6 minute read
American DBE Magazine
New Infrastructure Investment and Jobs Act Adds Prompt Pay Requirements – Impacting Public Sector Organizations, Prime Contractors and Subcontractors Alike
Increased Funding Opportunities Under the Infrastructure Investment and Jobs Act
To the relief of many, a bi-partisan majority in Congress recently enacted legislation to fund a massive investment in the nation’s infrastructure – including roads and bridges, public transit, rail, electric grids, and water systems. The highest proportion of the Infrastructure Investment and Jobs Act (the “Act”) funding falls within the oversight of the United States Department of Transportation (USDOT). As a result of the USDOT’s longstanding regulations requiring the utilization of Disadvantaged Business Enterprises (DBEs) on USDOT-funded projects, small and diverse contractors around the country are preparing for an increase in contracting opportunities.
At the same time, state departments of transportation are preparing for an influx of funds related to the Act. Likewise, many counties and cities that have seen only limited and sporadic direct funding from the USDOT over the past 25 years are ramping up their own grant applications as they reach out for direct grant funds from the Federal Aviation Administration (FAA) and the Federal Transit Administration (FTA) to address air, bus and rail infrastructure in need of updating.
The Act and Its Impact on the DBE Program
Almost lost amid this flurry of federally funded construction activities are important Congressional findings concerning the DBE Program. The Act makes two key findings related to the DBE Program:
1. Congress specifically reaffirmed the need for the continuation of the DBE Program in federal transportation contracting. Despite past DBE Program successes, Congress found that discrimination and related barriers continue to pose significant obstacles to women- and minority-owned businesses in federal transportation markets.
2. In the Act, Congress also placed a new and special emphasis on the concept of “Prompt Pay” as it pertains specifically to DBE subcontractors. The Act seeks to ensure the protection of DBEs by requiring guarantees that subcontractors will receive payments on their invoices timely and promptly.
The focus of this article is the second key finding in the Act related to guarantees of Prompt Pay for DBE subcontractors. But prior to exploring the Act’s effects in this regard, let’s take a brief tour of the concept of Prompt Pay as a whole.
What is Prompt Pay?
Prompt pay is not a new concept, as the Prompt Payment Act was first enacted in 1982 and applied to any construction contract funded by any agency of the federal government. See 39 U.S.C. § 3901 et seq. The intent of the Prompt Pay concept was to protect all tiers of contractors, subcontractors and suppliers from late payments on federally funded construction projects. The law did this by providing a timeline of when payments must be released to the prime contractor, subcontractors and suppliers. In a nutshell, parties must pay all applicable contractors within 30 days of receipt of each payment. Specific regulations also apply to retainage, work completion and means of enforcement.
Importantly, the federal Prompt Pay concepts were later incorporated into the transportation regulations for DBE programs under Title 49. See 49 C.F.R. § 26.29. The transportation regulations require that a government agency’s DBE Program also must include appropriate means to enforce the prompt pay requirements. See 49 C.F.R. § 26.29(f).
The 2021 Act’s Emphasis on Prompt Pay for DBE Subcontractors
With that background, let’s now turn to the unique Prompt Pay requirements arising out of the new 2021 Act. Interestingly, the Act does not contain Prompt Pay changes for all contractors. Instead, the Act focuses its efforts on one specific group of contractors – DBE subcontractors.
The Act contains a “sense of Congress” provision to introduce the concept of Prompt Payment for DBE subcontractors. A “sense of Congress” provision is a formal Congressional expression of opinion on matters of national interest. The specific provision states:
In a display of clarity, Congress expressed its opinion that not only should specific steps be taken to guarantee that DBE subcontractors are receiving Prompt Pay, but that such steps should include the ability for the USDOT to track and keep records of prompt payment complaints – and that such complaints should be made publicly available. Notably, the Act expresses no opinions on how such tracking and record keeping should be accomplished.
Technology Answers the Call
At first glance, the requirements of the Act appear out of touch. Tracking and surfacing findings related to 1-10 tiers of contractors on public works contracts can oftentimes involve hundreds of contractors with whom the contracting government agency has no information or connection.
Fortunately, the means to meet Congressional directives to the transportation contracting ecosystem do, in fact, exist in the market. Software systems such as the B2Gnow system and others in this class have been built specifically to track DBE participation and utilization on construction contracts. As a result, such software systems have the added functionality that permits not only DBE subcontractors, but all subcontractors on such projects, to report payment details and dates through multiple tiers of contracting, invoicing, and payment.
Supplier diversity compliance technologies such as B2Gnow allow transparency in determining which primes and subcontractors are dilatory in their payment practices to DBE subcontractors utilized on public contracts. In systems like B2Gnow, DBE subcontractors provide quick “audit” feedback on all invoices submitted on public works contracts. Through these systems, DBE subcontractors report back details such as: confirmation of the invoice amount, confirmation of receipt of payment, confirmation of date of payment, confirmation of paid-to-date, and even confirmation of retainage. System reports provide the summary roll-up data that Congress desires to comply with the new requirements of the Act.
Conclusions
Increased opportunities for funding at all government levels will be available through the Act – and these funding opportunities will filter down to contractors at all tiers. At the same time, new Congressional intent and directives are clear with respect to Prompt Pay requirements for DBE subcontractors. Is your organization ready to meet these requirements and provide the necessary reporting?
About the author: Ryan Kelly serves as the Chief Revenue Officer of B2Gnow (www. b2gnow.com), the leading supplier diversity management software in North America. He has worked with several compliance software companies over the past 20 years in executive leadership roles. Prior to that, Mr. Kelly was a practicing transportation regulatory attorney and served as an executive committee member for the Arizona Trucking Association.
