Prompt payment for subcontractors: the 7-day rule on federal jobs

Getting paid on time matters as much as winning the bid. If you're a subcontractor or supplier on a federal construction job, there is a specific clause that sets how fast money has to move down the chain, and knowing it helps you price your cash flow and push back when a payment stalls.

How fast the government pays the prime

Under FAR 52.232-27, Prompt Payment for Construction Contracts, all days are calendar days. For progress payments, "the due date for making such payments is 14 days after the designated billing office receives a proper payment request." Retainage held under the fixed-price payments clause is due as the contract says or, if not specified, 30 days after the contracting officer approves its release. Final payments are due on the later of the 30th day after a proper invoice is received or the 30th day after the government accepts the work.

If an invoice isn't "proper," the billing office has to send it back within 7 days with the reasons. Interest penalties are paid automatically when the government pays late on a proper invoice and there's no dispute over quantity, quality or compliance.

The 7-day pass-through to subcontractors

The same clause requires the prime to put a payment clause in every subcontract (including material suppliers) obligating it "to pay the subcontractor for satisfactory performance under its subcontract not later than 7 days from receipt of payment." It also requires:

• An interest penalty for late payment to the sub, running from the day after the required payment date at the Treasury rate for interest under 41 U.S.C. 7109.
• Flow-down: each subcontractor has to include the same payment and interest clauses in its own subcontracts, all the way down.

What a GC is still allowed to do

The clause doesn't stop the parties from negotiating subcontract terms that:

• Permit retainage: holding a specified percentage of each progress payment without owing late-payment interest (see retainage explained).
• Permit withholding of part or all of a payment request under the subcontract, without a late-payment penalty, if the sub has received a written notice of withholding and the contracting officer gets a copy.

Once the problem is fixed, the prime has to pay within 7 days after the deficiency is corrected (or within 7 days after it recovers the funds from the government, if those were reduced too).

How to use this when you bid and bill

1. Read the flow-down. Confirm your subcontract includes the 7-day payment and interest language on federal work.
2. Bill cleanly. Your pay app feeds the prime's request; missing backup slows everyone down (see progress payment requests).
3. Price the float. Even with prompt payment, you carry labor and material for weeks before money arrives. Build that financing cost into your overhead or general conditions.
4. Track dates. Note when your prime was paid (ask, or check if the agency publishes it) and when you were paid, so you can raise late payment with facts.
5. Know your bond rights. On federal jobs, payment bonds back up your right to be paid; see Miller Act bonds.

This is general information, not legal advice. Federal clauses are used here as a reference model; private and state contracts have their own terms. Have a construction attorney review anything you are unsure about.

Published October 29, 2026. We do not use affiliate links on this page; see our Affiliate Disclosure.