Prompt payment requirements establish a time period in which property owners or GCs must make payments to contractors and subcontractors.
In construction, the average payment takes nearly three months; the longest of any industry. State and federal requirements attempt to ensure that parties to a construction project receive payment within a reasonable amount of time.
The federal Prompt Payment Act applies to federal construction contracts. It requires that these contracts include a clause requiring the prime contractor to pay subcontractors for “satisfactory” work within seven days of being paid by the government.
States have their own prompt payment laws. These laws seek to reduce the time it takes for contractors, subcontractors, and suppliers to receive payment for the work and materials they provide. Laws and regulations try to establish a timeline for construction payments that is fair and reasonable for the people providing work and materials on a project.
In general, these requirements apply universally to public projects, i.e. state and federal construction jobs. Laws in some states apply these requirements to private projects as well.
Prompt payment requirements are not always cut-and-dry. The laws create a timeline for payment that often starts when a party receives a “proper” or “undisputed” invoice. As a result, the interpretation of the requirements can be quite subjective.
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