Leisa S. Bodway Director, Acquisition Business & Services Group CMS Office of Acquisition & Grants Management Thursday, January 8, 2015

2 What kind of Agency is CMS and what do we do? CMS is a Civilian Agency under the Department of Health & Human Services (HHS) CMS is the Agency that administers: Medicare Medicaid Children’s Health Insurance Program Affordable Care Act (Obamacare) – Health Insurance Marketplace CMS insures 100 million people... We're here to offer all Americans access to health insurance options they can afford - Options that protect Americans from financial hardship and give quality coverage. When Americans have good quality coverage, they're able to make the most of our health care system. CENTERS FOR MEDICARE & MEDICAID SERVICES (CMS)

3 U.S. Census information from 2008 identified a total of 27,281,452 businesses in the US. The number of businesses operated by proprietors with no employees is 21,351,320. Add to this the number of businesses having fewer than 500 employees and the number of small businesses comes to 27,262,983. Subtract 27,262,983 from the total number of businesses identified by the census (27,281,452) and you get the number of businesses with more than 500 employees: 18,586 Large Businesses It turns out that calculating all businesses up to 1,500 employees makes no substantial difference in the percentage calculations. Small Businesses = 99 % of all businesses in the United States. WHY ARE WE SO INTERESTED IN ACCELERATING PAYMENTS TO SBS?

Scope of subpart. prompt payment regulations This subpart prescribes policies, procedures, and clauses for implementing Office of Management and Budget (OMB) prompt payment regulations at 5 CFR Part PROMPT PAYMENT ACT

WHAT IS AN ACCELERATED PAYMENT? 5 CFR § Definitions. (a) Accelerated payment means a payment made prior to the due date (see discussion in §1315.5).

6 5 CFR CHAPTER III: OFFICE OF MANAGEMENT AND BUDGET

ACCELERATED PAYMENT REQUIREMENTS Established “the Executive Branch policy that, to the full extent permitted by law, agencies shall make their payments to small business contractors as soon as practicable, with the goal of making payments within 15 days” or receipt of relevant documents. OMB Memorandum 11-31, Accelerating Payments to Small Business for Goods and Services (9/14/11).

8 ADDITIONAL ACCELERATED PAYMENTS FOR LARGE BUSINESSES OMB Memorandum M-12-16, Providing Prompt Payment to Small Business Subcontractors (July 11, 2012) Establishes the Administration's initiative to accelerate Federal payments to prime contractors, so that prime contractors can, in turn, expedite payments to their small business subcontractors.

9 FAR Responsibilities (a) Agency heads— (1) Must establish the policies and procedures necessary to implement this subpart; (2)May prescribe additional standards for establishing invoice payment due dates (see ) necessary to support agency programs and foster prompt payment to contractors; (3) May adopt different payment procedures in order to accommodate unique circumstances, provided that such procedures are consistent with the policies in this subpart; (4) Must inform contractors of points of contact within their cognizant payment offices to enable contractors to obtain status of invoices; and (5) May authorize the use of the accelerated payment methods specified at 5 CFR (See Slides 2 & 3) FAR Provision Prompt Payment

10 FAR PROVISION – PROVIDING ACCELERATED PAYMENTS TO SMALL BUSINESS SUBCONTRACTORS.

Making payments. (a) General. The Government will not make invoice payments earlier than 7 days prior to the due dates specified in the contract unless the agency head determines— (1)To make earlier payment on a case-by-case basis; or That the use of accelerated payment methods are necessary (see (a)(5)). (2) That the use of accelerated payment methods are necessary (see (a)(5)). FAR 32.9 PROMPT PAYMENTS FAR Agencies may pay SBs as quickly as possible…

Providing Accelerated Payments to Small Business Subcontractors. As prescribed in , insert the following clause: Providing Accelerated Payments to Small Business Subcontractors (Dec 2013) (a)Upon receipt of accelerated payments from the Government, the Contractor shall make accelerated payments to its small business subcontractors under this contract, to the maximum extent practicable and prior to when such payment is otherwise required under the applicable contract or subcontract, after receipt of a proper invoice and all other required documentation from the small business subcontractor. (b) The acceleration of payments under this clause does not provide any new rights under the Prompt Payment Act. (c) Include the substance of this clause, including this paragraph (c), in all subcontracts with small business concerns, including subcontracts with small business concerns for the acquisition of commercial items. FAR PROVIDING ACCELERATED PAYMENTS TO SMALL BUSINESS SUBCONTRACTORS

13 CMS Invoice/Voucher Payment Policy Establishes processes for review and payment of invoices/vouchers; Establishes a process for 15-day accelerated payments to Small Businesses (SB) in accordance with (IAW) OMB Memorandum 11-31; and, Establishes a process for accelerated payments to Large Businesses (LB) with SB subcontractors IAW OMB Memorandum M WHAT MEASURES DID CMS TAKE TO ENSURE THAT PRIME CONTRACTORS PAY SMALL BUSINESS SUBCONTRACTORS ON AN ACCELERATED TIMETABLE?

14 INVOICE/VOUCHER REVIEW/APPROVAL PROCESSING TIME FRAMES Contract Payment Category Types ($ = Total Contract Value) Days = Calendar Days TYPE ITYPE IITYPE IIITYPE IV Type IAType IB Type IIIAType IIIB TEAM MEMBER All Small Businesses (No $ Limit) All QIOs (No $ Limit) All Other Contracts (No $ Limit) Simplified Acquisitions $3K to $150K (Small Businesses) Simplified Acquisitions $3K to $6.5M (Large Businesses) All Large Business Prime Contracts w/ Small Business SubCtrs OFM7 Days 14 Days7 Days22 Days12 Days COR4 Days0 Days8 Days CO/KO/CS4 Days8 Days N/A 8 Days Total Processing Time 15 Days Not-to- Exceed 30 Days 15 Days Not-to- Exceed 30 Days30 Days 15 Days Not-to- Exceed 30 Days30 Days 28 Days Not-to-Exceed 30 Days ALL CMS CONTRACTOR INVOICES AND VOUCHERS SHALL BE PAID IN ACCORDANCE WITH THE TIME FRAMES ESTABLISHED IN THE CHART BELOW:

15 Contract Provisions/Clauses: All solicitation and/or contracts shall incorporate, as appropriate, Agency specific provisions as follows: FFP Invoice Payment Provisions; Cost Reimbursement Voucher Payment Provisions; OR Time & Materials/Labor Hour Payment Provisions When the contract is awarded, the Category Type must be identified in Section G of every contract in the invoice/voucher payment clause. HOW DO WE COMMUNICATE THE CONTRACT PAYMENT CATEGORY TYPES?

16 G.x: PAYMENTS – VOUCHERS (Cost Reimbursement Contracts – MAR 2014) a.GENERAL: The Contractor may submit to the Government a voucher or Standard Form 1034, Public Voucher for Purchases and Services Other Than Personal, for payment in accordance with the instructions below. b.METHOD OF PAYMENT: CMS shall only make an electronic payment for reimbursement of voucher submissions in accordance with FAR , Payments by Electronic Funds Transfer – System for Award Management. In order to receive payments, the contractor shall register in the System for Award Management (SAM) database, in accordance with FAR , System for Award Management. Failure to register in SAM may prohibit CMS from making payments to your organization. WHAT DOES A PAYMENT PROVISION LOOK LIKE?

17 G.x: PAYMENTS – VOUCHERS (Cost Reimbursement Contracts – MAR 2014) c. CONTENT OF VOUCHER - Vouchers shall include, at a minimum: – Contractor’s name and address – Contractor’s Tax Identification Number (TIN) – Contractor’s DUNS Number – Voucher Number to include the designation of the Contract Payment Category Type as follows: Contract Payment Category Type I, II, III, IV (TBD upon award) WHAT DOES A PAYMENT PROVISION LOOK LIKE? (Cont)

18 INVOICE/VOUCHER REVIEW/APPROVAL PROCESSING TIME FRAMES Contract Payment Category Types ($ = Total Contract Value) Days = Calendar Days TYPE ITYPE IITYPE IIITYPE IV Type IAType IB Type IIIAType IIIB TEAM MEMBER All Small Businesses (No $ Limit) All QIOs (No $ Limit) All Other Contracts (No $ Limit) Simplified Acquisitions $3K to $150K (Small Businesses) Simplified Acquisitions $3K to $6.5M (Large Businesses) All Large Business Prime Contracts w/ Small Business SubCtrs Total Processing Time 15 Days Not-to- Exceed 30 Days 15 Days Not-to- Exceed 30 Days30 Days 15 Days Not-to- Exceed 30 Days30 Days 28 Days Not-to- Exceed 30 Days WHAT DOES A PAYMENT PROVISION LOOK LIKE? (Cont)

19 SF 1034 PUBLIC VOUCHER FOR PURCHASES AND SERVICES OTHER THAN PERSONAL #10 – Pmt Cat. IV XYZ Company 123 Contractor Blvd. Anywhere, USA

20 G.x: PAYMENTS – VOUCHERS (Cost Reimbursement Contracts – MAR 2014) Contract and Order Number, as applicable; Contract line item number and/or Subcontract line item number; Description, quantity, unit of measure, unit price and extended price/cost of the items actually delivered or services rendered, i.e., Labor category and labor hours x labor rate = total direct labor dollars, subcontractor costs, travel, other direct costs, overhead rate(s), etc.; Shipping and payment terms; Terms of any discount for prompt payment offered; Other substantiating documentation or information as required by the contract; Name, title, phone number and complete mailing address of responsible official to whom payment is to be sent; Name, title, phone number of person to notified in the event of a defective voucher; and, Period of performance for delivery date of goods or services provided. Additional items identified in Section J.x WHAT DOES A PAYMENT PROVISION LOOK LIKE? (Cont)

21 G.x: PAYMENTS – VOUCHERS (Cost Reimbursement Contracts – MAR 2014) PAYMENTS: The Government shall make provisional payments on all vouchers (pending the completion of a final audit of the Contractor's cost records) in accordance with: – FAR , Allowable Cost & Payment, and – FAR , Payments, and upon acceptance by the Contracting Officer’s Representative (COR) of the required supplies/services in accordance with the applicable FAR Inspection and Acceptance clause and the Contracting Officer’s approval. Reimbursement for vouchers submitted under this contract shall be made not later than thirty (30) calendar days after receipt of an acceptable voucher from the Contractor at the paying office designated above. Any discrepancies determined as a result of the audit could delay the processing of the voucher and may result in the voucher being returned to the Contractor for corrections. WHAT DOES A PAYMENT PROVISION LOOK LIKE? (Cont)

Nonpayment of subcontractors under contracts for noncommercial items Subcontractor assertions of nonpayment. (a) In accordance with Section 806(a)(4) of Pub. L , as amended by Sections 2091 and 8105 of Pub. L (10 U.S.C note), upon the assertion by a subcontractor or supplier of a Federal contractor that the subcontractor or supplier has not been paid in accordance with the payment terms of the subcontract, purchase order, or other agreement with the prime contractor, the contracting officer may determine— (1) For a construction contract, whether the contractor has made— (i) Progress payments to the subcontractor or supplier in compliance with Chapter 39 of Title 31, United States Code (Prompt Payment Act); or (ii) Final payment to the subcontractor or supplier in compliance with the terms of the subcontract, purchase order, or other agreement with the prime contractor; (2)For a contract other than construction, whether the contractor has made progress payments, final payments, or other payments to the subcontractor or supplier in compliance with the terms of the subcontract, purchase order, or other agreement with the prime contractor; or (3)For any contract, whether the contractor’s certification of payment of a subcontractor or supplier accompanying its payment request to the Government is accurate. (b) If, in making the determination in paragraphs (a)(1) and (2) of this subsection, the contracting officer finds the prime contractor is not in compliance, the contracting officer may— (1) Encourage the contractor to make timely payment to the subcontractor or supplier; or (2) If authorized by the applicable payment clauses, reduce or suspend progress payments to the contractor. (c) If the contracting officer determines that a certification referred to in paragraph (a)(3) of this subsection is inaccurate in any material respect, the contracting officer shall initiate administrative or other remedial action. WHAT HAPPENS IF A PRIME DOES NOT MAKE A PAYMENT TO A SUB?

23 Office of Acquisition & Grants Management: All contracts were required to be modified. Consistency in using the right provision/clause, i.e., FFP, CR or T&M Include the chart or just the Payment Category Type. Office of Financial Management: The accelerated payments increased their workload by almost 100%! In the beginning, they were required to check the contract Section G for every accelerated payment requested to make sure that the contractor was requesting the right type. Different payment category types require different routing time frames for review and approval. Challenges in Implementing the Payment Category Types

24 QUESTIONS???