The Prompt Payment Act interest rate for January 1 through June 30, 2026, is 4.125% per year.1Bureau of the Fiscal Service. Prompt Payment If a federal agency pays your invoice late, it owes you interest at that rate automatically, calculated from the day after the due date through the day the money actually arrives. You don’t have to ask for it. The rate resets every six months, so the figure you use depends on when the delay began, not when payment finally comes through.
How the Rate Is Set and Where to Find It
The Secretary of the Treasury sets the rate by reference to current private commercial lending rates for new loans maturing in roughly five years.2Office of the Law Revision Counsel. 41 USC 7109 – Interest The new figure is published in the Federal Register on or about January 1 and July 1 each year, and the same rate governs interest under the Contract Disputes Act.3Federal Register. Prompt Payment Interest Rate; Contract Disputes Act
For context, the rate for the second half of 2025 was 4.625%, so the current 4.125% reflects a modest decline.4Federal Register. Prompt Payment Interest Rate; Contract Disputes Act Once a six-month rate takes effect, it locks in for every late payment whose due date falls within that window, no matter what happens to market rates later. The current figure lives on the Bureau of the Fiscal Service website.5eCFR. 5 CFR 1315.10 – Late Payment Interest Penalties
How the Interest Is Calculated
Interest starts accruing the day after the payment due date and runs through the date of actual payment. The rate in effect on that first day of accrual governs the entire delay, even if a new six-month rate takes over partway through.5eCFR. 5 CFR 1315.10 – Late Payment Interest Penalties Calculations use a 360-day year, which is standard in government finance.
The daily math: multiply the unpaid invoice by the annual rate, divide by 360, and multiply by the number of days late. Where the cost climbs for the agency is compounding. Every 30 days that interest goes unpaid, it’s added to the principal, and interest then runs on the higher balance. Compounding continues for up to one year.5eCFR. 5 CFR 1315.10 – Late Payment Interest Penalties After twelve months, interest still accrues on the unpaid amount but no longer compounds.
Two limits catch vendors off guard. Agencies don’t have to pay interest penalties of less than one dollar, so a very small invoice or a very short delay can produce nothing.5eCFR. 5 CFR 1315.10 – Late Payment Interest Penalties And interest stops accruing the moment you file a formal claim under the Contract Disputes Act, which is a reason to calculate what you’re owed before choosing that route.
When the Clock Starts
The interest rate only matters once you know when the payment was actually late. Two things have to happen first: the billing office has to receive a proper invoice, and the government has to accept the goods or services. The due date is the later of those two events.6Acquisition.GOV. Federal Acquisition Regulation 52.232-25 – Prompt Payment If you deliver on day one and invoice on day fifteen, the 30-day standard clock starts on day fifteen.
A proper invoice must include your name and contact details, the invoice date and number, the contract or authorization number, a description of the goods or services with quantities and prices, shipping and payment terms, a taxpayer identification number where required, and electronic funds transfer information unless waived or already on file.7eCFR. 5 CFR 1315.9 – Required Documentation If a field is missing or wrong, the agency has seven days to return the invoice, and the payment clock doesn’t start until you resubmit a corrected version.8Acquisition.GOV. Federal Acquisition Regulation Subpart 32.9 – Prompt Payment Submitting a perfect invoice to the wrong billing office has the same effect as submitting a defective one.
On the acceptance side, the regulations use a constructive acceptance rule: for interest purposes, acceptance is deemed to occur on the seventh day after delivery unless the contract specifies a longer inspection period or a genuine dispute exists over quantity or quality.6Acquisition.GOV. Federal Acquisition Regulation 52.232-25 – Prompt Payment That prevents an agency from stalling by simply never signing off.
Shorter Deadlines for Some Contracts
The 30-day standard isn’t universal. Meat and meat food products, including fresh or frozen poultry and eggs, must be paid within seven days of delivery. Perishable agricultural commodities like fresh fruit and vegetables must be paid within ten days unless the contract sets a different date.9Acquisition.GOV. Federal Acquisition Regulation Subpart 32.9 – Prompt Payment – Section: 32.904 Determining Payment Due Dates Progress payments on federal construction contracts are due 14 days after the billing office receives a proper request.10eCFR. 48 CFR 52.232-27 – Prompt Payment for Construction Contracts Final construction payments use the ordinary 30-day rule, and retainage is due on the schedule stated in the contract, or within 30 days of the contracting officer’s approval to release it if the contract is silent. Miss any of these shorter deadlines and interest starts accruing the next day at the same Treasury rate.
Discounts Taken Late
Federal contracts often carry early-payment discount terms such as “2/10 net 30.” When an agency takes the discount after the discount deadline has passed, that’s treated as a form of late payment, and interest is owed on the discount amount.11eCFR. 5 CFR Part 1315 – Prompt Payment Interest runs from the day after the discount deadline through the date the agency actually paid. On a $100,000 invoice with a 2% discount taken a week late, that’s seven days of interest on $2,000. These are easy to miss when you’re checking only the main payment total.
If the Interest Doesn’t Show Up
The payment office is supposed to identify its own late payments, calculate the interest, and include it with the disbursement, all without any vendor action.12Acquisition.GOV. Federal Acquisition Regulation Subpart 32.9 – Prompt Payment – Section: 32.907 Interest Penalties It usually shows up as a separate line on the remittance advice. Check for it every time; automated systems make mistakes.
When interest is missing, start with the contracting officer or the agency finance office. Many omissions get fixed at that level. If they don’t, you can pursue an additional penalty on top of the original interest owed.
The Additional Penalty and the 40-Day Demand
If an agency pays late without the required interest and still hasn’t paid the interest within 10 days after the payment date, you become eligible for an additional penalty. Unlike the standard interest, this one isn’t automatic. You have to submit a written demand postmarked or received electronically by the 40th day after the late payment was made. The demand needs to identify the invoice, assert that interest is owed, attach a copy of the invoice, and state the date you received the principal payment.13eCFR. 5 CFR 1315.11 – Additional Penalties Miss the 40-day window and you lose the penalty entirely.
The penalty equals 100% of the original interest owed, with a floor of $25 and a ceiling of $5,000. If the missed interest was $200, you get another $200. If it was $12, you get $25. No additional penalty applies when the original interest is under a dollar.13eCFR. 5 CFR 1315.11 – Additional Penalties
Formal Claims
When informal contact and the additional-penalty demand don’t resolve the issue, or when the amounts justify it, the Contract Disputes Act supplies the formal route. A claim goes in writing to the contracting officer, who issues a written decision; disagreements can move to the Civilian Board of Contract Appeals or the Court of Federal Claims.14Acquisition.gov. FAR 52.233-1 Disputes Remember that Prompt Payment interest stops accruing the day you file. That’s not a reason to delay, since the one-year compounding cap limits the accrual anyway, but it’s a reason to calculate the full amount owed before you file.