Overview
FAR 32.112 establishes the procedures and authorities for Contracting Officers (CO) to address situations where a subcontractor alleges nonpayment by a prime contractor under non-commercial government contracts. It also grants subcontractors the right to obtain specific information regarding the status of the prime contractor's payment requests and receipts from the Government.
Key Rules
- CO Investigation Authority: Upon a subcontractor's assertion of nonpayment, the CO may determine if the prime contractor is in compliance with payment terms (specifically the Prompt Payment Act for construction or general subcontract terms for other contracts).
- Verification of Certifications: The CO is authorized to verify the accuracy of the prime contractor’s certification that subcontractors have been paid, which typically accompanies a progress payment request.
- Remedial Actions: If a prime contractor is non-compliant, the CO may encourage payment or, if authorized by the contract, reduce or suspend the prime's progress payments.
- Mandatory Action for False Certification: If a prime contractor’s payment certification is determined to be materially inaccurate, the CO must initiate administrative or other remedial actions (such as potential fraud proceedings or suspension/debarment).
- Information Disclosure: Upon request, the CO is required to promptly inform a subcontractor whether the prime contractor has submitted payment requests and whether the Government has issued final payment.
- Exemptions: These provisions do not apply to contracts for commercial products or commercial services, nor do they apply to properly classified national security matters.
Practical Implications
- Transparency for Subcontractors: Subcontractors gain a critical tool to verify if a prime contractor is withholding funds that the Government has already disbursed, helping them determine if a payment delay is due to Government processing or prime contractor delinquency.
- Prime Contractor Risk: Prime contractors must ensure absolute accuracy in their payment certifications; a material inaccuracy regarding subcontractor payments can trigger severe administrative penalties beyond simple contract disputes.
- Limited Government Intervention: While the CO can pressure a prime contractor or withhold progress payments, they generally do not have the authority to directly pay the subcontractor or adjudicate legal disputes between the two parties.