Understanding the 3-Way Match for Invoice Reviews
Read Time 6 mins | Written by: Patrick Shields
Federal Government personnel involved in reviewing contractor payment requests/ – invoices – are your efforts governed by the commonly accepted “accounts payable” accounting process “3-Way Match” process which should govern your efforts? Whether or not you know the term, the concepts need to govern your invoice review process.
FAR Part 32, “Contract Financing” describes the policies and procedures for a large range of types of contract financing that are available for use under contracts issued by the Federal Government agencies. If you are assigned to a role in contractor invoice review and approval, you likely recognize your fiduciary responsibility: to your program, to the agency – and to the contractor - to ensure that payments are made in the correct amounts – and on time.
In exchange for the contractor providing the goods/services described and specified in the contract details, the Government must promptly pay the amounts the contractor is entitled to or promptly disallow/reject the charges that are not verified as accurate and valid.
When you receive a contractor invoice, how can you know if they are actually entitled to the full amount billed – or have they made a mistake? The answer lies in the 3-way match process for determining payment entitlement by matching information from 3 unique, relevant documents. For a Government contract what 3 documents?
1. The contract (order, etc.) – know the contract and what it specifies:- Allowed billing frequency
- What must be accomplished/achieved to bill for, and
- What are the applicable prices/amounts for the billable achievements
2. Completion evidence regarding the billable achievement, but recognize that acceptable evidence differs with different contract types and other factors, for example:
- Government-signed acceptance documents in fixed-price type contracts
- Labor records in labor-hour type contracts
- Evidence of actual payment for cost-reimbursement type contracts, and
- Specific fee-payment, incentive or other provisions
3. The contractor’s invoiced amounts – as broken down and the total invoice amount.
Also, the timeliness of completing your review matters – the Prompt Payment Act (FAR 32.9) requires the contractor to receive payment within 30 calendar days from receipt of a ‘proper’ invoice – or the contractor must also be paid interest for the late payment. That interest comes from your program/agency’s budget resources. The FAR also requires that the contractor be notified if there is anything wrong (dollar amount or otherwise) within 7 calendar days.
| Note: For small business contractors, agencies must accelerate invoice payments to 15 days, if possible, although 30 days remains the requirement for interest accrual purposes. Also, for various perishable types of items, invoice issues must be identified within 3 calendar days to avoid impacting the normal 30-day processing time for a resubmittal. |
Are you new to the invoice review process in your agency or in general? Or could you just use a refresher on best practices for assessing the contractor entitlement to be paid? One source of assistance is our Contractor Performance Intelligence™ (CPI™) app that will simplify how you manage your contractor performance from post-award to closeout. CPI provides the video tutorials, templates tailorable for your agency’s needs, and access to additional help when needed, as well as an extensive, user-friendly process flow with document flow and records management for the full range of post-award activities to successfully manage your contractors. The short video tutorials and other job aids are conveniently located in the app so that compliance and best practices are convenient.
Check out our video that provides an overview of CPI. Or better yet, request a demo at demo@seventhsenseconsulting.com or contact us at (301) 392-1895 or lakers@seventhsenseconsulting.com.
Make it an enlightened day,
Pat Shields
Director – Acquisition Practice
Seventh Sense Consulting
Would You Like to Know More?
Patrick Shields
Mr. Patrick Shields has over 45 years of experience as an acquisition and contracting professional and innovative leader. Since 2016 Mr. Shields has served as the Seventh Sense Consulting LLC (SSC) Director of Acquisition Practice in which his extensive knowledge pf Federal Government acquisition and contracting, plus his passion for innovation and enlightened efficiency enable him to serve SSC’s clients, both directly through consulting engagements and indirectly, both as a “reachback” resource for all SSC personnel and by providing subject matter expertise (SME) for the development and support of SSC’s suite of Enlightened Solutions intelligent products. Prior to joining SSC, Mr. Shields was the Senior Manager for Research Services for ASI Government (ASI) (2012-2016), where he led a team of acquisition experts within ASI’s Virtual Acquisition Office (VAO) who researched and developed responses to inquiries on acquisition/ contracting topics that spanned the acquisition lifecycle plus various acquisition organization and policy-related topics. Also, Mr. Shields authored, co-authored or contributed content to dozens of VAO educational/advisory publications. Inquiry responses and VAO’s publications were provided to over 25,000 acquisition professionals within the numerous VAO subscriber agencies. Prior to joining the VAO, Mr. Shields served as a senior subject matter expert within ASI’s consulting division, providing expertise to various clients, including DoD and Intelligence Community agencies, GSA, and numerous other civilian agencies. Mr. Shields’ consulting efforts included development of acquisition-specific documents, agency-specific policies, and requested topical training materials and presentations. While at ASI, he earned ASI’s Masters Certificate in Performance Based Acquisition and was selected as an ASI Research Fellow. After a short time as a high school and collegiate level mathematics teacher, Mr. Shields began his acquisition and contracting career at the Naval Air Systems Command (1987-2004), advancing to serve in various Division Head level assignments for over 10 years before retiring from civil service. During this tenure, he executed and/or oversaw over $10B in contracts spanning the full major systems acquisition cycle for some of the most consequential major weapon systems programs in Naval Aviation. Mr. Shields earned numerous certifications, awards and recognitions, including DAWIA Level III in both Contracting and Program Management, was a Charter Member of the Navy Acquisition Corps, and a Meritorious Civilian Service Medal. Mr. Shields holds a bachelor’s degree in Mathematics Education from Virginia Tech, plus master’s degrees in Mathematics from Virginia Commonwealth University, and in Strategic Studies from the U.S. Army War College.