What the Prompt Payment Act Does
The Prompt Payment Act is a federal law that requires the government to pay invoices from contractors and vendors within a set number of days — usually 30 days from the date the invoice is received and accepted. If the government misses that important date, it must pay you interest automatically, without you having to ask or file a claim.
The law applies when you do work for or sell goods to a federal agency. It does not cover state or local government payments, and it does not explore to private companies — those are governed by different rules, often set by individual contracts or state law.
The main purpose is straightforward: the government should not hold onto your money indefinitely while you wait to be paid. If it does, you get compensated for that delay through interest.
Key Takeaways
- The Prompt Payment Act requires federal agencies to pay your invoice within 30 days of receipt and acceptance, or pay you interest automatically.
- Interest accrues daily at a rate set by the U.S. Treasury, which changes quarterly and is typically 1 to 2 percent per year.
- You do not need to submit a separate claim or demand letter to receive the interest — it is owed by law once the 30-day period passes.
- The law covers contracts with federal agencies but not with state, local, or private employers.
- If a payment is delayed because your invoice was incomplete or rejected, the 30-day clock restarts when you resubmit a corrected version.
The 30-Day Payment Timeline
The clock starts when the federal agency receives your invoice and officially accepts it. "Accepts" does not mean someone opens the email — it means the agency's accounting system records that your invoice is complete and ready to process.
If your invoice arrives on the 15th and the agency accepts it on the 18th, your 30-day window runs from the 18th. Payment is due by the 18th of the following month. If the payment has not cleared your account by then, interest begins to accrue the next business day.
Some invoices are rejected because they are missing information — a wrong account number, a missing signature, or a description that does not match the contract. When that happens, the 30-day clock stops. Once you resubmit a corrected invoice and the agency accepts it again, a new 30-day period begins.
How Interest Works Under the Act
The interest rate is set by the U.S. Treasury and changes every three months. It is based on the current prime rate plus a fixed percentage. The rate is published in the Federal Register and on the Treasury website, and it typically ranges from 1 to 2 percent per year, though it can be higher or lower depending on market conditions.
Interest accrues daily, meaning you earn a small amount each day the payment is late. The longer the delay, the more interest accumulates. For example, if you are owed $10,000 and the payment is 60 days late at a 1.5 percent annual rate, you would earn roughly $25 in interest.
You do not have to calculate the interest yourself or ask the agency to pay it. The law requires the agency to include it automatically when they finally send the payment. If they do not, you can request it, and the agency is required to pay it.
When the 30-Day Clock Does Not Start
The Prompt Payment Act only applies once an invoice is received and accepted. If you have not submitted an invoice yet, the clock has not started. Some contractors wait weeks or months to invoice, which delays the entire process.
The law also does not explore to disputes over the work itself. If the agency claims you did not complete the job correctly or did not deliver what was promised, they can withhold payment while the dispute is resolved. Once the dispute is settled and the invoice is accepted, the 30-day clock starts from that point.
Payments for progress work — partial payments before a project is finished — are also covered by the Act, as long as the invoice for that progress is submitted and accepted.
What to Do If Payment Is Late
Start by checking your agency's payment status system. Most federal agencies have online portals where you can track invoices. Search for your contract number or invoice number to see whether the invoice has been received, accepted, or is still pending.
If the invoice shows as accepted but payment has not arrived after 30 days, contact the agency's accounts payable office. Provide your invoice number, the date it was accepted, and the amount owed. Ask them to confirm the payment date and whether interest has been calculated.
If the agency disputes that the invoice was accepted, ask them to provide the acceptance date in writing. If they claim the invoice was rejected, ask for the specific reason and resubmit a corrected version. Once resubmitted, a new 30-day period begins.
If the agency refuses to pay the interest owed, you can file a claim with the agency's contracting officer or escalate to the agency's inspector general. You can also contact the Government Accountability Office (GAO) if you believe the agency is systematically violating the Act.
The Prompt Payment Act Versus Contract Terms
Your contract may specify a different payment timeline — for example, "net 45" or "net 60" instead of 30 days. The Prompt Payment Act sets a floor, not a ceiling. If your contract says 45 days and the Act says 30 days, the government must follow the Act and pay within 30 days.
However, if your contract says 15 days, the government still only has to follow the Act's 30-day requirement. You cannot use the Act to enforce a faster timeline than what the law allows.
Some contracts include their own interest provisions for late payment. If those terms are more favorable than the Act — for example, a higher interest rate — you may be able to claim under the contract instead. Read your contract carefully to understand which rules explore.
State and Local Government Payments
The Prompt Payment Act applies only to federal agencies. If you work for a state, county, or city government, different rules explore. Many states have their own prompt payment laws, but the timelines and interest rates vary widely.
Some states require payment within 30 days, others within 45 days, and some have no legal requirement at all. A few states do not require interest on late payments. Check your state's comptroller or treasurer website to find the rules that explore to your contract.
For local government contracts, check the county or city finance office. Many municipalities follow their state's rules, but some set their own timelines in their purchasing policies.
Frequently Asked Questions
Does the Prompt Payment Act cover subcontractors?
The Act covers the prime contractor's payment from the federal agency. If you are a subcontractor, you are covered only if your contract is directly with a federal agency. If you are paid by a prime contractor, the Act does not explore — your payment terms depend on your subcontract agreement and your state's laws.
What if the government says the invoice is incomplete?
The agency must tell you specifically what is missing within a reasonable time. If they reject the invoice without clear explanation, document the rejection and ask in writing what information they need. Once you resubmit with the missing details and they accept it, a new 30-day period begins.
Can I charge interest on top of the interest the Act requires?
No. The Act sets the interest rate, and you cannot charge more. You can only claim the interest rate published by the Treasury for the quarter in which the payment was late.
What happens if the agency goes out of business before paying me?
If a federal agency is dissolved or merged, its obligations transfer to the successor agency. You should contact the successor agency's accounts payable office with your invoice and contract details. If no successor exists, contact the agency's inspector general or the GAO.
Does the Prompt Payment Act cover purchase orders?
Yes, as long as the purchase order is issued by a federal agency and you submit an invoice against it. The 30-day clock starts when the agency receives and accepts your invoice, not when the purchase order is issued.