should

reference the docket number and the

date and page number of this issue of

the Federal Register and will be made

available for public inspection in the

Office of the Docket Clerk during regular

business hours.

FOR FURTHER INFORMATION CONTACT:

Martin Engeler, Assistant Regional

Manager, California Marketing Field

Office, Marketing Order Administration

Branch, F&V, AMS, USDA, 2202

Monterey Street, suite 102B, Fresno,

California 93721; telephone: (209) 487–

5901, Fax: (209) 487–5906; or George

Kelhart, Technical Advisor, Marketing

Order Administration Branch, Fruit and

Vegetable Programs, AMS, USDA, room

2525–S, P.O. Box 96456, Washington,

DC 20090–6456; telephone: (202) 690–

3919, Fax: (202) 205–6632. Small

businesses may request information on

compliance with this regulation by

contacting Jay Guerber, Marketing Order

Administration Branch, F&V, AMS,

USDA, room 2525–S, P.O. Box 96456,

Washington, DC 20090–6456; telephone:

(202) 720–2491, Fax: (202) 205–6632.

SUPPLEMENTARY INFORMATION: This

proposal is issued under Marketing

Order No. 981, as amended (7 CFR part

981), regulating the handling of almonds

grown in California, hereinafter referred

to as the ‘‘order.’’ The marketing order

is effective under the Agricultural

Marketing Agreement Act of 1937, as

amended (7 U.S.C. 601–674), hereinafter

referred to as the ‘‘Act.’’

The Department of Agriculture

(Department) is issuing this rule in

conformance with Executive Order

12866.

This rule has been reviewed under

Executive Order 12988, Civil Justice

Reform. This rule is not intended to