A subcontractor not getting paid by a government prime contractor has specific legal protections — including federal prompt payment flow-down rules, Miller Act bond claims, and state-level Little Miller Act remedies — that most subs never use because they don't know they exist.
If you're a subcontractor on a government project and the prime is holding your money, you're caught in what amounts to a double delay. First, the government agency takes 30, 60, or even 90+ days to pay the prime. Then the prime sits on that cash before passing it down to you. The result is a payment timeline that can stretch well beyond 120 days — long enough to threaten your payroll, your supplier relationships, and your ability to bid on the next job.
This guide covers the legal distinctions you need to understand, the federal rules that work in your favor, and the practical steps to get paid.
Key Takeaways
- Pay-when-paid and pay-if-paid are not the same thing. One sets a timeline; the other can eliminate the prime's obligation to pay you entirely. Know which clause is in your subcontract.
- Federal contracts require primes to pay subs within 7 days of receiving payment from the government, under FAR 52.222-40. Many subs don't know this rule exists.
- The Miller Act gives you the right to file a claim against the prime's payment bond on federal projects over $100,000 — no lien needed.
- State "Little Miller Acts" provide similar protections on state and local public projects, though rules vary by state.
- You have escalation options beyond waiting. Written demands, contracting officer complaints, bond claims, and early payment programs can all break the cycle.
The Double-Delay Problem for Government Subcontractors
Government projects are structured in layers. The agency contracts with a prime, and the prime subcontracts portions of the work. Payment flows in the same direction: agency to prime, then prime to sub.
Each layer adds delay. According to the U.S. Government Accountability Office, the federal government pays roughly 95% of invoices within 30 days (GAO, 2023). That sounds fast — until you factor in what happens next. The prime may not pass that payment along for weeks or months. A 2022 survey by the National Subcontractors Alliance found that 49% of subcontractors reported waiting more than 60 days past invoice approval to receive payment from a prime contractor.
For subcontractors already operating on thin margins, this gap is not an inconvenience. It's an existential threat. Understanding your government vendor payment terms — and the contractual language that governs when a prime must pay you — is the first step toward protecting yourself.
Pay-When-Paid vs. Pay-If-Paid: The Clause That Changes Everything
Most subcontracts on government projects include a clause that ties your payment to the prime receiving payment from the government. These clauses come in two forms, and the legal difference between them is enormous.
Pay-When-Paid
A pay-when-paid clause means the prime will pay you when it receives payment from the government. Courts in most states interpret this as a timing mechanism, not a condition. The prime still owes you the money. The government's payment simply sets a reasonable timeline for when you should expect it.
If the government pays the prime and the prime doesn't pay you within a reasonable period (typically 30-60 days, depending on jurisdiction), you can pursue collection. The prime cannot hold your money indefinitely just because the clause exists.
Pay-If-Paid
A pay-if-paid clause is far more dangerous. It means the prime will pay you only if it receives payment from the government. Courts that enforce these clauses treat the government's payment as a condition precedent — meaning if the government never pays the prime, the prime has no obligation to pay you.
Not all states enforce pay-if-paid clauses. States including California, New York, and North Carolina have statutes or case law that void or limit them, particularly on public projects. But in states that do enforce them, a pay-if-paid clause can leave a sub with no contractual right to payment through no fault of their own.
Comparison: Pay-When-Paid vs. Pay-If-Paid
| Feature | Pay-When-Paid | Pay-If-Paid |
|---|---|---|
| Prime's obligation | Must pay you; timing tied to government payment | Obligation only arises if government pays the prime |
| Legal interpretation | Timing mechanism | Condition precedent |
| If the government never pays | Prime still owes you | Prime may owe you nothing |
| Enforceability | Enforced in all states | Void or restricted in many states on public projects |
| Risk to the sub | Moderate (delayed payment) | High (potential non-payment) |
| Your best move | Track government payment status, push for timely flow-down | Negotiate this clause out before signing, or understand your state's law |
Bottom line: Before you sign any subcontract on a government project, identify which clause you're agreeing to. If it's pay-if-paid, negotiate. If you can't negotiate it out, know whether your state enforces it.
The FAR Subcontractor Prompt Payment Provision
If you're working on a federal government contract, you have a protection that most subcontractors don't know about: the FAR Subcontractor Prompt Payment provision.
Under FAR 52.222-40, prime contractors on federal contracts are required to pay subcontractors for satisfactory work within 7 calendar days of receiving payment from the government. This is not a suggestion. It's a clause that federal contracting officers are required to include in prime contracts, and it flows down to subcontract agreements.
Here's what the provision covers:
- 7-day payment window. Once the prime receives payment from the government for work that includes your scope, the prime has 7 days to pay you.
- Interest on late payments. If the prime pays late, you are entitled to interest penalties, calculated at the rate established by the Secretary of the Treasury under the Prompt Payment Act.
- No waiver allowed. The prime cannot include language in your subcontract that waives this provision. Any clause attempting to do so is unenforceable on a federal contract.
This provision exists because Congress recognized the same double-delay problem described above. Yet awareness among subcontractors remains low. A 2021 study by the Small Business Administration's Office of Advocacy found that only 28% of small subcontractors on federal projects were aware of the prompt payment flow-down requirements under FAR.
If you're on a federal project and your prime is sitting on your payment, cite FAR 52.222-40 in your written demand. If the prime still won't pay, your next step is to contact the contracting officer at the federal agency — they have the authority to enforce this provision. For a deeper look at how the Prompt Payment Act works at the agency level, see our full guide.
Miller Act Remedies: Your Right to Claim Against the Payment Bond
On federal construction projects over $100,000, the Miller Act (40 U.S.C. §§ 3131–3134) requires the prime contractor to obtain a payment bond. This bond exists specifically to protect subcontractors and suppliers who aren't getting paid.
Who Can File a Miller Act Claim
- First-tier subcontractors (those with a direct contract with the prime) can file a claim against the payment bond.
- Second-tier subcontractors and suppliers (those who contracted with a first-tier sub, not directly with the prime) can also file, but must provide written notice to the prime contractor within 90 days of their last day of work or material delivery.
How to File
- Send written notice. If you're a second-tier sub or supplier, you must notify the prime in writing within 90 days. First-tier subs are not required to give advance notice, but doing so strengthens your position.
- File suit in federal court. If the claim isn't resolved, you can file a lawsuit in the U.S. district court where the project is located. You must file no earlier than 90 days after notice and no later than 1 year after your last day of work.
- Recover what you're owed. A successful Miller Act claim entitles you to the unpaid balance plus interest and, in some cases, attorney's fees.
We cover the full process, deadlines, and strategic considerations in our Miller Act payment bond claim guide.
Little Miller Acts for State and Local Projects
State and local government projects are not covered by the federal Miller Act. However, every state has its own version — commonly called a "Little Miller Act" — that imposes similar payment bond requirements on public construction projects.
The rules vary significantly by state. Bond thresholds, notice deadlines, and filing windows all differ. Some states set the bond requirement at $25,000; others at $100,000 or higher. Notice periods range from 30 to 90 days. Our state-by-state Little Miller Act reference covers the specifics for each jurisdiction.
One important note: on government projects, you generally cannot file a mechanics lien against public property. The payment bond is your substitute remedy. If you're unsure whether a mechanics lien applies to your government project, check our guide to that topic as well.
Practical Escalation Tactics: Step by Step
Knowing your legal rights matters. But most subcontractors want to get paid without filing a lawsuit. Here's a practical escalation path, in order:
Step 1: Document Everything
Before you escalate, make sure your records are in order. Gather your subcontract, all invoices, proof of work completion or delivery, any lien waivers you've signed, and all correspondence with the prime. If your invoices have been approved by the prime's project manager, get that confirmation in writing.
Step 2: Send a Formal Written Demand
Call the prime's accounts payable team. If that doesn't resolve things within a week, send a written demand letter via certified mail. Reference the specific invoice numbers, amounts, and due dates. If you're on a federal contract, cite FAR 52.222-40 and the 7-day payment window. Keep the tone professional — you may need to continue working with this prime.
Step 3: Contact the Contracting Officer
On federal contracts, the government's contracting officer has oversight authority over the prime's compliance with contract terms, including prompt payment flow-down. A phone call or email to the CO explaining that the prime is not complying with FAR 52.222-40 can move things quickly. Primes don't want contracting officers scrutinizing their payment practices.
On state or local projects, contact the agency's project manager or procurement office. Many agencies include prompt payment requirements in their prime contracts and take sub complaints seriously.
Step 4: File a Bond Claim
If written demands and agency contact don't produce results, file a claim against the prime's payment bond (Miller Act for federal, Little Miller Act for state/local). This triggers the surety's involvement. Sureties have a financial incentive to resolve claims quickly and will often push the prime to pay.
Step 5: Consult a Construction Attorney
If your bond claim is disputed or the amounts are significant, get legal counsel. Many construction attorneys work on contingency for Miller Act claims, meaning you pay nothing upfront. An attorney can also evaluate whether you have additional claims — breach of contract, unjust enrichment, or violations of state prompt payment statutes.
Breaking the Cycle: Cash Flow Options for Subcontractors
Even when you follow every step above, getting paid can take months. And during those months, you still need to cover payroll, materials, insurance, and equipment costs.
Some subcontractors turn to invoice factoring — selling their receivables to a third party at a discount. This can work, but factoring fees add up, especially if the prime or agency pays slowly (since many factoring agreements charge more the longer the invoice stays outstanding).
Another model is an early payment program, where a financing provider purchases approved invoices for a flat fee and collects from the agency or prime directly. Companies like Lunch, for example, advance payment to government vendors in 1–3 business days for a flat per-invoice fee — no interest, no compounding, and no additional charges if the agency pays late. These programs are more common on direct-to-agency contracts, but they illustrate a broader shift: vendors and subcontractors increasingly have alternatives to simply waiting.
Whatever option you consider, understand the cost structure, know whether fees increase with delay, and confirm whether the arrangement is recourse (you pay back if the invoice isn't collected) or non-recourse.
FAQ
Can a prime contractor withhold my payment until the government pays them?
It depends on the language in your subcontract. A pay-when-paid clause allows the prime to delay payment until they receive funds from the government, but they still owe you the money. A pay-if-paid clause, in states that enforce it, can relieve the prime of the obligation entirely if the government never pays. On federal contracts, FAR 52.222-40 limits the delay to 7 days after the prime receives payment.
What is the FAR subcontractor prompt payment rule?
FAR 52.222-40 requires prime contractors on federal projects to pay subcontractors within 7 calendar days of receiving payment from the government. Late payments accrue interest at the Treasury rate. The prime cannot waive this requirement in the subcontract.
How long do I have to file a Miller Act bond claim?
You must file suit no earlier than 90 days and no later than 1 year after your last day of work or material delivery on the project. If you're a second-tier subcontractor or supplier, you must also provide written notice to the prime within 90 days of your last work date.
Can I file a mechanics lien on a government project?
Generally, no. Government property is protected from mechanics liens in most jurisdictions. The payment bond (required under the Miller Act or your state's Little Miller Act) is the substitute remedy for subcontractors on public projects.
What should I do before signing a subcontract on a government project?
Read the payment clause carefully and determine whether it's pay-when-paid or pay-if-paid. Check whether your state enforces pay-if-paid clauses on public projects. Confirm that the prime has a payment bond in place. Understand the payment terms the government agency has with the prime, since those terms directly affect when you'll be paid. And document everything from day one.