National Defense Authorization Act for Fiscal Year 2012

Floor Speech

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Mr. FRANKEN. Mr. President, the amendment I offered, No. 1197, will help small businesses. Small businesses often serve as subcontractors, or suppliers, to large corporations that have a primary government contract. My amendment would help guarantee that small businesses get paid by these large corporations in a timely way. More specifically, my amendment would require the Office of Management and Budget to issue regulations in the next year to do this.

This amendment sounds simple. There is a reason for that. It is. It is something we can do here today that will offer real and significant help to small businesses. It is going to offer predictability and certainty to them.

Anyone who owns a small business will tell you that they can't hire more people or plan for the future if they don't know when their next paycheck is coming. Getting their money more predictably and quickly will enable them to make the investments they need to grow, thrive, and hire more people.

The administration has recognized that small businesses are the engine that drives our economy. According to the U.S. Census Bureau, small businesses create an overwhelming majority of all new jobs. Small businesses are also responsible for producing half of the private sector GDP.

Given this, it makes sense to me that we need to figure out how to make sure small businesses are getting paid on time. OMB recognized this and issued a new policy statement that will require all Federal agencies to make payments to their small business contractors within 15 days of receiving an invoice. But the fact is, a lot of small businesses serve as subcontractors to direct prime contractors. It only makes sense that we should require our large prime contractors to play by the same rules we play by and to pay their suppliers in a timely manner.
When Congress passed the Prompt Payments Act back in 1983, it recognized that the Federal Government needed to lead by example, and that we should be paying all of our contractors in no more than 30 days after the contractor sent an invoice our way. Congress went back in 1988 to create an obligation on construction contractors that they pay their suppliers within 7 days of the government paying them. But no other contractors were under the same commonsense obligation. I think that is a mistake we should correct, especially as we are pouring billions and billions of government dollars into contingency operations overseas--and all sorts of other projects that have nothing to do with construction. All suppliers working with these contractors deserve to be paid on time. I am hoping one day we can tackle this problem for all subcontractors, not just small businesses that are contractors.

For now, my amendment takes a modest approach and focuses on the biggest problem--creating certainty and predictability for small business subcontractors.

The National Federation of Independent Business recently conducted a survey, and they found nearly 40 percent of firms reported that receivables are coming in at a slower pace. I have heard stories from companies that have not been paid in 90 days or 120 days after they have invoiced. This is unacceptable.

These sorts of delays affect cashflow for these small businesses and make it tough for these businesses to meet payroll obligations and pay their other basic bills, such as their rent.

I want to tell a personal story that relates to small businesses and how important it is to them to be paid on time or how important cashflow is. My uncle, Lionel Kunst, was a small businessman. He died in 1994. I went to his funeral. At the funeral were a number of his business associates--people who supplied him. He made fabric, quilting. These were people who supplied him and people whom he supplied. One after another got up and testified how quickly he paid, or how, if they could not pay on time, he would cut them some slack. That is how important this is. That is how important it was to them. My uncle was a mensch. It was a big deal. These guys got up and all talked about this.

This is what we should do. We should do it for these small business subcontractors--make sure they get paid on time. That is all.

This is a sensible, simple solution to a real problem that small businesses are confronting. I urge my colleagues to support me in this effort.

I thank the Chair and yield the floor.

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