The government is generally required to pay you for work on a government contract within 30 days, and it usually requires the use of electronic fund transfers.
After you have delivered, and the government has accepted, the contracted product or service, all you have to do is submit a proper invoice to the billing office specified in your contract and you're going to get paid! Under law, the government is required to pay you within 30 days.
Warning
For all of the conditions and requirements for payment, refer to Federal Acquisition Regulation (FAR) 52.232-25.
Prompt payment and a proper invoice
The Prompt Payment Act, which was enacted in the mid-'80s, requires the government to pay a small business within 30 days after receipt of the invoice, if the business completes its end of the contract. However, as you might expect, there is an important catch. The clock on this Act starts only if your invoice, as received, is deemed "proper" under the law.
If your invoice is not deemed "proper," it will get sent back to you within seven days after the billing office received it, with a statement of the reasons why it is not considered proper. You will then have to correct it, resubmit it to the government, and restart the 30-day wait. Therefore, "prompt payment" by the government is directly tied to the "properness" of your invoice.
To make sure that your invoice is correct and proper the first time around, include the following items:
- The name and address of your company.
- Invoice date. You are encouraged to date invoices as close as possible to the date of mailing or transmitting the invoice.
- Contract number or other authorization for supplies delivered or services performed. Be sure to also include the order number and contract line item number.
- Description, quantity, unit of measure, unit price and extended price of supplies delivered or services performed.
- Shipping and payment terms, such as shipment number and date of shipment, prompt payment discount terms, etc. Bill of lading number and weight of shipment will be shown for shipments on government bills of lading.
- The name and address of the person at your company to whom payment is to be sent. This must be the same person specified in the contract or in a proper notice of assignment.
- Name, title, phone number and mailing address of the person to be notified in the event of a defective invoice.
- Any other information or documentation required by the contract, such as evidence of shipment.
- While not required, you are strongly encouraged to assign an identification number to each invoice.
In addition, your invoice may be deemed not proper, for purposes of prompt payment, if the information you furnished in the CCR (Central Contractor Registration) database regarding EFT (electronic funds transfer) is incorrect or not current.
Rules regarding invoices and interest government contract payments
As we stated previously, the law requires the government to pay a small business within 30 days after receipt of a proper invoice. Payment is considered as being made on the day a check is dated or on the date of an electronic funds transfer. An interest penalty will automatically be paid to the contractor if payment is not made by the due date and if the following conditions are met:
- A proper invoice was received by the designated billing office.
- A receiving report or other government documentation authorizing payment was processed, and there was no disagreement over quantity, quality or compliance by the contractor with any contract term or condition.
- The amount due was not subject to further contract settlement actions between the government and the contractor.
Government invoice form
You may use your own invoice to bill the government, but you must make sure that it meets all of the requirements previously discussed. If it doesn't, you will only slow up payment. Sometimes you might find it easier to use a government form. One common form that is used with military contracts is the DD Form 250, Material Inspection and Receiving Report.
The DD Form 250 is basically a material inspection and receiving report (MIRR) that can be used by the government to document contract compliance and by the contractor to submit an invoice. The contractor is responsible for preparing the MIRR, except for entries that an authorized government representative is required to complete. You should contact the office that is administering your contract to get specific help with this form. The appropriate office is identified in the contract. A handy guide for contractors is available at https://www.dfas.mil/, in the "Commercial Pay" section.
Tools to use
Among the Tools & Forms is DD Form 250. It is an Adobe PDF (.pdf) file.
Specifically, this multi-purpose report is used for the following:
- Evidence of government contract quality assurance at origin or destination
- Evidence of acceptance at origin or destination
- Packing lists
- Receiving
- Shipping
- Contractor invoice
- Commercial invoice support
Work smart
The DD Form 250 applies to supplies or services acquired by the Department of Defense when the clause at DFARS 252.246-7000, Material Inspection and Receiving Report, is included in the contract.
Subcontractors do not use the DD Form 250 for shipments to their primes unless specified in their subcontract.
Government contractors paid via EFT
It is now government policy to pay all contractors by EFT, electronic funds transfer, whenever feasible. In making EFT payments, the government uses the information contained in the Central Contractor Registration (CCR) database. To be paid, you must be in CCR.
This policy underscores the need to get your company registered in the CCR database, and to make sure that the information that you have entered is correct and current. If the EFT information in the CCR database is incorrect, then the government may suspend payment until correct information is entered. Remember that if your EFT information changes, you are responsible for seeing that the information in the CCR database is updated.
If you have more than one remittance address and/or EFT information set in the CCR database, you must remember to notify the government of the payment receiving point applicable to the contract you are working on. Otherwise, the government will automatically make payment to the first address.
If an incomplete or erroneous transfer occurs because the government used a contractor's EFT information incorrectly, the government is responsible for making a correct payment, paying any prompt payment penalty and recovering any erroneously directed funds.
The government has two mechanisms for making EFT payment: the Automated Clearing House (ACH) network or the Fedwire Transfer System. If the government is unable to release one or more payments by EFT, you will be paid by check or some other mutually agreeable method of payment, or you may request the government to extend the payment due date until such time as the government can make payment by EFT.
Under certain specific circumstances, payment by electronic funds transfer may be made through other than the CCR database. In this case, the contractor will be required to provide the EFT information directly to the office(s) and by the date designated in the contract. And, again, if the EFT information changes, the contractor is responsible for providing the updated information to the designated office(s).
The EFT information that the contractor must provide to the designated office(s) includes:
- The contract number (or other procurement identification number).
- The contractor's name and remittance address, as stated in the contract(s).
- The signature (manual or electronic, as appropriate), title, and telephone number of the contractor official authorized to provide this information.
- The name, address, and 9-digit Routing Transit Number of the contractor's financial agent.
- The contractor's account number and the type of account (checking, saving or lockbox).
- If applicable, the Fedwire Transfer System telegraphic abbreviation of the contractor's financial agent.
Warning
Remember, all government requirements pertaining to electronic funds transfer are spelled out in the Federal Acquisition Regulation (FAR 32.1110 and FAR 52.232-33 and -34). Any language that you will see in a bid or contract related to EFT consists of clauses extracted from these sections.
Note that the government is required to protect against improper disclosure of all contractors' EFT information.
EFT includes government credit card
Under recent legislative requirements, the term "electronic funds transfer" now includes a government-wide commercial purchase card. Under the law, the government purchase may be used as a means to meet the requirement to pay by EFT.
A government-wide commercial purchase card is similar in nature to a commercial credit card and is used by the government to make financing and delivery payments for supplies and services. A government purchase card charge authorizes the third party (e.g., financial institution) that issued the purchase card to make immediate payment to the contractor.
The contract will identify the third party and the particular purchase card to be used, but will not include the purchase card account number. The purchase card account number is provided separately to the contractor.
The provisions related to EFT payment will be specified in your contract. Complete details on electronic funds transfer are included in FAR 32.1110 and FAR 52.232-33 and -34.
