Most, if not all, jurisdictions, including the federal government, have what is known as a “Prompt Payment Act.”  The objective is to ensure prompt payment. If prompt payment is not made, the Prompt Payment Act provides for interest penalties, as well as potentially other costs such as attorney’s fees.

But the thing is, it’s not as simple as untimely payment to support the recourse and interest penalties the applicable Prompt Payment Act affords. And the teeth associated with the applicable Prompt Payment Act are not as sharp as perhaps the party claiming untimely payment prefers.

A recent case out of the federal arena where the contractor claimed Prompt Payment Act recourse due to untimely progress payments from the government explains that the teeth of the Act are fully negated by a “bona fide” dispute:

[The contractor] bears the burden to establish that the progress payments were erroneously withheld. PPA interest will be paid if the Government receives a proper payment request and “there is no disagreement over quantity, quality, or Contractor compliance with any contract term or condition, or requested progress payment amount.”

The prompt payment regulations at…do not require the Government to pay interest penalties if payment delays are due to disagreement between the Government and the Contractor over the payment amount or other issues involving contract compliance, or on amounts temporarily withheld or retained in accordance with the terms of the contract.

However, to avoid PPA interest:

“[T]here must be, at the time payment of an invoice is delayed, a ‘present basis for delaying payment which is related to an objective discernible dispute.”’ All that is required to raise a bona fide dispute concerning contract compliance is that the government’s questions be raised in good faith. That a contractor may ultimately prevail on the merits does not defeat an otherwise proper payment withholding if there is such a good faith dispute.

F.O.G., LLC v. Department of the Interior, CBCA 8203, 2026 WL 1191881 (CBCA 2026) (internal citations omitted).

Take a look at the underlined language and keep this in mind.

A bona fide dispute raised in good faith will defeat the recourse in the Prompt Payment Act, which is what occurred in this case. (Naturally the dispute needs to be in good faith for there to be a bona fide dispute.) Moreover, just because the party claiming untimely payment prevails on the merits does not mean the dispute was not bona fide, meaning prevailing on the merits does not support a violation the Prompt Payment Act.