Do Accelerated Payments for DoD Contractors Help Small Businesses?
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In 2011, the Department of Defense (DoD) set a goal of paying small business contractors within 15 days of invoice receipt rather than the standard 30 days. In 2012, other federal agencies also set a goal of accelerated payments to small businesses, and all agencies later expanded this goal to include all contractors regardless of size. We study whether small businesses benefited from these accelerated payment goals. Using a difference-in-difference design, we find that small business participation in government contracts rose following the setting of accelerated payments goals. Importantly, contracts for perishable foods and construction services, which were unaffected by the new accelerated payments policies, do not see an increase in small business participation. We also find that the benefits of accelerated payments are concentrated among small businesses with a backlog of ongoing projects. This is consistent with the hypothesis that accelerated payments alleviate the liquidity constraints that may be particularly acute for small businesses.
Acquisition Research Program Sponsored Report SeriesSponsored Acquisition Research & Technical Reports
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NPS Report NumberNPS-AM-21-030
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Cunha, Jesse; Marion, Justin (Monterey, California. Naval Postgraduate School, 2021-05-10); SYM-AM-21-054In 2011, the Department of Defense (DoD) set a goal of paying small business contractors within 15 days of invoice receipt rather than the standard 30 days. In 2012, other federal agencies also set a goal of accelerated ...
Winston, Pearl A. (Monterey, CA; Naval Postgraduate School, 2020-06);The purpose of this research is to analyze small-business responses to the accelerated payments policy for DOD contractors. This research explored small-business decision-making due to the DOD accelerated payments policy. ...
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