Prompt Payment Act
Theodore Watson, Esq (Government Contract Attorney)
As a government contractor, your ability to collect prompt payment from the federal government is essential to your success. The Federal Acquisition Regulation includes law that supports timely payment by the government.
As government contract attorneys, we sometimes have to represent contractors by assisting them in receiving prompt payment for unpaid invoices.
The Prompt Payment Act (PPA), as enacted by Congress requires the government to pay invoices by the required due date. As practical matter, the federal government usually pays invoices within 30 days. However, this does not always happen.
Conditions of Payment
If you don’t submit a proper invoice then, you will have a hard time demanding payment and interest. Most contractors are now signed up with Wide Area Workflow. This process is designed to speed up payment of invoices. Invoices for progress payments should be certified under FAR 52.232-5. Nevertheless, the government must notify you if you have submitted a defective invoice.
Am I entitled to Interest?
The Prompt Payment Act does not allow interest if the government and the contractor do not agreement on the amount invoiced (disputed invoice). Also, contractors should be aware that if they are paid for work that does not conform to the contract requirements, then the government may be entitled to interest.
The prime contractors on government projects are also supposed to pay subcontractors within 7 days after receiving payment from the government. Failure to do this will incur interest.
However, prime contractors are not required to pay a sub contractor for work that is not timely or accurately performed under the subcontract. Some government contract attorneys forget this point when dealing with prompt payment act issues, and focus solely on whether the government has paid the prime.
Subcontractors should be aware that complaining to the government will not solve the problem simply because the government has no privity of contract with subcontractors. The basis for payment is the terms and conditions of the subcontract not the prime contract.
What can I do to ensure that the quality of work does not harm prompt payment?
As a matter of practice, you can keep in close communication with government contracting and quality assurance personnel. Written communication and project reports can reduce prompt payment act issues.