In plain English
FAR 52.242-5, Payments to Small Business Subcontractors, is a contract clause prescribed at FAR 42.150, most recently dated Jan 2017. The complete official text is reproduced below, verbatim, from GSA's published FAR source files.
Its text contains no sentence requiring insertion into subcontracts; see the flowdown section below for what that does and does not mean.
Does it flow down to subcontracts?
No flowdown mandate found in the clause text
We scanned the full clause text and found no sentence directing the contractor to insert this clause into subcontracts. That is a statement about the text, not legal advice: a prime contractor may still flow terms down contractually, an agency supplement (DFARS, VAAR, …) may add requirements, and clauses listed below (if any) may order this clause into subcontracts from the outside.
Where it's prescribed
As prescribed in 42.1504 , insert the following clause:
Prescribing reference: FAR 42.150.
The official text, verbatim
As prescribed in 42.1504 , insert the following clause:
Payments to Small Business Subcontractors (Jan 2017)
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(a) Definitions. As used in this clause-
Reduced payment means a payment that is for less than the amount agreed upon in a subcontract in accordance with its terms and conditions, for supplies and services for which the Government has paid the prime contractor.
Untimely payment means a payment that is more than 90 days past due under the terms and conditions of a subcontract, for supplies and services for which the Government has paid the prime contractor.
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(b) Notice. The Contractor shall notify the Contracting Officer, in writing, not later than 14 days after-
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(1) A small business subcontractor was entitled to payment under the terms and conditions of the subcontract; and
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(2) The Contractor-
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(i) Made a reduced or untimely payment to the small business subcontractor; or
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(ii) Failed to make a payment, which is now untimely.
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(c) Content of notice. The Contractor shall include the reason(s) for making the reduced or untimely payment in any notice required under paragraph (b) of this clause.
(End of clause)