The Federal Government's Bill Payment Performance Is Good but Should Be Better

FGMSD-78-16: Published: Feb 24, 1978. Publicly Released: Feb 24, 1978.

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Many companies doing business with the federal government have complained that its agencies are slow in paying their bills. To determine how well the government does as a bill payer, a sample of 3,263 contractor invoices totaling $34.1 million was analyzed as were responses from 590 contractors concerning the payment performance of federal agencies.

About 61 percent of the government's bills and 81 percent of the dollar total are paid within 30 days, the accepted period in commercial practice. Nearly 85 percent of the bills and 98 percent of the dollar total are paid within 60 days. When adjusted for delays caused by contractors and other causes not attributable to federal agencies, 70 percent of the bills and 83 percent of the dollar amount were paid on time. Delays in making payments harm the contractors' cashflow and reduce the government's opportunity to benefit from cash discounts. Delayed payments may also cause contractors to stop doing business with federal agencies, although only 16 percent of the companies questioned indicated that they were dissatisfied with the government's payments. Invoices involving recurring payments, such as utilities and telephone and data processing services were twice as likely to be late as invoices for one-time procurements, and invoices for large amounts were generally paid faster than small-dollar invoices.

Recommendation for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Director of the Office of Management and Budget together with the Departments of the Treasury and Defense and the General Services Administration, should: (1) require federal agencies, when practical, to include payment terms in each contract and purchase order; (2) develop due date standards for major types of goods and services; (3) explore the extended use by both civil and military agencies of procedures for paying bills without a receiving report; (4) authorize the use of imprest funds to pay small bills on delivery; (5) decide how close to the due date agencies should schedule bills for payment; and (6) continue to monitor payment performance, making sure that agencies are adopting procedures to pay bills on time and evaluating the need for further improvements.

    Agency Affected:

 

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