US Federal Government Contracting and Payment Options

Introduction

The United States federal government Contracting is a strategy that is used to provide equal access to government procurements to large and small businesses. The Federal Acquisition Regulation (FAR) system governs state procurement of goods and services. It stipulates the procedures for contracting together with the payment methods for such contracts. Rules and procedures that pertain to acquisition of goods and services are contained in the Federal Acquisition Regulation. This essay provides an overview of the US federal government contracting and payment options by examining the Prompt Payment Act, FAR payment options, the Buy American Act, and the Truth in Negotiations Act (TINA).

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Payment Options

Payments under Fixed-Price Research and Development Contracts

This payment option requires the government to pay contractors after receiving the accurate invoices or vouchers for delivered works. Amounts that are payable to the contractors include stipulated prices that are set for the contract based on the contract provisions. Payments that are under fixed-price research and development contracts are completed after the contractors accomplish assigned contracts. Payments under this option do not involve progress disbursements.

Lester and Everett (2013) reveal that payment can be made for any portion of work that has been done adequately. Prices for partial work are stated separately in the contract. Nevertheless, this option is subject to certain deductions that are included in the final payments. As a result, contractors may not receive full contract prices depending on the extent of contract infringement.

Payments under Fixed-Price Construction Contracts

Under this option of payment, the government pays the contractor based on the price lists that are stipulated by the contract agreement. Feldman (2013) reveals that progress payments are frequently made as work proceeds. However, progress payments for the contract are made after the contracting officer verifies the degree to which the contractor meets contract standards. This option of payment is based on duration of the contract.

As a result, contractors have to deliver their work first before final payment is done (Feldman, 2013). Consequently, it does not favor small business contractors who have insufficient capital to invest in large projects. However, progress payments are made periodically after the contracting officer approves their work. In case of contractors deliver unsatisfactory work under this payment option, they are entitled to refund any earlier disbursements to the government.

Payments under Personal Services Contracts

Payments under Personal Services Contracts require the government to pay for services that are rendered by contractors after receiving accurate invoices or time statements at the right time as per contract provisions. Furthermore, this option covers various responsibilities such as payment for transport costs and daily costs that are incurred by the contractor owing to mobility. Feldman (2013) reveals that travel expenses are rated according to Federal Travel Regulations (TFR).

This payment option is only meant for services that have been accomplished. However, it does not involve periodic payments that are available in the above-mentioned payment options. However, the fact that this payment option covers travel expenses is an advantage to the contractor. In addition, payments under this action are not subject to deductions (Lester & Everett, 2013).

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Prompt Payment Act

Interest Penalties

The Prompt Payment Act provides contracting parties with information about interest penalties. Contractors incur interest penalties upon breach of contract. However, before a penalty is made based on late payment, various conditions have to be fulfilled. First, payment to the contractor has to be accomplished after the due date. In addition, there must be proof that an appropriate invoice was delivered to the contract officer in charge of payment. Lastly, the contract officer must approve that there was an earlier authorization of payment as per the contract requirements (Renner, 1991).

Interest penalties can also occur when the government inappropriately takes a prompt payment discount that is calculated based on the discount percentage. In addition, the designated office is liable to pay interest penalties for defaulting to pay interest. The element is consummate and does not require amendment.

Payment Due Dates

The Prompt Payment Act provides guidelines and procedures for determining payment due dates according to different types of contracts. It also outlines payment specifications for all forms of purchases that pertain to government contracts. For example, if the payment due date for an architect engineer contract is the 30th day after the designated office receives the accurate invoice, then the engineer is entitled to receive payment at the 30th day after approval of the contractual work (Renner, 1991). The Act clearly outlines payment procedures and consequences that can arise from breach of contract (Renner, 1991). Scheffler (2013) reveals that many contractors are satisfied with this element provided the government meets its conditions. Therefore, this Act does not need amendment.

Payments Documentation and Process

The Act outlines specifications for the right documents that necessitate a need for payment. For example, it provides the contractor with proper invoice formats that outline the name of address, name of contractor, invoice date, detailed description of service or product, contract number, shipping, and terms of payment. Just as the invoice, the Act also outlines the contents of all other documents that are used in the contract. Nonetheless, the Congress needs to amend this element of the Act since it does not provide the contractor with provisions to end the contract in case the government fails to honor payment within the stipulated period (Scheffler, 2003).

Limiting Government Cost

The Truth in Negotiations Act (TINA) requires contractors and subcontractors to submit accurate, current, and complete cost and price data prior to commencement of a contract. Contractors must provide full and fair disclosure of information at the time of price agreement. Under these terms, the government is assured of entering into fair contractual negotiations without defective price information. Defective pricing occurs due to provision of uncertified prices and cost information by the contractor. For defective pricing to occur, the contractor fails to disclose accurate, complete, and current price information. A post-ward audit program is done to identify defective pricing. Government auditors compare the submitted details against certified cost and price data that are availed to the contractor prior to validation of the contract.

However, for the post ward audit to determine defective pricing, government auditors must establish availability of accurate, complete, and current price information prior to validation of the contract. According to Calhoon and Sybert (2012), the TINA provides remedies for price reduction together with accompanying penalties and interests upon realization of defective pricing. Remedies of defective pricing take effect immediately after the contractor provides defective cost pricing data and the government’s authorization letter.

The aim of the TINA is to ensure that government contracts are fair. It ensures that the government does not pay too high prices for contracts. The TINA regulations cover prime contracts, subcontracts, and contract modifications. In this case accurate, complete, and timely price and cost information is required by the government. Calhoon and Sybert (2012) reveal that this Act enables the government to abate costs that are incurred due unnecessary loopholes.

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According to the TINA, cost and pricing data refer to any facts that a buyer expects to affect pricing prior to validation of the contract (Calhoon & Sybert, 2012). The TINA ensures proper assessment of contractual information in an attempt to document accurate, complete, and current records. As a result, it prevents contractors from ripping off the government by charging exorbitant prices for contracts; hence, government costs are minimized.

Suggested Revisions to the Truth in Negotiations Act (TINA)

In spite of the aforementioned precautions to limited government cost, there is a need to device various means to lessen government’s procurement of technical data and computer software. Although the Federal Acquisition Streamlining Act (FASA) of 1994 established various hierarchies for assessment of price, it is important for the government to pass a bill of amendment to improve certain provisions in the Act.

For instance, assessment of price is mainly based on historical data and market price catalogue. The former describes the use of historical data based on available information on any past dealing while the latter describes determination of price reasonableness using market prices for commercial products. According to Scheffler (2003), emergence of technical data and robust computer software has led to increased government costs. As a result, there is a need to widen the scope of price assessment based on other factors such as obsoleteness of technology to avoid often and unnecessary shifting of technical data whenever the government requires upgrades.

There is also a need for continual monitoring of government systems by selected professionals to reduce costs that are incurred while making new acquisitions of hardware and software upgrades through contractual basis (Scheffler, 2003). In this manner, it will be easy for the government to validate procurement processes that are based on fairness rather than exhaustiveness since all the necessary requirements for price assessment will be determined prior to negotiation of price with contractors.

Secondly, there is a need to create exceptions for commercial products that are based on catalogue or market prices to ensure exclusion of cost and pricing data that are provided by commercial suppliers from post-contract audits. In this case, commercial suppliers who do not provide their cost and pricing data will not be subjected to post-ward audits. Procurement of technical data and computer software will depend on established catalogue prices. In this case, it will be deemed futile whenever contractors present further provisions of cost and pricing data. Therefore, predetermined prices will not require adjustments (Scheffler, 2003). Commercial products whose price can easily be determined based on prevailing market prices do not require lengthy procedures.

Exceptions of the Buy American Act

Non-availability Exception

The non-availability exception of the Buy American Act covers purchase of reasonably insufficient commercial quantities. Nonetheless, products and services whose availability in the United States is limited are not subject to the Buy American Act. As a result, such products have to be purchased from other countries (Luckey, 2012).

In justification of the non-availability exception from the Buy American Act, it is obvious that accessing of material and products that are not adequately available within the US boundaries can only be possible foreign purchasing. Although the Buy American Act restricts purchase of items from other countries, the non-availability exception is justifiable because it enables citizens to gain access to a wide range of products that are unavailable in their own country (Luckey, 2012).

Public Interest Exception

Certain exceptions of the Buy America Act are based on specified trade agreements. Foreign government agreements and head of agencies approve public interest. However, the Buy American Act has procedures and guidelines that do not match with Acts of other countries. As a result, the Act does not epitomize concern of the Americans. The Act does not apply in circumstances where product purchasing is influenced by public interest and country of origin. In such cases, the public (including head of agencies and foreign government agreements) controls and regulates accessibility of products. Therefore, public opinion supersedes a single entity; hence, public interest is put into consideration first (Luckey, 2012).

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Conclusion

From the above description and analysis of different Foreign Agency Regulations, it is evident that the federal government has set up clear procurement stipulations to ensure equal access to state procurement. In addition, there are well-outlined guidelines and procedures that control payments such as the Prompt Payment Act. The Truth in Negotiations Act (TINA) that aims to protect the government from excessive payments of contracts plays a critical role in minimizing government costs. The Buy American Act exceptions also play a vital role of easing government procurement procedures for the public rather than just fulfillment of the requirements of the Act. However, various amendments of the Acts need to be executed to improve the overall government procurement processes. There is also a need to enact regulations that match with international trade requirements.

Reference List

Calhoon, B., & Sybert, J. (2012). Truth in Negotiations Act (TINA) Essentials. Web.

Feldman, S. W. (2013). Government contract guidebook. Eagan, MN: Thomson Reuters, Westlaw.

Lester, W., & Everett, B. (2013). Federal Acquisition Regulation and Acquisition Workforce Training: Elements and Analyses. New York, NY: Nova Science Publishers, Inc.

Luckey, J. (2012). Domestic Content Legislation: The Buy American Act and Complementary Little Buy American Provisions. Web.

Renner, M. (1991). Prompt Payment Act: An Interest(ing) Remedy for Government Late Payment. Public Contract Law Journal, 21(2), 177-278.

Scheffler, M. (2003). Protecting Owners in Private Construction Projects from Unfavorable Provisions in State Prompt Payment Acts. Real Estate Finance (Aspen Publishers Inc.), 20(4), 21-5.

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StudyCorgi. (2020, December 30). US Federal Government Contracting and Payment Options. Retrieved from https://studycorgi.com/us-federal-government-contracting-and-payment-options/

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