Silo 1 · Global Late Payment Law
Understanding US Prompt Payment Acts
By Santanu Sarma — Mathematical Economics & Public Finance · Updated June 2026
A Prompt Payment Act claim is a different legal animal from the contractual late fee covered in our companion article. It is statutory, not contractual — the interest penalty exists by operation of law the moment a government payer misses its deadline, and it applies automatically, without the vendor needing to plead a clause into the contract. There is a federal version and a separate layer of state versions, and they compute interest differently.
The Federal Prompt Payment Act — 31 U.S.C. Chapter 39
Congress passed the Prompt Payment Act in 1982, effective 1983, after a GAO report found roughly 30% of federal invoice payments were late due to agency-side delay. It is now codified at 31 U.S.C. §§ 3901–3907 and implemented through FAR Subpart 32.9 and 5 CFR Part 1315.
The payment window is the later of two dates, per FAR clause 52.232-25:
- The 30th day after the designated billing office receives a proper invoice, or
- The 30th day after the government accepts the delivered supplies or completed services.
Construction contracts run on a tighter clock. Under FAR 52.232-27, progress payment requests are due in 14 days, not 30 — a distinction that matters if you're billing a federal construction contract under a fixed-price progress schedule.
Interest accrues automatically once the due date passes — the statute is explicit that the vendor does not need to request it:
the penalty shall be paid regardless of whether the business concern requested payment of such penalty
The Current Rate
The Treasury Secretary sets the rate every six months under the Contract Disputes Act computation, effective each January 1 and July 1. For the first half of 2026:
This is published in the Federal Register under 31 U.S.C. § 3902(a) and is always simple interest — the statute defines the penalty period as running from the day after the due date to the date of actual payment, with no compounding mechanism.
Worked Example
A $50,000 invoice to a federal agency, 45 days overdue under the H1 2026 rate:
Interest = $50,000 × 0.00011301 × 45 = $254.28
If the rate changes mid-delinquency (a possibility for any invoice that crosses a January 1 or July 1 reset), the calculation splits into two segments, each using the rate in force for its respective days.
State-Level "Little Prompt Payment Acts"
Most states run a parallel statute governing how state agencies pay their own vendors and contractors — structurally similar to the federal Act but with independently set rates. Texas is a representative example: Government Code Chapter 2251 sets a 30-day payment window for state agency invoices, with interest accruing from the 31st day, at a rate set annually under § 2251.025 using the Wall Street Journal prime rate as of the first business day of July, plus one percentage point. The exact figure resets every state fiscal year — check the Texas Comptroller's published rate before billing rather than relying on a fixed number here.
Construction Prompt Payment Acts Are a Separate Statute
Do not assume your state's general government prompt-pay statute covers private construction work — most states split these into two separate acts. In Texas, private construction is governed by Property Code Chapter 28, not Chapter 2251, and it sets a fixed, non-waivable rate rather than a floating one:
Owners must pay general contractors within 35 days of invoice; contractors must then pay subcontractors within 7 days of receiving that payment. Any contract clause attempting to waive or alter these terms is void by statute.
Comparison Table
| Statute | Payment Window | Current/Default Rate | Compounding |
|---|---|---|---|
| Federal — 31 U.S.C. § 3902 | 30 days (14 days for construction progress payments) | 4.125% p.a. (H1 2026, Treasury-set semi-annually) | Simple only |
| Texas Gov't Code Ch. 2251 (public vendors) | 30 days | WSJ prime + 1%, reset each state fiscal year | Simple |
| Texas Property Code Ch. 28 (private construction) | 35 days (owner→GC); 7 days (GC→sub) | 1.5%/month fixed (18% p.a.) | Simple |
Three Things That Will Cost You the Interest Claim
- An improper invoice. Federal billing offices can return a defective invoice within 7 days, which restarts your 30-day clock from zero.
- Missing the receipt date stamp. If the billing office fails to annotate the actual receipt date, the due date reverts to the invoice date — track both independently.
- Disagreement over quantity or quality. The clock does not start until any dispute over delivered goods or services is resolved.
None of these statutes require you to draft a clause — the interest is mandatory by law. Your only job is documentation: a proper invoice, a verifiable receipt date, and a clean record of when the work was accepted.
This article is informational and reflects published federal and Texas statutory mechanics as of June 2026. It is not legal advice. Prompt Payment Act rates reset every six months and state rates reset annually — confirm the current published figure with the Treasury Bureau of the Fiscal Service or your state comptroller before relying on a specific number.