Comments of a Proposed Amendment to Federal Procurement Regulations

GAO comments were requested on a proposed amendment to Federal Procurement Regulations (FPR). The amendment adds a subpart regarding payment to contractors, including establishing target dates for payments to contractors and the evaluation of prompt payment discounts. GAO has previously recommended that agencies should be required, whenever practical, to include specific payment terms in each contract or purchase order. A GAO survey showed that agencies generally still do not include specific payment due dates in purchase documents. This is creating problems for agency financial managers responsible for paying bills and for contractors since they often cannot agree on when a payment should be made. Thus, GAO supported a proposal to amend the FPR to require specified payment dates. As to a proposal to require agencies to monitor their payment performance and submit monitoring reports to the Federal Procurement Regulations Directorate, GAO felt that the monitoring and reporting should include early payments as well as the timely and late payments specified in the proposed amendment. Early payments are often a greater problem than late payments and are costly to the Government when it has to borrow funds and thus incur interest expense. The practice of considering prompt payment discounts when evaluating offers sometimes results in inequities, and the procedure requiring the application of time value of money principles in the evaluation of offers can be complex and burdensome. However, GAO did not believe that the evaluation of prompt payment discounts should be discontinued completely. Although the procedure of considering prompt payment discounts for evaluating offers may be too burdensome for routine procurement, the procedure should be retained for high dollar value purchases. GAO believed that it would be cost effective to retain the procedure for high dollar value purchases because of the kinds of savings that would be available.