The United States government is notoriously slow when it comes to paying its bills, and it's the thousands of small business suppliers that generally suffer the most. But soon all those late accounts will be costing Uncle Sam interest.Legislation with strong backing in Congress will require the government to pay interest on all accounts payable more than 15 days overdue. And the Reagan Administration has promised to sign the new law.
The drive for speedier federal payments and interest payments on past-due accounts has been led by the Slow Pay Coalition, an umbrella group of 40 trade associations -- including the Door and Hardware Institute, the National Meat Association, and the National Association of Manufacturers. The coalition's legislative push began in January 1981 when, according to founder Kenton Pattie, senior staff vice-president of the National Audio-Visual Association in Fairfax, Vs., it became clear that solving the problem was not a Reagan Administration priority.
In late 1978, Pattie had launched a campaign to convince federal agencies to pay more promptly, but found that persuasion alone was a tactic with limited effectiveness. Although agency officials were sympathetic to the slowpay problem, Pattie says, "nobody was interested in cracking the whip." Even an interagency memo from the Office of Management and Budget urging federal departments to accelerate their tardy payment practices "had no teeth in it," he says.
The federal government's penchant for foot-dragging on bill payments has been well documented by the General Accounting Office. The GAO notes that nearly 40% of all government accounts are typically beyond the traditional 30-day period. Moreover, the average late bill is 74 days delinquent, according to the GAO. "The guilt is pretty well spread among all the agencies," says Pattie.
Under the prompt-payment bill, the government will have to pay interest on any account more than 30 days old; the interest accrues from the conventional 31st day. If the account is paid during an additional 15-day grace period -- a provision the White House fought hard for -- there is no interest charge. The rate government contractors will receive, currently 14.75%, is set twice each year by the secretary of the Treasury under the 1978 Contract Disputes Act and published in the Federal Register.