How the Prompt Payment Act Protects You When You Pay Bills
What the Prompt Payment Act does
The Prompt Payment Act is a federal law that requires contractors and subcontractors working on federal construction projects to pay their suppliers and workers on time. If you are a supplier, material vendor, or worker on a federal project, this law creates a legal obligation for the people who owe you money to pay within a set number of days—usually 7 days after they receive payment from the government, or within 30 days of invoice, whichever comes first.
The law does not create a payment system you sign up for. Instead, it sets a floor: anyone who contracts with the federal government to build or repair something must follow these payment rules, and they must pass those rules down the chain to whoever they hire. If someone breaks the rule, you have a legal claim against them.
This matters because construction payment chains are long and slow. A general contractor gets paid by the federal government, then pays a subcontractor, who pays a material supplier, who pays a warehouse. Without the Prompt Payment Act, each person in that chain could hold money indefinitely. The law forces money to move.
Key Takeaways
- The Prompt Payment Act requires federal construction contractors to pay suppliers and workers within 7 days of receiving government payment, or within 30 days of invoice, whichever is sooner.
- The law applies only to work done on federal construction projects—not private construction, not service contracts, and not supply agreements outside federal work.
- If someone owes you money under this law and does not pay on time, you can file a claim with the federal agency overseeing the project or pursue a lawsuit.
- Interest accrues automatically on late payments under the law, so the longer someone delays, the more they owe you beyond the original invoice amount.
- You do not need to register or take action to be covered—the law applies to any supplier, vendor, or worker on a may have access to federal project.
Who the law covers and who it does not
The Prompt Payment Act covers anyone who supplies materials, equipment, or labor to a federal construction project. That includes general contractors, subcontractors, material suppliers, equipment rental companies, and workers. It also covers architects and engineers on federal projects.
The law does not cover private construction, even if it is large. It does not cover service contracts—only construction. It does not cover supply agreements that are not tied to a federal construction project. And it does not cover work done for state or local governments, only the federal government.
The federal government itself is not covered by the law—it is the law's source. But every private entity in the payment chain below the federal agency is bound by it.
How payment timing works under the law
The clock starts when the contractor receives payment from the federal government, not when they receive your invoice. The contractor must pay you within 7 days of receiving that government payment. If the contractor has not received government payment yet, the clock does not start.
There is a second deadline: 30 days from the date of your invoice. Whichever comes first—7 days after the contractor gets paid, or 30 days after you invoice—is the deadline. So if you invoice on day 1 and the contractor receives government payment on day 20, they owe you money by day 27 (7 days after day 20), not day 31.
The contractor can withhold payment only if there is a legitimate dispute about the work or materials—for example, if materials arrived damaged or work was not completed as specified. They cannot withhold payment simply because they have not received their own payment yet, and they cannot withhold payment to improve their cash flow.
Interest and penalties for late payment
If a contractor does not pay you by the deadline, interest starts accruing automatically. The interest rate is set by the federal government and changes quarterly. You do not have to ask for interest or file a claim to earn it—it accumulates on its own.
The contractor also owes you the cost of any collection action you take, including attorney fees, if you have to pursue a lawsuit. This means the longer they delay, the more they owe you beyond the original invoice.
Some contractors include language in their contracts saying they will not pay interest or that you waive your right to it. That language is void under the Prompt Payment Act. You cannot waive the protections the law gives you, no matter what a contract says.
What to do if you are not paid on time
First, document everything: your invoice, the date you sent it, the date the contractor received it (if you have proof), and the date payment was due. Keep records of any communication with the contractor about the payment.
Contact the contractor in writing and reference the Prompt Payment Act. Many contractors will pay once they realize you know the law and the interest clock is running. Give them a reasonable window—a few business days—to respond.
If the contractor does not pay, you can file a complaint with the federal agency overseeing the project. The agency has a contracting officer who manages the contractor's performance. You can also file a claim in court. Because the law is federal, you can file in federal court, and you can recover attorney fees if you win.
Some contractors carry performance bonds that may provide payment. If the contractor fails to pay, you may be able to file a claim against the bond. Ask the general contractor or the federal agency whether a bond is in place.
Disputes and withholding
A contractor can withhold payment if there is a genuine dispute about the work or materials. For example, if you supplied materials that arrived damaged, or if you completed only part of the work, the contractor can hold the disputed amount while the issue is resolved. But they must still pay the undisputed portion on time.
The contractor must notify you in writing of the dispute and explain what is wrong. They cannot simply refuse to pay and claim a dispute exists. If you disagree with their claim that there is a dispute, you can file a claim under the Prompt Payment Act and let a court decide whether the dispute was legitimate.
How this differs from private construction payment
On private construction projects, payment terms are whatever the contract says. A contractor can negotiate 60-day payment terms, 90-day terms, or longer. They can withhold payment for any reason the contract allows. There is no federal law forcing them to pay quickly.
On federal projects, the Prompt Payment Act overrides those negotiations. Even if your contract says payment is due in 60 days, the law says it is due in 7 days or 30 days, whichever is sooner. Even if your contract says the contractor can withhold payment for any reason, the law says they can withhold only for legitimate disputes.
This is why federal construction work is often more reliable for payment than private work. The law creates a floor that protects you regardless of what you negotiated.
Frequently Asked Questions
Does the Prompt Payment Act cover me if I am a worker, not a company?
Yes. The law covers workers, including laborers, electricians, plumbers, and other trades. If you worked on a federal construction project and were not paid on time, the law protects you the same way it protects a material supplier. You can file a claim for the unpaid wages plus interest.
What if the contractor says they have not been paid by the government yet?
That is not your problem under the law. The contractor is responsible for managing their own cash flow and their relationship with the federal government. They cannot delay paying you because the government has delayed paying them. If they have not been paid, they should contact the federal agency, not hold your money.
Can I waive my rights under the Prompt Payment Act in a contract?
No. Any contract language that waives or reduces your protections under the law is void. You cannot sign away the Prompt Payment Act's protections, even if you agree to do so. The law applies whether or not you know about it.
How do I know if a project is a federal project covered by the law?
Ask the general contractor or the project owner directly. Federal projects are usually identified clearly because they require compliance with federal rules, prevailing wage laws, and other regulations. If you are unsure, ask for the federal agency name and the contract number. You can also contact the federal agency's contracting office to confirm.
What if I am a subcontractor and the general contractor has not paid me—can I go after the federal government?
No. The federal government is not liable to you. Your claim is against the contractor who hired you. However, you can file a complaint with the federal agency overseeing the project, and the agency can take action against the contractor for violating the Prompt Payment Act. The agency may withhold payment to the contractor or terminate the contract.