52.232-27
Prompt Payment for Construction Contracts
FAR 52.232-27 requires prompt payment to contractors and subcontractors on federal construction contracts, with automatic interest penalties for late payments and strict flowdown and notice requirements.
Overview
FAR 52.232-27, Prompt Payment for Construction Contracts, establishes the requirements for timely payments to contractors and subcontractors on federal construction contracts. It sets specific deadlines for progress and final payments, details the process for submitting proper invoices, and mandates automatic interest penalties for late payments. The clause also requires contractors to flow down prompt payment and interest penalty provisions to all subcontractors and suppliers, and outlines procedures for withholding payments, resolving disputes, and handling overpayments. The regulation aims to ensure fair and prompt compensation throughout the construction contracting chain, reducing payment delays and disputes.
Key Rules
- Invoice Payment Deadlines
- Progress payments are due within 14 days of the billing office receiving a proper payment request; final payments are due within 30 days of invoice receipt or government acceptance, whichever is later.
- Proper Invoice Requirements
- Invoices must include specific information (contractor details, invoice number, contract number, work description, payment terms, etc.) and must be returned within 7 days if not proper.
- Automatic Interest Penalties
- The government must pay interest automatically if payments are late, with additional penalties if interest is not paid promptly.
- Subcontractor Payment Flowdown
- Contractors must include prompt payment and interest penalty clauses in all subcontracts and require lower-tier subcontractors to do the same.
- Withholding and Notice Procedures
- Contractors may withhold payments for performance deficiencies but must provide written notice to subcontractors and the contracting officer, and pay promptly once deficiencies are corrected.
- Dispute and Overpayment Handling
- Disputes between prime and subcontractors do not involve the government, and contractors must promptly remit and report any overpayments.
Responsibilities
- Contracting Officers: Ensure contract clauses are included, monitor compliance, and process payments and interest penalties as required.
- Contractors: Submit proper invoices, pay subcontractors promptly, flow down required clauses, provide notices for withholdings, and handle overpayments.
- Agencies: Oversee payment processes, enforce compliance, and resolve disputes related to government payment obligations.
Practical Implications
- This clause exists to promote timely payments and reduce financial strain on contractors and subcontractors in federal construction projects.
- It impacts daily operations by requiring strict invoice documentation, prompt payment practices, and clear communication regarding payment issues.
- Common pitfalls include submitting incomplete invoices, failing to flow down required clauses, or improper handling of withholdings and overpayments.