(a) Policy. It is the policy of the City of New York to process contract payments efficiently and expeditiously so as to assure payment in a timely manner to firms and organizations that do business with the City.
(b) Definitions. In this section, the following words have the meanings indicated.
Applicable Interest Rate. Interest shall be the maximum amount allowed by law or such lower uniform interest rate as may be set jointly by the Comptroller and OMB.
Designated Billing Office. The office or employee designated in the contract to which a proper invoice is to be submitted by a contractor.
Discount Date. The date by which, if payment is made, a specified invoice payment reduction, or discount, can be taken.
Invoice Received or Acceptance Date ("IRA Date") – Goods and Services.
(i) For purposes of determining a payment due date for goods and services and the date on which interest will begin to accrue and for no other purpose, an invoice received or acceptance date ("IRA date") is defined as the later of:
(A) the date a proper invoice is actually received by the designated billing office if the agency annotates the invoice with the date of receipt at the time of receipt, or
(B) the seventh day after either the date on which the goods are actually delivered or the services are actually performed, unless:
((a)) the agency has actually accepted and approved the goods or the services before the seventh day (in which case the acceptance date shall substitute for the seventh day after the delivery or performance date), or
((b)) a longer acceptance period is required by law or included in the contract to afford the agency a practicable opportunity to inspect, test, and accept the goods or evaluate the services (in which case the date of actual acceptance or the date on which such longer acceptance period ends shall substitute for the seventh day after the delivery or performance date).
Invoice Received or Acceptance Date ("IRA Date") – Construction and Construction-Related Services. For construction, for purpose of determining a payment due date and the date on which interest will begin to accrue and for no other purpose, an invoice received or acceptance date ("IRA date") is defined as the date when the field engineer certifies on the payment requisition that the work has been accepted.
Proper Invoice. A written request for a contract payment that is submitted by a vendor in good faith setting forth the description, price, and quantity of goods or services delivered or rendered, in such form and supported by such documentation as an agency may require, and any other documents required by contract.
Required Payment Date or Interest Eligibility Date. The date by which a contract payment must be made in order for an agency not to become liable for interest payments.
Receiving Report. This report may be used by a receiving unit to inform others, such as the purchasing, warehousing, accounting, and quality assurance departments, of the receipt of goods purchased or acceptance of services rendered. A receiving unit may, in some cases, also verify that goods and services conform to specification requirements and may include on the receiving report evidence of the acceptance of the goods and services.
Retainage. The right of the City pursuant to a contract and/or law to withhold from the invoice and retain a specified percentage of payment until such time as it is to be released pursuant to the contract and/or law.
(c) Standards for prompt payment.
(1) Starting the payment period. The period available to an agency to make a timely payment of an invoice without incurring an interest penalty shall begin on the IRA date.
(2) Required payment date. The required payment date shall be:
(i) thirty days; or
(ii) in the case of contract changes, sixty days; or
(iii) in the case of substantial completion payments or final payments on construction contracts, sixty days after the IRA date, except as described in paragraph (3) below; or
(iv) except as provided in subdivision (d)(4)(iv), the required payment date for the release of retained amounts shall be in accordance with the contract and law, and thirty days after the submission of a proper invoice for the return of the retained amounts.
(3) Extension of the required payment date. The date by which a contract payment may be made without the payment of interest may be extended by the time taken to satisfy or rectify any of the following:
(i) the Comptroller, in the course of an audit, determines that there is reasonable cause to believe that payment may not be properly due, in whole or in part, due to fault of the vendor;
(ii) the necessary City, State, or federal government appropriation required to authorize payment has not been made;
(iii) a proper invoice must be examined by the State or federal government prior to payment;
(iv) the goods have not been delivered or the construction or services have not been performed in compliance with the terms and conditions of the contract;
(v) in the case of substantial or final payments on construction contracts, the ACCO determines that the vendor has failed to properly submit the necessary documents and other submissions prescribed by the contract specifications and requirements or by law in order to enable the agency to process the final payment properly and expeditiously; and
(vi) when the required payment date falls on a weekend or City holiday, the required payment date shall be extended to the next following business day.
(4) Proper invoice required to initiate payment. A proper invoice submitted by the vendor shall be required to initiate payment, except where the contract provides that the vendor will be paid at predetermined intervals without having to submit an invoice for each scheduled payment.
(5) Receipt and acceptance of goods and services. Agencies shall ensure that receipt and acceptance are executed within seven days unless otherwise specified in the contract. Receiving reports and invoices shall be stamped or otherwise annotated with the date upon receipt in the designated billing office.
(d) Interest eligibility and computation.
(1) Eligibility. When payments are made after the required payment date, interest shall be paid to the vendor based on the IRA date. Interest shall be computed at the maximum amount allowed by law, or such lower uniform rate set jointly by the Comptroller and OMB. Such interest rate shall not apply to contracts where, as part of the contract obligation, the City is required to pay an interest rate other than the rate determined by the Comptroller and OMB.
(2) The interest rate shall be reviewed every six months by the Comptroller and OMB to determine its continued applicability. The new interest rate for each upcoming six-month period, i.e., July 1 through December 31/January 1 through June 30, shall take effect on payments made on or after the effective date and shall be published by the CCPO in the City Record as soon as is practicable after such determination is made, not to exceed thirty days. The CCPO shall notify in writing all ACCOs of this action.
(3) Interest shall not be paid where:
(i) payment on the invoice is delayed because of a disagreement between an agency and a vendor over the amount of the payment and other issues concerning compliance with the terms of a contract. Payments shall be made, and as required by these Rules, interest shall be paid, on undisputed amounts;
(ii) the failure to make the contract payment is the result of a lien, attachment, or other legal process against the money due to the vendor;
(iii) amounts are temporarily withheld in accordance with the contract; or
(iv) the amount of the interest payment is less than twenty-five dollars.
(4) The following types of payments are ineligible for interest:
(i) payments under the eminent domain law;
(ii) payments to the federal government, to any state or City agency or their instrumentalities, to any duly constituted unit of local government or any of their related instrumentalities, to any public authority or public benefit corporation;
(iii) payment in a situation where the City takes a deduction permitted by law or contract against all or part of a payment due the vendor; or
(iv) where, for reasonable cause, the City determines not to release or to reduce retainage upon completion or substantial completion of a construction contract.
(5) Interest that is due shall be paid within twenty days of payment of the original invoice. The failure to make an interest payment within such twenty days shall not generate additional interest.
(6) The Comptroller and OMB may, for a limited period of time not to exceed thirty days per calendar year, jointly defer the City's obligation to pay interest when the City is experiencing a shortage of cash. In such event, the CCPO shall provide, at the earliest practicable opportunity, written notice to ACCOs of this action and its expected duration. Notice of this action shall be published by the CCPO in the City Record as soon as is practicable after such determination is made, not to exceed thirty days. The CCPO shall provide similar written notice of subsequent action either to extend or cancel this period of deferral.
(e) Additional requirements for construction and construction-related services contracts.
(1) Progress payment. An agency may not approve a request for a progress payment unless the request includes:
(i) substantiation of the amounts requested, including:
(A) an itemized list of the amounts requested related to the various elements of work required by the contract,
(B) a listing of the amount included for work performed by each subcontractor under the contract,
(C) a listing of the total amount of each subcontract under the contract,
(D) a listing of the amounts previously paid to each such subcontractor under the contract, and
(E) additional supporting data in a form or detail required by the contract or the resident engineer;
(ii) certification by the prime contractor, that:
(A) the amounts requested are only for performance in accordance with the specifications, terms, and conditions of the contract;
(B) payments to subcontractors and vendors have been made from previous payments received under the contract, and timely payments will be made from the proceeds of the payment covered by the certification, in accordance with their subcontract agreements and the requirements of these Rules; and
(C) the application does not include any amounts that the prime contractor intends to withhold or retain from a subcontractor or vendor in accordance with the terms and conditions of their subcontract/agreement except as may be allowed.
(2) Subcontracts.
(i) All construction contracts awarded by the City shall include:
(A) a payment clause that obligates the prime contractor(s) to pay each subcontractor and vendor (including a materials vendor) not later than seven days after receipt of payment out of amounts paid to the contractor by the City for work performed by the subcontractor or supplier under that contract and that provides for the payment of interest by the prime contractor in accordance with Section 106-b of the New York State General Municipal Law on amounts not timely paid to a subcontractor, and
(B) a clause requiring the prime contractor to include in each of its subcontracts a provision requiring each subcontractor to include the same payment clause in their contracts with each lower-tier subcontractor or vendor.
(ii) If a prime contractor is paid interest earned due to late payments by an agency, the proportionate share of that interest shall be forwarded by the prime contractor to each of its subcontractors and vendors.
(f) Determination of appropriations against which interest penalties shall be charged. Except where otherwise required by law, an interest payment required by these Rules shall be paid from the agency expense budget of the agency awarding the contract, provided however that if the obligation to make an interest payment is incurred in whole or in part due to another agency's involvement in the payment process, then the portion of the total interest payment that is attributable to delays by that agency shall be charged to that agency's miscellaneous budget.
(g) Responsibilities. Each Agency Head is responsible for the following:
(1) assuring timely payments and the payment of interest penalties where required;
(2) publishing lists of designated agency contacts within their payment centers or finance offices to provide vendors with assistance in determining the status of their invoices;
(3) issuing internal instructions, as necessary, to implement these Rules. Such instructions shall include provisions for monitoring the causes of any interest penalties incurred, taking necessary corrective or disciplinary action, and dealing with inquiries from vendors;
(4) assuring that effective control systems are established and maintained to provide reasonable assurance that administrative activities required under these Rules are effectively and efficiently carried out;
(5) assuring that inspectors general and internal auditors periodically review implementation, as they and their Agency Head deem appropriate. Copies of reports on audits and reviews should be provided to the CCPO and Comptroller upon issuance.
(6) establishing a quality control program to assess performance of payment systems and provide a reliable way to estimate payment performance.
(h) Reporting Requirements. PPB shall coordinate and publish an annual prompt payment performance report detailing each agency's performance pursuant to Section 332 of the Charter. PPB shall additionally make cumulative prompt payment performance statistics available upon request. All reports shall be distributed to the CCPO, OMB, and Comptroller and shall be posted on the City's website in a location that is accessible by the public simultaneously with their publication.
(1) Report contents. The annual prompt payment report shall contain the following information for both expense and capital expenditures:
(i) agency performance in descending order by percentage of on-time payments,
(ii) amount and percentage paid by the "Required Payment Date" or "Interest Eligibility Date" by agency in descending order as contrasted with the total amount eligible for payment,
(iii) distribution of interest penalties paid by agencies as a result of late payments, and
(iv) trend information as to how agencies are performing as compared with previous time periods, i.e., past year, past six months, quarter to quarter.