FAR 42.1504—Contract clause.
Plain-English Summary
FAR 42.1504 is a simple but important cross-reference rule about contract clauses tied to small business subcontracting. It requires contracting officers to insert the clause at 52.242-5, Payments to Small Business Subcontractors, in every solicitation and contract that includes the clause at 52.219-9, Small Business Subcontracting Plan. In practice, this means the payment-protection clause is mandatory whenever a contractor is required to have a subcontracting plan, so the Government can reinforce timely payment to small business subcontractors. The section does not create a standalone performance standard or reporting system by itself; instead, it tells the acquisition team when the clause must be included. Its practical significance is that it links subcontracting-plan requirements with payment obligations, helping support small business participation and reducing the risk that prime contractors delay or withhold payment from small business subs. For contractors, it means the subcontracting-plan requirement carries an additional contractual obligation related to paying small business subcontractors promptly and in accordance with the clause.
Key Rules
Clause must be inserted
If a solicitation or contract contains FAR 52.219-9, Small Business Subcontracting Plan, the contracting officer must also include FAR 52.242-5, Payments to Small Business Subcontractors. The requirement is mandatory, not discretionary.
Applies to solicitations and contracts
The rule covers both solicitations and awarded contracts that contain the subcontracting plan clause. This ensures the payment clause is present from the outset and remains part of the contract terms.
Tied to subcontracting plans
The trigger for this clause is the presence of the small business subcontracting plan clause. If 52.219-9 is not included, this section does not require 52.242-5 on its own.
Supports small business payment protection
The purpose of the clause is to protect small business subcontractors by requiring timely payment-related obligations in contracts where subcontracting plans are already required. It reinforces the Government’s small business subcontracting policy.
Responsibilities
Contracting Officer
Ensure FAR 52.242-5 is included in every solicitation and contract that contains FAR 52.219-9. Verify clause flowdown and contract formatting so the required payment clause is not omitted.
Prime Contractor
Comply with the payment obligations in FAR 52.242-5 when the clause is included in the contract. Manage subcontract payments to small business subcontractors in accordance with the clause and related contract terms.
Small Business Subcontractor
Monitor payment terms and invoice status under the subcontract and prime contract. Raise concerns if the prime contractor does not make payments consistent with the clause or subcontract terms.
Agency/Acquisition Team
Support proper solicitation and contract preparation by ensuring the subcontracting-plan clause and the required payment clause are used together when applicable. Review contract templates and clause checklists for consistency.
Practical Implications
Whenever a subcontracting plan is required, the payment clause should be treated as a standard companion clause; missing it is a contract preparation error that can create compliance problems later.
Contracting officers should use clause checklists or automated templates to avoid omitting 52.242-5 when 52.219-9 is present, especially in complex or heavily modified solicitations.
Prime contractors should expect heightened scrutiny of payment practices to small business subcontractors and should maintain records showing timely payment and any justified disputes.
Small business subcontractors should know that the clause is intended to strengthen payment protections, but they still need to track invoices, delivery acceptance, and subcontract terms carefully.
A common pitfall is assuming the subcontracting plan clause alone is enough; FAR 42.1504 makes clear that the payment clause must be added as well.
Official Regulatory Text
Insert the clause at 52.242-5 , Payments to Small Business Subcontractors, in all solicitations and contracts containing the clause at 52.219-9 , Small Business Subcontracting Plan.