In light of the US$46 billion in automatic defense spending cuts, now in effect as of March 1, 2013, the Department of Defense (DoD) announced that it would be slowing payments in an attempt to increase its short-term cash availability. See, e.g., Marcus Weisgerber, Pentagon to Slow Contractor Payments to Boost Cash Reserve, Federal Times, Feb. 25, 2013. These spending cuts are part of the US$1.2 billion reductions to federal spending known as “sequestration,” and comprise about 9% of the Pentagon’s budget. Compounding the money crunch is that the Pentagon is currently operating under a continuing resolution that leaves operations and maintenance accounts frozen at 2012 levels, thereby creating an US$11 billion shortfall from planned 2013 spending. This resolution is set to expire on March 27, and the prospect that Congress may extend the resolution through September 30 could result in further spending adjustments. As a result, the DoD announced last week that it would slow contractor payments as part of the curtailment of its QuickPay initiative, a process whereby DoD budget officials ensure that the bills it receives are accurate and consistent with the correlating contract. In 2011, the DoD began using QuickPay to accelerate payment to small business contractors, with the DoD extending QuickPay to prime contractors in July 2012. However, in light of the DoD’s cash problems, the DoD announced that the QuickPay initiative would be available for only eligible small businesses.
Contractors that are affected by the DoD’s plan to slow payments should be aware of their rights under the Prompt Payment Act (PPA). Specifically, the PPA requires the government to pay proper invoices within certain time periods and to pay interest penalties when payments are late. 31 U.S.C. §§ 3901-07 (2012). Therefore, should the DoD’s plan result in a delay of payment of a proper invoice beyond the period called for under the PPA, then a contractor may be entitled to obtain interest on this delayed payment.