FAR 52.232-40—Providing Accelerated Payments to Small Business Subcontractors.
Plain-English Summary
FAR 52.232-40 requires contractors to pass through accelerated payment benefits they receive from the Government to their small business subcontractors. The clause addresses four main topics: the timing of accelerated payments to small business subcontractors, the requirement to pay without charging extra fees or demanding additional consideration, the rule that this acceleration does not create any new rights under the Prompt Payment Act, and the flowdown requirement to include the substance of the clause in subcontracts with small business concerns, including commercial product and commercial service subcontracts. In practice, the clause is intended to improve cash flow for small businesses in the federal supply chain by ensuring that when the Government pays the prime contractor early, the prime contractor must promptly pay its small business subs in turn. It also prevents primes from treating accelerated payment as a financing opportunity or imposing administrative charges on small businesses. For contracting officers and contractors, the clause creates a compliance obligation tied to payment processing and subcontract administration, not just a contract boilerplate requirement.
Key Rules
Pass Through Accelerated Payments
If the contractor receives accelerated payments from the Government, it must make accelerated payments to its small business subcontractors within 15 days after receipt, to the maximum extent practicable and before the subcontract payment would otherwise be due. The contractor must do this after receiving a proper invoice and all other required documentation from the subcontractor.
No Extra Consideration or Fees
The contractor must make accelerated payments to small business subcontractors without asking for any additional consideration and without charging the subcontractor any fee for the accelerated payment. The clause is meant to benefit the subcontractor, not create a paid financing service.
No New Prompt Payment Rights
Accelerating payment under this clause does not create any new rights under the Prompt Payment Act. The clause changes the timing of payment when accelerated funds are received, but it does not expand statutory prompt payment entitlements beyond what otherwise applies.
Mandatory Flowdown
The contractor must include the substance of this clause, including paragraph (c), in all subcontracts with small business concerns. This flowdown applies even when the subcontract is for commercial products or commercial services.
Applies Only to Small Business Subcontractors
The accelerated payment obligation is specifically tied to small business subcontractors. The clause does not require the contractor to accelerate payments to large business subcontractors, though other contract terms or policies may address those relationships.
Responsibilities
Contracting Officer
Insert the clause when prescribed by FAR 32.009-2 and ensure the prime contract includes the accelerated payment requirement applicable to small business subcontractors.
Prime Contractor
When it receives accelerated payments from the Government, pay its small business subcontractors within 15 days to the maximum extent practicable, after receipt of a proper invoice and required documentation, and do so without charging fees or demanding extra consideration.
Prime Contractor
Flow down the substance of the clause, including paragraph (c), into all subcontracts with small business concerns, including commercial product and commercial service subcontracts.
Small Business Subcontractor
Submit a proper invoice and any other required documentation needed to trigger payment under the subcontract and the accelerated payment process.
Agency/Payment Office
Process accelerated payments to the contractor in accordance with applicable payment authorities and contract terms, which in turn triggers the contractor’s obligation to accelerate payment to small business subcontractors.
Practical Implications
This clause is mainly a cash-flow rule: if the Government pays the prime early, the prime must pass that benefit down quickly to small business subs.
Contractors should have internal controls to identify which subcontractors qualify as small businesses and to track the 15-day payment window after receipt of accelerated funds.
A common pitfall is assuming the clause allows the prime to delay payment until its normal accounts payable cycle; the clause requires earlier payment to the extent practicable.
Another pitfall is charging administrative, financing, or processing fees to the subcontractor; the clause expressly prohibits that.
Because the clause must be flowed down to small business subcontracts, primes should ensure subcontract templates and purchasing systems include the required language, including for commercial-item subcontracts.
Official Regulatory Text
As prescribed in 32.009-2 , insert the following clause: Providing Accelerated Payments to Small Business Subcontractors (Mar 2023) (a) (1) In accordance with 31 U.S.C. 3903 and 10 U.S.C. 3801 , within 15 days after receipt of accelerated payments from the Government, the Contractor shall make accelerated payments to its small business subcontractors under this contract, to the maximum extent practicable and prior to when such payment is otherwise required under the applicable contract or subcontract, after receipt of a proper invoice and all other required documentation from the small business subcontractor. (2) The Contractor agrees to make such payments to its small business subcontractors without any further consideration from or fees charged to the subcontractor. (b) The acceleration of payments under this clause does not provide any new rights under the Prompt Payment Act. (c) Include the substance of this clause, including this paragraph (c), in all subcontracts with small business concerns, including subcontracts with small business concerns for the acquisition of commercial products or commercial services. (End of clause)