31 U.S.C. § 3903 — Regulations

Page 362 TITLE 31—MONEY AND FINANCE § 3903 1 See References in Text note below. 107–107, div. A, title X, § 1007, Dec. 28, 2001, 115 Stat. 1204, provided that: ‘‘(a) PROMPT PAYMENT REQUIREMENT FOR INTERIM PAYMENTS.—Under regulations prescribed under sub- section (c), the head of an agency acquiring services from a business concern under a cost reimbursement contract requiring interim payments who does not pay the concern a required interim payment by the date that is 30 days after the date of the receipt of a proper invoice shall pay an interest penalty to the concern on the amount of the payment due. The interest shall be computed as provided in section 3902(a) of title 31, United States Code. ‘‘(b) REGULATIONS.—The Director of the Office of Management and Budget shall prescribe regulations to carry out this section. Such regulations shall be pre- scribed as part of the regulations prescribed under sec- tion 3903 of title 31, United States Code. ‘‘(c) INCORPORATION OF CERTAIN PROVISIONS OF LAW.— The provisions of chapter 39 of title 31, United States Code, shall apply to this section in the same manner as if this section were enacted as part of such chapter. ‘‘(d) EFFECTIVE DATE.—Subsection (a) shall take ef- fect on December 15, 2000, and shall apply with respect to interim payments that are due on or after such date under contracts entered into before, on, or after that date. No interest shall accrue by reason of that sub- section for any period before that date.’’ § 3903. Regulations (a) The Director of the Office of Management and Budget shall prescribe regulations to carry out section 3902 of this title. The regulations shall— (1) provide that the required payment date is— (A) the date payment is due under the con- tract for the item of property or service pro- vided; or (B) except as provided in paragraphs (10) and (11), 30 days after a proper invoice for the amount due is received if a specific pay- ment date is not established by contract; (2) for the acquisition of meat or a meat food product (as defined in section 2(a)(3) of the Packers and Stockyards Act, 1921 (7 U.S.C. 182(3))), including any edible fresh or frozen poultry meat, any perishable poultry meat food product, fresh eggs, and any perishable egg product, or of fresh or frozen fish (as de- fined in section 204(3) of the Fish and Seafood Promotion Act of 1986 (16 U.S.C. 4003(3)), pro- vide a required payment date of not later than 7 days after the meat, meat food product, or fish is delivered; and (3) for the acquisition of a perishable agri- cultural commodity (as defined in section 1(4) 1 of the Perishable Agricultural Commodities Act, 1930 (7 U.S.C. 499a(4))), provide a required payment date consistent with that Act; (4) for the acquisition of dairy products (as defined in section 111(e) of the Dairy Produc- tion Stabilization Act of 1983 (7 U.S.C. 4502(e)), the acquisition of edible fats or oils, and the acquisition of food products prepared from edi- ble fats or oils, provide a required payment date of not later than 10 days after the date on which a proper invoice for the amount due has been received by the agency acquiring such dairy products, fats, oils, or food products; (5) require periodic payments, in the case of a property or service contract which does not prohibit periodic payments for partial deliv- eries or other contract performance during the contract period, upon— (A) submission of an invoice for property delivered or services performed during the contract period, if an invoice is required by the contract; and (B) either— (i) acceptance of the property or services by an employee of an agency authorized to accept the property or services; or (ii) the making of a determination by such an employee, that the performance covered by the payment conforms to the terms and conditions of the contract; (6) in the case of a construction contract, provide for the payment of interest on— (A) a progress payment (including a monthly percentage-of-completion progress payment or milestone payments for com- pleted phases, increments, or segments of any project) that is approved as payable by the agency pursuant to subsection (b) of this section and remains unpaid for— (i) a period of more than 14 days after re- ceipt of the payment request by the place or person designated by the agency to first receive such requests; or (ii) a longer period, specified in the solic- itation, if required to afford the Govern- ment a practicable opportunity to ade- quately inspect the work and to determine the adequacy of the contractor’s perform- ance under the contract; and (B) any amounts which the agency has re- tained pursuant to a prime contract clause providing for retaining a percentage of progress payments otherwise due to a con- tractor and that are approved for release to the contractor, if such retained amounts are not paid to the contractor by a date speci- fied in the contract or, in the absence of such a specified date, by the 30th day after final acceptance; (7) require that— (A) each invoice be reviewed as soon as practicable after receipt for the purpose of determining that such an invoice is a proper invoice within the meaning of section 3901(a)(3) of this title; (B) any invoice determined not to be such a proper invoice suitable for payment shall be returned as soon as practicable, but not later than 7 days, after receipt, specifying the reasons that the invoice is not a proper invoice; and (C) the number of days available to an agency to make a timely payment of an in- voice without incurring an interest penalty shall be reduced by the number of days by which an agency exceeds the requirements of subparagraph (B) of this paragraph; (8) permit an agency to make payment up to 7 days prior to the required payment date, or earlier as determined by the agency to be nec- essary on a case-by-case basis; (9) prescribe the methods for computing in- terest under section 3903(c) 1 of this title; (10) for a prime contractor (as defined in sec- tion 8701(5) of title 41) that is a small business Page 363 TITLE 31—MONEY AND FINANCE § 3903 concern (as defined under section 3 of the Small Business Act (15 U.S.C. 632)), to the full- est extent permitted by law, require that the head of an agency establish an accelerated payment date with a goal of 15 days after a proper invoice for the amount due is received if a specific payment date is not established by contract; and (11) for a prime contractor (as defined in sec- tion 8701(5) of title 41) that subcontracts with a small business concern (as defined under sec- tion 3 of the Small Business Act (15 U.S.C. 632)), to the fullest extent permitted by law, require that the head of an agency establish an accelerated payment date with a goal of 15 days after a proper invoice for the amount due is received if— (A) a specific payment date is not estab- lished by contract; and (B) such prime contractor agrees to make payments to such subcontractor in accord- ance with such accelerated payment date, to the maximum extent practicable, without any further consideration from or fees charged to such subcontractor. (b)(1) A payment request may not be approved under subsection (a)(6)(A) of this section unless the application for such payment includes— (A) substantiation of the amounts requested; and (B) a certification by the prime contractor, to the best of the contractor’s knowledge and belief, that— (i) the amounts requested are only for per- formance in accordance with the specifica- tions, terms, and conditions of the contract; (ii) payments to subcontractors and sup- pliers have been made from previous pay- ments received under the contract, and timely payments will be made from the pro- ceeds of the payment covered by the certifi- cation, in accordance with their subcontract agreements and the requirements of this chapter; and (iii) the application does not include any amounts which the prime contractor intends to withhold or retain from a subcontractor or supplier in accordance with the terms and conditions of their subcontract. (2) The agency shall return any such payment request which is defective to the contractor within 7 days after receipt, with a statement identifying the defect. (c) A contract for the procurement of subsist- ence items that is entered into under the prime vendor program of the Defense Logistics Agency may specify for the purposes of section 3902 of this title a single required payment date that is to be applicable to an invoice for subsistence items furnished under the contract when more than one payment due date would otherwise be applicable to the invoice under the regulations prescribed under paragraphs (2), (3), and (4) of subsection (a) or under any other provisions of law. The required payment date specified in the contract shall be consistent with prevailing in- dustry practices for the subsistence items, but may not be more than 10 days after the date of receipt of the invoice or the certified date of re- ceipt of the items. The Director of the Office of Management and Budget shall provide in the regulations under subsection (a) that when a re- quired payment date is so specified for an in- voice, no other payment due date applies to the invoice. (d)(1) The contracting officer shall— (A) compute the interest which a contractor shall be obligated to pay under sections 3905(a)(2) and 3905(e)(6) of this title on the basis of the average bond equivalent rates of 91-day Treasury bills auctioned at the most re- cent auction of such bills prior to the date the contractor received the unearned amount; and (B) deduct the interest amount determined under subparagraph (A) of this paragraph from the next available payment to the contractor. (2) Amounts deducted from payments to con- tractors under paragraph (1)(B) shall revert to the Treasury. (Added Pub. L. 97–452, § 1(18)(A), Jan. 12, 1983, 96 Stat. 2476; amended Pub. L. 100–496, §§ 4–7, 13(a), Oct. 17, 1988, 102 Stat. 2457–2459, 2465; Pub. L. 102–190, div. A, title VIII, § 842, Dec. 5, 1991, 105 Stat. 1449; Pub. L. 106–65, div. A, title X, § 1009, Oct. 5, 1999, 113 Stat. 738; Pub. L. 116–92, div. A, title VIII, § 873, Dec. 20, 2019, 133 Stat. 1527.) HISTORICAL AND REVISION NOTES Revised Section Source (U.S. Code) Source (Statutes at Large) 3903 ......... 31 App.:1801(a)(2). May 21, 1982, Pub. L. 97–177, § 2(a)(2), 96 Stat. 85. In the section, before clause (1), the words ‘‘The Di- rector of the Office of Management and Budget shall prescribe regulations to carry out section 3902 of this title’’ are added because of the restatement. In clause (1)(A), the words ‘‘the terms of’’ are omitted as surplus. In clause (1)(B), the words ‘‘of the payment’’ are omit- ted as surplus. Editorial Notes REFERENCES IN TEXT The Perishable Agricultural Commodities Act, 1930, referred to in subsec. (a)(3), is act June 10, 1930, ch. 436, 46 Stat. 531, which is classified generally to chapter 20A (§ 499a et seq.) of Title 7, Agriculture. Section 1(4) of the Act was redesignated section 1(b)(4) by Pub. L. 102–237, title X, § 1011(1)(A), Dec. 13, 1991, 105 Stat. 1898, and is classified to section 499a(b)(4) of Title 7. For complete classification of this Act to the Code, see section 499r of Title 7 and Tables. Section 3903(c) of this title, referred to in subsec. (a)(9), was redesignated section 3903(d) by Pub. L. 106–65, div. A, title X, § 1009(1), Oct. 5, 1999, 113 Stat. 738. AMENDMENTS 2019—Subsec. (a)(1)(B). Pub. L. 116–92, § 873(1), inserted ‘‘except as provided in paragraphs (10) and (11),’’ before ‘‘30 days’’. Subsec. (a)(10), (11). Pub. L. 116–92, § 873(2)–(4), added pars. (10) and (11). 1999—Subsecs. (c), (d). Pub. L. 106–65 added subsec. (c) and redesignated former subsec. (c) as (d). 1991—Subsec. (a)(2). Pub. L. 102–190 inserted provi- sions relating to fresh or frozen fish as defined in 16 U.S.C. 4003(3) and substituted ‘‘meat, meat food prod- uct, or fish’’ for ‘‘meat or meat food product’’. 1988—Subsec. (a). Pub. L. 100–496, § 6(1), designated ex- isting provisions as subsec. (a). Subsec. (a)(2). Pub. L. 100–496, § 13(a), included any ed- ible fresh or frozen poultry meat, any perishable poul- try meat food product, fresh eggs, and any perishable egg product. Page 364 TITLE 31—MONEY AND FINANCE § 3904 Subsec. (a)(4). Pub. L. 100–496, § 4, amended par. (4) generally. Prior to amendment, par. (4) read as follows: ‘‘provide separate required payment dates for a con- tract under which property or service is provided in a series of partial executions or deliveries to the extent the contract provides for separate payments for partial execution or delivery; and’’. Subsec. (a)(5). Pub. L. 100–496, § 5(2), added par. (5). Former par. (5) redesignated (7). Subsec. (a)(6). Pub. L. 100–496, § 6(2), added par. (6). Subsec. (a)(7). Pub. L. 100–496, § 7, added par. (7) and struck out former par. (7), which read as follows: ‘‘re- quire that, within 15 days after an invoice is received, the head of an agency notify the business concern of a defect or impropriety in the invoice that would prevent the running of the time period specified in clause (1)(B) of this section.’’ Pub. L. 100–496, § 5(1), redesignated par. (5) as (7). Subsec. (a)(8), (9). Pub. L. 100–496, § 7, added pars. (8) and (9). Subsecs. (b), (c). Pub. L. 100–496, § 6(3), added subsecs. (b) and (c). Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1988 AMENDMENT Amendment by Pub. L. 100–496 applicable to pay- ments under contracts awarded, contracts renewed, and contract options exercised during or after the first fis- cal quarter which begins more than 90 days after Oct. 17, 1988, see section 14(a) of Pub. L. 100–496, set out as a note under section 3902 of this title. IMPLEMENTATION THROUGH FEDERAL ACQUISITION REGULATION Pub. L. 100–496, § 11, Oct. 17, 1988, 102 Stat. 2463, pro- vided that: ‘‘(a) The Federal Acquisition Regulation shall be modified to provide appropriate solicitation provisions and contract clauses that implement chapter 39 of title 31, United States Code, as amended by this Act [see Short Title of 1988 Amendment note set out under sec- tion 3901 of this title], and the regulations prescribed under section 3903 of such title (as amended). ‘‘(b) The solicitation provisions and contract clauses required by subsection (a) of this section shall include (but not be limited to) the following matters: ‘‘(1) Authority for a contracting officer to specify for a contract or class of contracts a specific payment period, which— ‘‘(A) in the case of payments for commercial items or services, is similar to the payment period or periods permitted in prevailing private industry contracting practices; ‘‘(B) in the case of payments for noncommercial items and services, does not exceed 30 days unless the circumstances of the procurement action is de- termined to require a longer period for payment and such determination is approved above the level of the contracting officer; ‘‘(C) in the case of payments for items of property or services in an amount less than the amount spec- ified as a small purchase in section 303(g)(2) of the Federal Property and Administrative Services Act of 1949 ([former] 41 U.S.C. 253(g)(2)) [now 41 U.S.C. 3305(b)], does not exceed 15 days after the date of re- ceipt of the invoice, if— ‘‘(i) the contract provides for such ‘fast pay- ment’ terms; ‘‘(ii) title to any property will vest in the Gov- ernment upon delivery (including delivery to a common carrier); and ‘‘(iii) the business concern offers appropriate warranties to furnish property or services con- forming to the requirements of the contract or purchase order, if payment will be due prior to ac- ceptance of the items or services; and ‘‘(D) in the case of progress payments under con- struction contracts, does not exceed 14 days, unless the solicitation specifies a longer period which the contracting officer has determined is required to af- ford the Government a practicable opportunity to adequately inspect the work and to evaluate the adequacy of the contractor’s performance under the contract. ‘‘(2) Requirements to make periodic payments, in the case of a property or service contract which does not prohibit periodic payments for partial deliveries or other contract performance during the contract period, upon— ‘‘(A) submission of an invoice for property deliv- ered or services performed during the contract pe- riod, if an invoice is required by the contract; and ‘‘(B) either— ‘‘(i) acceptance of the property or services by an employee of the contracting agency authorized to accept the property or services; or ‘‘(ii) the making of a determination by such an employee, that the performance covered by the payment conforms to the terms and conditions of the contract. ‘‘(3) A conclusive presumption, exclusively for the purposes of determining when an agency becomes ob- ligated to pay a late payment interest penalty (other than under construction contracts), that the Federal Government has accepted property or services by the 7th day after the date on which, in accordance with the terms and conditions of the contract, the prop- erty is delivered or final performance of the services is completed, unless the solicitation specifies a longer period which is determined by the contracting officer to be required to afford the agency a prac- ticable opportunity to inspect and test the property furnished or evaluate the services performed. ‘‘(4) The limitation that the Federal Government may take a discount offered by a contractor for early payment by the Federal Government only in accord- ance with the time limits specified by the contractor, determined in accordance with the second sentence of section 3904 of title 31, United States Code. ‘‘(5) The requirements of section 3902(c) of title 31, United States Code. ‘‘(6) The requirements of section 3903(a)(6) of title 31, United States Code. ‘‘(7) The requirements of section 3905 of title 31, United States Code. ‘‘(c) The regulations required by subsection (a) of this section shall be published as proposed regulations for public comment as provided in section 22 of the Office of Federal Procurement Policy Act ([former] 41 U.S.C. 418b) [now 41 U.S.C. 1707] within 120 days after the date of the enactment of this Act [Oct. 17, 1988].’’ EDIBLE FRESH OR FROZEN POULTRY MEAT, PERISHABLE POULTRY MEAT FOOD PRODUCTS, FRESH EGGS, AND PERISHABLE EGG PRODUCTS Pub. L. 98–181, title II, § 2002, Nov. 30, 1983, 97 Stat. 1297, to the extent that it provided that the terms ‘‘meat’’ and ‘‘meat food products’’ as used in 31 U.S.C. 3903(2) also included edible fresh or frozen poultry meat, perishable poultry meat food products, fresh eggs and perishable egg products, was stricken by Pub. L. 100–496, § 13(b), Oct. 17, 1988, 102 Stat. 2465, applicable to payments under contracts awarded, contracts renewed, and contract options exercised during or after the first fiscal quarter which begins more than 90 days after Oct. 17, 1988. § 3904. Limitations on discount payments The head of an agency offered a discount by a business concern from an amount due under a contract for property or service in exchange for payment within a specified time may pay the discounted amount only if payment is made within the specified time. For the purpose of the preceding sentence, the specified time shall be determined from the date of the invoice. The