Federal contractors who deliver on time often assume the government will pay on time, but the rules that govern late payment are more precise, and more favorable to the contractor, than most invoices suggest. The FAR Subpart 32.9 prompt payment rules, together with the Office of Management and Budget regulations at 5 CFR Part 1315, set a hard due date, compute interest automatically when an agency misses it, and in some cases stack a second penalty on top. Knowing exactly when the clock starts is the difference between writing off a slow payment and collecting what the regulation already owes you.
Background
The Prompt Payment Act directs federal agencies to pay their bills on time and to pay interest when they do not. FAR Subpart 32.9 implements the statute for acquisition, while OMB's regulations at 5 CFR Part 1315 supply the mechanics that payment offices follow. The framework covers most contracts for supplies and services, and it does not require a contractor to negotiate for interest, because the entitlement is built into the payment process itself.
The starting point is the due date. Under FAR 32.904(b)(1), payment is due the later of two events: the 30th day after the designated billing office receives a proper invoice, or the 30th day after the government accepts the supplies or services. A "proper invoice" is a threshold concept. If an invoice is defective, the clock does not start until a corrected invoice arrives, which is why invoice accuracy is the contractor's first line of defense.
Acceptance is the second variable, and it is where many contractors lose track of the count. FAR 32.904(b)(1)(ii) and 5 CFR 1315.4(b) provide that, for the purpose of computing interest, government acceptance is deemed to occur constructively on the 7th day after the contractor delivers the supplies or performs the services, unless the contract specifies a longer acceptance period or actual acceptance happens sooner. In practice, that constructive-acceptance rule caps how long an agency can delay the clock simply by sitting on an inspection.
Key Details
The most important feature of the statute is that interest is automatic. Under FAR 32.907, the payment office must pay a late-payment interest penalty without any request, claim, or demand from the contractor whenever payment is made after the due date. A contractor does not have to invoke the Contract Disputes Act or file anything to trigger it; the obligation sits with the government's payment office. That design matters because it shifts the burden: the agency, not the contractor, is responsible for tracking the due date and cutting the interest check, even though the contractor should verify the math independently.
The interest rate is not fixed in the regulation. It is the rate established by the Secretary of the Treasury under the Contract Disputes Act, published semiannually by Treasury's Bureau of the Fiscal Service in the Federal Register on or about January 1 and July 1 (5 CFR 1315.2(d)). Each rate governs payments that come due during its six-month window, so a contractor checking what it is owed should pull the current rate from fiscal.treasury.gov rather than assume last period's figure.
A second penalty can stack on the first. Under 5 CFR 1315.11, if a contractor is owed a late-payment interest penalty, is not paid it, and makes a written demand within 40 days after the date of the payment, an additional penalty applies. That additional penalty equals 100 percent of the original interest penalty, subject to a floor of $25 and a ceiling of $5,000. Two limits bound the mechanism: no additional penalty is due if the underlying interest amount is less than $1.00, and the written-demand deadline is strict, so missing the 40-day window makes the second penalty disappear.
Discounts run on their own timeline. Under 5 CFR 1315.7, an agency may take a prompt-payment discount a contractor offers only after acceptance has occurred, and only when taking it is economically justified. When an agency does take the discount, it must pay as close as possible to, but no later than, the discount date; if it takes the discount but still pays late, interest runs on top.
What It Means for Contractors
The practical lesson is to treat the due date as a number you calculate, not one you wait for the agency to announce. Record three dates for every deliverable: the day the designated billing office received your proper invoice, the day you delivered or completed performance, and the day the government actually accepted. The due date is 30 days after the later of a proper invoice and acceptance, and acceptance defaults to seven days after delivery unless the contract says otherwise. If payment lands after that date, interest is owed by rule, and you should not write it off as the cost of doing business with the government.
Protect the invoice first. Because a defective invoice resets the clock, confirm that each submission carries every element the contract requires: line items, the contract and order number, the remittance address, and any taxpayer identification the payment office needs. A single missing field can hand the agency a legitimate reason to restart the 30-day count. Because the count runs from receipt of a proper invoice, each corrected resubmission starts that 30-day period over again, so getting the first submission right is the cheapest way to protect the due date.
Watch the constructive-acceptance rule when inspections drag. If your contract does not specify a longer acceptance period, the seven-day default means the government cannot indefinitely postpone the payment clock by delaying formal acceptance. Contractors on contracts with unusually long stated acceptance windows should read that clause carefully, because it directly moves the due date.
Finally, calendar the 40-day demand window. If interest is owed and the payment office fails to pay it, which happens more often than the "automatic" label suggests, a written demand within 40 days of payment can double the penalty, up to the $5,000 ceiling. That demand costs nothing but a letter, and the regulation, not the contracting officer's goodwill, decides whether it is honored. Keep the Treasury rate table, your invoice dates, and your acceptance records together, and the money the rule already provides becomes straightforward to collect.
