Glossary · Legal and regulation
Prompt Payment Act (US)
The US Prompt Payment Act requires federal agencies to pay contractors on time, and to pay interest automatically when they pay late.
The Prompt Payment Act requires federal agencies to pay proper invoices on time — generally within 30 days of receiving the invoice, unless the contract sets another date — and to add interest automatically when they don’t. The contractor doesn’t have to ask for it.
The interest rate is set by the Treasury Department every six months. Payment runs from receipt of a proper invoice, so an invoice missing required information can be returned, and the clock restarts.
Many US states have their own prompt payment laws for state agencies, and many cover private construction contracts too. They differ in deadlines and rates.
Example
A federal agency receives a proper $40,000 invoice on 1 March and pays it on 15 April. The payment includes interest for the days after the due date, calculated at the Treasury’s current rate.