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Will DoD’s Payment Plan Changes be Implemented by Jan 2019?

About a month ago the DoD (Department of Defense) proposed to enforce a rule through the Defense Acquisition Regulations System which would make changes to payments for ongoing contracts. This would make payments to government contractors linked to performance and delivery events rather than timeline-based progress, at least for contractors that aren’t small businesses.

Specifically, for DoD solicitations 2019 and onward, this would trim down the baseline progress-payment rate from 80% to 50% for contractors that aren’t small businesses. The small business payments would remain the usual 90%. DOD-Proposed-Payment-Plan

It appears the proposed rule would apply mostly to fixed-price contracts, which are common in more complex information technology contracts based on new or innovative technology, as well as new platform development and new military technology.

Some analysts believe the new plan will be difficult to implement by January 2019 as planned, and a reduced likelihood that the new rules would affect cost-plus or time-and-materials contracts. In addition, there is pushback from interests such as the Aerospace Industries Association, the Professional Services Council, and the National Defense Industrial Association. These entities have all made releases that expressed their disapproval to the proposal, mostly centered around disruption in cash flow to contractors.

You can read more about the proposed rule at the Federal Register. The DoD is accepting feedback from contractors until October 23, 2018.

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