Analysis of Proposed Legislation: H.R. 4709, H.R. 4895, and S. 1131

In 1977, GAO reported that, although the government's bill payment performance was more often good than bad, lengthy delays did occur, and many contractors believed they were not paid promptly. The payment problem was costing the government unnecessary interest payments and causing some contractors to stop offering discounts. The cost to the government could amount to hundreds of millions of dollars annually. H.R. 4895 and 4709, and S. 1131 are proposed to help alleviate the payment problem. The bills would require agencies to pay interest on certain late payments and would protect business concerns experiencing long delays in receiving payment. The bills provide for congressional oversight by requiring agencies to file annual reports. H.R. 4895, which applies to small businesses, also has a requirement to have the Department of the Treasury make payments not made by the agency on small business contracts within 6 months after all terms of the contract have been met. This would improve cash flow, which is vital to small businesses. GAO commented that: (1) under H.R. 4895, rather than using fulfillment of the contract terms as the reference point for late payments, the receipt of a proper invoice from the contractor might be used, and clarifying language should be provided to specify that bills are to be paid when due and that 6 months is not a normal payment timeframe; (2) under S. 1131, GAO supports the section calling for the government to take early disounts only when payment is made within the specified time for earning the discount; (3) H.R. 4895 and S. 1131 will generate significant administrative burdens and, therefore, should provide for the payment of interest within some designated period of time after payment of the underlying amount; (4) H.R. 4895 and H.R. 4709 should use the same interest for all late payments; (5) under H.R. 4895 and S. 1131, the government's interest should be limited to avoid excessive accumulation of interest amounts; and (6) neither H.R. 4895 nor S.1131 contain provisions for notifying the contractor of a defect in the invoice.