Getting paid on federal construction

The payment chain, and where you sit in it

Money moves in defined hops. You bill your prime; the prime submits a payment request to the designated billing office; the government pays the prime; the prime pays you. Each hop has a rule attached, and the rules are in the contract as FAR clauses rather than in anyone's discretion.

The government's obligation runs to the prime, not to you — there is no privity between a sub and the federal government, which is why the sub-facing protections are drafted as mandatory subcontract clauses the prime has to carry down. Understanding that structure is what tells you who to press when a payment is late, and with what.

The Prompt Payment rules that protect subs

FAR 52.232-27 sets the government's due date for construction progress payments at 14 days after the designated billing office receives a proper payment request — a contracting officer may specify longer where inspection genuinely requires it, but 14 days is the default. Final payment is due the later of 30 days after receipt of a proper invoice or 30 days after government acceptance of the work.

The part that matters to you sits in paragraph (c). Every construction prime contract must carry a subcontract clause obligating the contractor to pay each subcontractor for satisfactory performance not later than 7 days from receipt of payment, plus an interest penalty clause for payments that miss that deadline — and each subcontractor must include the same clauses in its own subcontracts, at every tier. If the prime withholds over a performance deficiency and you then correct it, payment is due as soon as practicable and no later than 7 days after the correction.

One important limit: the prime's obligation to pay you an interest penalty is not an obligation of the government. Nobody at the agency is going to collect it for you. The clause gives you a contractual right against your prime, and its practical value is that it makes a specific, citable demand possible instead of a general complaint.

Retainage: what may be held, and by whom

On the government-to-prime link, retainage is conditional rather than automatic. Under FAR 52.232-5, the contracting officer may retain funds only where satisfactory progress has not been made, and the maximum is 10% of the payment amount. When progress becomes satisfactory, payment is to be made in full; when the work is substantially complete, the contracting officer retains only what is considered adequate protection and releases the rest. Where a building or division is separately priced, completing and getting it accepted means payment for that portion without retention.

Down at the subcontract level the rules are looser: the Prompt Payment construction clause expressly permits the prime or a subcontractor to retain an agreed percentage of each progress payment from a lower-tier sub without triggering an interest penalty, per the terms the parties agreed to. In other words, sub-level retainage is a negotiation, not a regulation. Read the retainage and release language in your subcontract before you sign it — that clause, not the FAR, is what governs your money on that job.

When it stops: the payment bond clock

There are no mechanic's liens against federal property. The Miller Act payment bond is the substitute, and it works — but on a schedule you have to respect. A first-tier subcontractor with a direct contract with the prime may bring an action on the payment bond after 90 days from the day it last furnished labor or materials, and must file no later than one year after that day.

A lower-tier claimant — a sub to a sub, or a supplier to a sub — has an additional prerequisite: written notice to the prime contractor within 90 days from the day it last furnished labor or materials, stating with substantial accuracy the amount claimed and the party it worked for. Miss that notice window and the bond claim is gone even though the one-year suit deadline hasn't run.

Both clocks run from your last day of labor or materials on the job, which is why documenting that date is not busywork. See bid bonds and performance bonds for how the bonds are structured and why the payment bond is the sub's friend.

The paperwork that makes the remedy easy

Every protection above turns on records you either kept or didn't. Keep dated delivery tickets and daily labor records that establish your last-furnished date. Get a copy of the payment bond at subcontract signing — you're entitled to ask, and asking early is unremarkable while asking late is a signal. Submit clean, complete pay applications, because a payment request that isn't proper never starts the 14-day clock in the first place. Stay current on certified payroll, since compliance gaps are the most common legitimate reason a payment gets held.

Then escalate in order rather than all at once: a specific written demand citing the 7-day subcontract clause, then the interest penalty, then written notice preserving your bond rights, then counsel. Most disputes end at step one, because a prime that knows you know the clause usually finds the check.

This is orientation to the payment framework as of July 2026, not legal advice — your subcontract's terms control, and Miller Act deadlines are strict enough that a construction attorney is the right reader once a claim looks real.

Frequently asked questions

How long does the government have to pay on a federal construction contract?

Progress payments are due 14 days after the designated billing office receives a proper payment request, though a contracting officer may specify a longer period where inspection requires it. Final payment is due the later of 30 days after receipt of a proper invoice or 30 days after government acceptance of the work.

How soon must a prime contractor pay a subcontractor on a federal job?

Not later than 7 days from the prime's receipt of payment from the government, under the mandatory subcontract clause in FAR 52.232-27. The prime also owes an interest penalty for payments that miss that deadline, and the same clauses must be flowed down at every lower tier. The government is not obligated to pay that interest penalty.

How much retainage can be withheld on federal construction?

The contracting officer may retain a maximum of 10% of a progress payment, and only where satisfactory progress has not been made. Retainage between a prime and its subcontractors is different — the Prompt Payment clause allows an agreed percentage to be retained on subcontract terms, so your subcontract language controls that money, not the FAR.

What is the deadline to file a Miller Act payment bond claim?

Suit may be brought 90 days after the day you last furnished labor or materials, and no later than one year after that day. Claimants without a direct contract with the prime must additionally give the prime written notice within 90 days of last furnishing, stating the amount claimed and who they worked for.