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The latest regulatory notice affecting the Federal Acquisition Regulations (FAR) provides 11 changes to the small business subcontracting plan procedures required of prime contractors on covered prime contracts ($1.5 million or more), the most significant of which is the subcontractor listing and payment protections.

The prime contractor must make demonstrable good faith efforts to use the same small business subcontractors they relied on in preparing and presenting their bid, proposal and small business utilization plan to the contracting agency for approval.

If the prime contractor fails to utilize the relied-upon small business subcontractors, the prime must provide a written explanation to the contracting agency within 30 days of contract completion. Failure to use the named subs can be the basis for future adverse prime contract performance evaluations and responsibility determinations.

The regulations also prohibit prime contractors from attempting to bar small business subcontractors from discussing subcontract plan compliance or prime contract payment problems with the contracting agency directly.

The regulations also require that prime contractors notify the contracting officer in writing if they pay a small business subcontractor a reduced amount or if payment is held more than 90 days after the prime has been paid.

And, any record of payment violations is to be recorded in the prime contractors’ past performance evaluation in the Federal Awardee Past Performance information System (FAPPIS).

MCAA testified in support of these provisions on May 23, 2013 before the House Small Business Committee. Read the testimony here.

Access the new regulations.

The annual round of MCAA local affiliated association summer board meetings continues to bring strong support for the national MCAA Political Action Committee (MCAA-PAC).  All members of MCA of New Jersey’s board of directors just contributed to the MCAA-PAC. The MCA of Connecticut, ARCA-MCA, CPMCA and the MCA Kansas City, among others, also have 100% board participation.  Last year, the Association Executives Council (AEC) also responded with strong participation by local affiliate executives. The MCAA Board of Directors members have contributed generously to the MCAA-PAC. With multiemployer pension reform leading MCAA’s legislative priorities, participation levels have increased markedly.  Lend your support to MCAA advocacy efforts by contributing to the MCAA-PAC by making a contribution today.

Small business subcontracting payment protections supplement those already in place in the Federal Prompt Payment Acts of 1982 and 1988 for construction subcontractors.

Those requirements (Far Part 52.232-5) require the prime contractor to pay the subcontractor within seven days of the prime’s receipt of payment for the subcontractors’ work.

The law permits the prime to impose retainage on the sub and permits withholding for written cause for specific performance deficiency. Interest is payable on late payments after seven days; interest accrues on payments withheld for cause after seven days as well. The payment rules affect all subcontractors on the covered project.

In addition, the Obama Administration has issued supplementary guidance to the Prompt Payment Act (PPA) calling for accelerated payments to small business prime contractors and subcontractors within 15 days of the contracting agency’s receipt of an invoice (the PPA permits agencies to take 30 days from receipt to pay the prime).

Click below to access OMB memos extending the accelerated payment procedures through December 2016.

OMB Memorandum

OMB Memorandum

The Pension Benefit Guaranty Corporation (PBGC) recently issued two reports underscoring its multiemployer plan insurance fund’s precarious position, predicting that complete insolvency is more likely than not by 2025, if not sooner.

The PBGC reports (PBGC MPRA Report, and FY2015 PBGC Projections Report) call for substantial if modulated minimum level premium increases as follows . . . “for the longer-term PBGC solvency scenarios, all four scenarios require a very substantial increase from the current $27 per participant premium rate, ranging from a 363 percent increase to a 552 percent increase.” They acknowledge that higher rate increases raise the likelihood of driving greater numbers of financially challenged plans into insolvency – compounding the need for further PBGC premium increases.

The reports offer some discussion of the Administration’s budget proposal for Congress to allow PBGC to set its own premiums, charge additional new risk-based premiums on multiemployer plans, and to charge an “exit” fee on sponsoring employers (not paid out of plan assets) to shore up PBGC resources.

In all this, there is little discussion on the impact of these measures on the competitiveness of plan sponsoring employers, or the tendency of PBGC premium issues and uncertainty to push sponsoring employers and plans out of the defined benefit system.

On these points, the PBGC MPRA report says: “Given the scale of the necessary premium increases, their design and structure are critical. A well-designed increase may encourage additional contributions, encourage continued participation in plans, and strengthen the multiemployer system. A poorly designed premium increase may encourage employer withdrawals and accelerate plan insolvency with a resulting cost to plan participants and a need for even larger premiums.”

House Education and Workforce Chairman John Kline (R-MN-2)(retiring), the leading proponent of the MCAA and NCCMP-backed composite plan proposal, cited the PBGC fiscal challenge as yet one more instance of the imperative need for Congress to modernize the multiemployer system. MCAA and the entire NCCMP Retirement Security Reform Coalition continue to press for new composite plan design options to be enacted by Congress.

Click here for the PBGC reports.