Simplified Acquisition Procedures And Fast Payment On Government Contracts
By Jennifer Jones
“Simplified Acquisition Procedures (SAP) are a flexible tool when conditions are right. They are low visibility and not “sexy” like weapons systems. But they account for most of the purchases we [the government] make, and a substantial amount of the money we spend.”
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“New contracting professionals often start out using these procedures. So, I feel it is warranted to spend some time discussing them. An often misunderstood or over-looked aspect of SAP leveraged by the government contracting workforce endeavors to balance government risk with a contractor’s need for cash flow—namely, use of Fast Payment procedures.
As discussed in previous articles in this series, cash flow is a major motivator for industry (see “Prompt Payment Act” article, July-August 2025 issue of Defense Acquisition magazine). It can increase the size of the industrial base, enhance competition, and otherwise encourage participation in our mission success. And if we can reassure vendors about timely payment, their prices may be lower.
Enter Simplified Acquisition
SAP means the procedures covered in parts 12 and 13 of the Federal Acquisition Regulation (FAR) are designed to reduce administrative costs, improve opportunities for all types of small businesses, promote efficiency and economy in contracting, and avoid unnecessary burdens for both government and industry.
These goals are accomplished by designing procedures and processes that are less formal than those used in other parts of the FAR. Documentation requirements are reduced; timelines can be compressed. Detailed steps are reduced or eliminated and great discretion is afforded the government when using SAP. Also, certain statutes and clauses do not apply to SAP [e.g., the Competition in Contracting Act—SAP (Simplified Acquisition Procedures | Acquisition.GOV)]will be a topic for another article.
But in brief, the procedures in question include use of the governmentwide commercial purchase card, Blanket Purchase Agreements, and purchase orders. For purposes of this article, note that an entire FAR subpart 13.4 was dedicated to Fast Payment. With the Revolutionary FAR Overhaul (RFO), this topic has been moved to RFO FAR subpart 32.12.
The Uniqueness of Fast Payment
To understand how unique (to the government) Fast Payment procedures are, we first must discuss normal receipt and payment processes. We normally issue a contract; the vendor delivers and invoices the government. The government receives supplies or services, inspects and accepts them. Only then will the seller get paid in accordance with the Prompt Payment Act, which generally establishes a payment due date 30 days after the acceptance of supplies/services or receipt of invoice. This can create hardship for vendors carrying those costs, sometimes for months, until we (eventually) make payment. This is especially problematic when delivery occurs at distant locations with limited communications (e.g., to a war zone or remote area). When we elect to use Fast Payment procedures, the entire process changes.
When using these procedures, we are allowed to pay the contractor prior to the government receipt, inspection, and acceptance of the supplies! This could cut weeks if not months off the payment timeframe. So, it is very beneficial for the vendors.
But do you see any risk involved? What if we never receive the items or the vendors are not vetted? Since we have already paid, we have no recourse, right? That is not so! Herein lies the beauty of Fast Payment procedures. The government is willing to take some risks to help the vendor with its payment timeframes. But in return, we put some of that risk back on the vendor. Specifically, when we include that clause in our purchase orders, it means that by submitting an invoice, the vendor is certifying the supplies have been delivered in accordance with the contract (to post office, common carrier like UPS, or first point of government receipt [like a transshipment point for things going overseas]).
The clause also requires the vendor to replace, repair, or correct any supplies the government does not receive—or receives damaged—or that are not in accordance with the contract. Therefore, while the government assumes some risk, we mitigate that risk by the language of the Fast Payment clause at RFO FAR 52.232-90.
Conditions for Use
Well, this is a good deal, right? Why don’t we use it all the time? The answer lies in our willingness to accept risk, in terms of contract/project performance and dollar exposure. So RFO FAR 32.1202 establishes parameters to balance risk equitably. The language specifies the following conditions when and where we may use the Fast Payment procedures:
a. The transaction cannot exceed the Simplified Acquisition Threshold (currently $350,000 in normal circumstances) per the FAR. However, the DoW FAR Supplement (DFARS) 232. 1202(a) states an individual order may exceed the Simplified Acquisition Threshold for brand name commercial subsistence products for commissary resale and for medical supplies being shipped directly overseas.
b. Delivery will be to a distant, remote location where communications may limit the use of normal receipt processes. (Use of these procedures enhances our ability to find suppliers willing to ship to overseas locations, to ships at sea, and to war zones.)
c. Title to the supplies passes to the government upon delivery to the post office, common carrier, or initial point of government receipt.
d. The supplier agrees to replace, repair, or correct supplies not properly received.
e. The purchase is made as a firm-fixed-price purchase order or contract.
f. A system is in place to ensure the documentation of delivery, timely feedback to the contracting officer in case of problems, and verification that the supplier in question does not have a record of poor integrity with prior fast payment orders.
Procedures
Once we meet the conditions noted above, we must take a few more steps when issuing our purchase order or Blanket Purchase Agreement per RFO FAR 32.1203. The items must be shipped with prepaid transportation included. The vendor must send invoices directly to the payment/finance office clearly marked “FAST PAY” per the clause to ensure that the invoices are not held pending documented acceptance. Also, per the clause, outer shipping containers must be marked “FAST PAY.” (This ideally will trigger the receiver’s recall of their duties under the next bullet.) The copy of the contract sent to the receiving office (consignee) must include the following statement:
Consignee’s Notification to Purchasing Activity of Nonreceipt, Damage, or Nonconformance
The consignee shall notify the purchasing office promptly after the specified date of delivery of supplies not received, damaged in transit, or not conforming to specifications of the purchase order. Unless extenuating circumstances exist, the notification should be made not later than 60 days after the specified date of delivery.
This notification is intended to ensure that we “close the loop” with the contracting officer in the event of any issues so that they may demand correction, replacement, or repair within the 180 days allowed by the clause.
The government is willing to take some risks to help the vendor with its payment timeframes. But in return, we put some of that risk back on the vendor. Specifically, when we include that clause in our purchase orders, it means that by submitting an invoice, the vendor is certifying the supplies have been delivered in accordance with the contract.
I was curious about how this all works considering DoW’s use of Wide Area Workflow (WAWF). Well, the Defense Federal Acquisition Regulation Supplement (DFARS) 252.232-7006 Wide Area Workflow Payment Instructions specifically state that “Fast Pay requests are only permitted when FAR 52.213-1 (sic) is included in the contract.” So Fast Pay is considered and allowed when using WAWF.
I also was curious about the Government Accountability Office (GAO)’s take on Fast Payment procedures. In 1968, the GAO issued an appropriation act decision in B-155253. In this decision, GAO opined on the legality of Fast Payment procedures as included in the Armed Services Procurement Regulation (predecessor to the Defense Acquisition Regulation, predecessor to the FAR/DFARS). GAO stated that initially they disapproved of using such procedures unless the DoD included reviews and internal audits as outlined in their letter to DoD. The revised Fast Payment procedures included such internal controls, so they were approved. This emphasizes how critical it is to “close the loop” on items paid for as discussed in the procedures. Also, to avoid an illegal advance payment, you will recall that the government takes title to the supplies at the same time that the vendor is allowed to invoice.
Later GAO decisions, often motivated by savings, followed. In B-158487, the concern about advanced payments was addressed, and documented savings swayed the GAO to approve a similar procedure for the General Services Administration. In B-205868, GAO addressed the use of similar procedures by the former Veterans Administration (VA) to enable the VA to take prompt payment discounts. In all of these decisions, a main concern of the GAO was risk and the need for internal controls to ensure that the government actually receives the supplies and services it purchases. The safeguards established in Fast Payment procedures provide those internal controls.
I refer you to the purposes for using SAP as noted at the beginning of this article. Clearly, the use of Fast Payment procedures contributes to at least two of those purposes: It improves opportunities for small businesses (who find it more difficult to carry the finance costs) and it avoids the unnecessary burden doing so imposes on vendors. Missions accomplished!
When I was an intern, my first real assignment was working in an office entitled “Special Purchase Urgent Requirements.” We were running fast and hard, with minimal time for on-the-job training. I will never forget preparing my first purchase order and wondering whether to include the Fast Payment clause. I asked my mentor, and she said I should use it whenever the delivery location was far away from the vendor’s facility. So, I took that advice and ran with it. I did not understand what it meant until at least 15 years later, when I started teaching the then-called “small purchase” course. And in fact, a student (AP) in a recent class is working in a similar office now, which prompted me to write this article.
To summarize, if you are purchasing supplies for delivery to a remote location and you meet the conditions, consider using Fast Payment procedures unless there is evidence to the contrary. This is especially valid if your order includes shipping items overseas, to a ship afloat, or to a deployed unit, and experience difficulty finding suppliers willing to wait for payment.”
ABOUT THE AUTHOR:
JENNIFER JONES is an intermittent professor of Contract Management in the Warfighting Acquisition University South Region. She has worked in the warfighting contracting field for 46 years and holds a B.S. from the College of William and Mary. The author can be contacted at [email protected].
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