PETALUMA, Calif., July 21, 2006 /PRNewswire/ -- The Government Accountability Office has issued a report which found that the Department of Defense is late-paying invoices from small businesses more often than all other invoices. Overall, small firms are paid late about 14.5% of the time. In many cases, this causes a financial hardship for small contractors, interrupting their day-to-day operations and often forcing them to seek credit to cover their costs while they await payment for goods and services already rendered.

The report found that DOD's antiquated paper-based systems are part of the problem, but DOD also admitted to paying larger contractors on a priority basis. Furthermore, the Prompt Payment Act requires that DOD pay interest on certain late invoices, but of the 17 small contractors that GAO interviewed, 10 stated that they often were not paid interest on late payments. One contractor was owed $1000 in interest after he followed up with DOD on late invoices. To make matters worse, the cost of capital is often more than any interest payment made.

The Department of Defense is responsible for about two-thirds of all small business procurement dollars, reported at $46.9 billion in fiscal year 2005. Because of the magnitude of their expenditures and their history of late paying small firms, Congress has mandated that GAO report on the timeliness of DOD payments to small contractors.

DOD pay officials told GAO they were unaware that small businesses were paid late more often than other businesses. And while their written policy states that small disadvantaged businesses are to be paid as quickly as possible, none of the pay sites investigated by GAO were following this directive. When questioned about this issue, officials responded that it would be too complicated to alter their systems to take size determinations into consideration when processing invoices.

"The Pentagon's failure to pay small businesses in a timely manner underscores the fact that the current administration has no commitment to policies designed to help America's entrepreneurs," stated Lloyd Chapman, President of the American Small Business League. "This GAO report is the latest in a series of federal investigations that show that small firms are being treated unfairly by the government. It's time for small businesses to join forces to see that their interests are being represented."

About the ASBL
The American Small Business League was formed to promote and advocate policies that provide the greatest opportunity for small businesses - the 98% of U.S. companies with less than 100 employees. The ASBL is founded on the principle that small businesses, the backbone of a vital American economy, should receive the fair treatment promised by the Small Business Act of 1953. Representing small businesses in all fields and industries throughout the United States, the ASBL monitors existing policies and proposed policy changes by the Small Business Administration and other federal agencies that affect its members.

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