Department of Defense Contract Finance Study Follow-Up Activity, 45190-45191 [2023-14959]

Agencies

• Defense Acquisition Regulations System
• DEPARTMENT OF DEFENSE

[Federal Register Volume 88, Number 134 (Friday, July 14, 2023)]
[Notices]
[Pages 45190-45191]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-14959]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

[Docket Number DARS-2022-0012]


Department of Defense Contract Finance Study Follow-Up Activity

AGENCY: Defense Acquisition Regulations System, Department of Defense 
(DoD).

ACTION: Request for information.

-----------------------------------------------------------------------

SUMMARY: This notice requests input on improving the timeliness of 
payments to defense subcontractors as a means of enhancing and securing 
the financial health of these critical members of the Defense 
Industrial Base, as well as attracting new entrants into the Defense 
Industrial Base while retaining existing participants. Input is 
solicited from the public, including companies currently participating 
in the Defense Industrial Base as a prime contractor, subcontractor, 
supplier, or vendor; as well as other interested parties.

DATES: Interested parties should submit written comments to the address 
shown in the ADDRESSES section on or before September 12, 2023.

ADDRESSES: Submit comments in response to the questions provided below, 
using either of the following methods:
    [cir] Federal eRulemaking Portal: https://www.regulations.gov. 
Search for ``Docket Number DARS-2022-0012.'' Select ``Comment'' and 
follow the instructions to submit a comment. Please include your name, 
company name (if any), and ``Docket Number DARS-2022-0012'' on any 
attached document(s).
    [cir] Email: [email protected]. Include 
``DoD Contract Finance Study Follow-up Activity'' in the subject line 
of the message.
    Comments received generally will be posted without change to 
https://www.regulations.gov, including any personal information 
provided. To confirm receipt of your comment(s), please check https://www.regulations.gov, approximately two to three days after submission, 
to verify posting.

FOR FURTHER INFORMATION CONTACT: Ms. Regina Bova, telephone 937-200-
4020.

SUPPLEMENTARY INFORMATION:

A. Background

    The DoD Contract Finance Study, published in April 2023 and 
available at https://www.acq.osd.mil/asda/dpc/pcf/finance-study.html, 
was the first comprehensive contract finance study since publication of 
the Defense Financial and Investment Review in June 1985. The DoD 
Contract Finance Study concluded that, in the aggregate, the defense 
industry is financially healthy, and that its financial health has 
improved over time. However, the findings were not as auspicious when 
specifically considering the supply base (the members of the Defense 
Industrial Base operating as first-tier or lower-tier subcontractors 
and suppliers). The DoD Contract Finance Study found that defense 
subcontractors and suppliers generally do not receive favorable cash 
flow benefits as consistently or to the same extent enjoyed by defense 
prime contractors. This is a crucial finding, as the Government 
Accountability Office (GAO) has noted estimates of 60 to 70% of defense 
work being performed by subcontractors (GAO-11-61r). In response to the 
findings of the DoD Contract Finance Study, the Department is 
investigating ways to improve cash flow and payment timeliness for the 
supplier base. Enhancements in this area would not only improve the 
financial health of defense subcontractors and suppliers, but could 
potentially assist in attracting new entrants into the Defense 
Industrial Base, including at the supply chain level.

B. Areas of Interest

    The Department is seeking input on the following questions, all of 
which but one relate to Tenet 2 in the DoD Contract Finance Study 
Report (see page 6 of the Report for the Summary Table identifying all 
tenets). The Department anticipates requesting public comments on other 
areas of the DoD Contract Finance Study in subsequent Federal Register 
notices (e.g., responses to question 6.c. may inform further 
exploration of Tenet 4).
    1. What are your thoughts about extending the protections provided 
by the Prompt Payment Act to subcontractors? Generally, the Prompt 
Payment Act establishes payment due dates (in most cases, 30 days after 
receipt of a proper invoice or after acceptance of the product or 
service, whichever is later); establishes constructive acceptance 
criteria for purposes of starting the ``interest clock''; and requires 
payment of interest from the payment due date to the actual payment 
date when payment is not made timely. (Reference: Tenet 2, Action 2a; 
details available in the Study Report, Section 3, under the headings of 
``Favorable Payment Terms and the Prompt Payment Act'' and ``Payment 
Timeliness''; see pages 56-62.)
    2. What are your ideas about how to improve the timeliness of 
payments to subcontractors? (Reference: Tenet 2, Action 2b; details 
available in the Study Report, Section 3, under the heading of 
``Payment Timeliness''; see pages 60-62.)
    3. Do you think it is necessary to improve the ability of 
subcontractors to bring payment issues to the attention of the 
Government contracting officer? If so, how can the Department 
facilitate subcontractor reporting of nonpayment issues to the 
cognizant contracting officer? (Reference: Tenet 2, Action 2d; details 
available in the Study Report, Section 3, under the heading ``Oversight

[[Page 45191]]

Concerns and Recourse for Non-payment''; see pages 64-66.)
    4. Please share your thoughts about how to improve the 
implementation of the Executive Branch policy on accelerating payments 
to small business subcontractors, which was originally laid out by 
Office of Management and Budget memorandum M-12-16. (This policy is 
currently implemented through Federal Acquisition Regulation (FAR) 
clause 52.232-40, Providing Accelerated Payments to Small Business 
Subcontractors.) What are your thoughts about the concerns laid out in 
Section 4 of the Defense Contract Finance Study Report regarding 
providing accelerated payments to small business contractors? For 
example, on the potential effectiveness of expanding the flowdown of 
52.232-40 to all subcontractors, rather than only small business 
subcontractors? (Reference: Tenet 2, Action 2e; details available in 
the Study Report, Section 4, under the heading ``FAR 52.232-40, 
Providing Accelerated Payments to Small Business Subcontractors''; see 
pages 76-78.)
    5. Do you have any other ideas for improving payments to 
subcontractors on DoD contracts? (Reference: Tenet 2.)
    6. Please tell us about your business relationship to the areas of 
interest enumerated above:
    a. In what capacity are you commenting? If you are commenting on 
behalf of a professional association or a company, what is the size 
status (see FAR part 19) of your company (or for associations, member 
companies) for the majority of your contracts and subcontracts? What is 
your company's (or for associations, member companies') usual role or 
position in the DoD supply chain? (For context, please see page 53 of 
the Study Report, Section 3, ``Financing and Payment Policy Impacts to 
Subcontractors,'' first paragraph.)
    b. If you have experienced payment timeliness issues as a member of 
the DoD supply chain, please provide insights into these experiences, 
including your role or position in the DoD supply chain at the time, 
the timeframe (when this occurred and how long it continued), and how 
frequently such experiences occurred.
    c. If you have experienced an inability to obtain financing as a 
member of the DoD supply chain, please provide insights into these 
experiences, including your role or position in the DoD supply chain at 
the time, the timeframe, and how frequently such experiences occurred.
    Authority: DoD Instruction 5000.35, Defense Acquisition Regulations 
(DAR) System.

Jennifer D. Johnson,
Editor/Publisher, Defense Acquisition Regulations System.
[FR Doc. 2023-14959 Filed 7-13-23; 8:45 am]
BILLING CODE 5001-06-P