Reference

How Federal Contractors Get Paid — Financing & Payment Methods

Winning the award is only half the game — getting paid, on time and in full, is what keeps a small prime alive. Cash flow is the number-one killer of small businesses in federal contracting: you fund labor and materials for weeks or months before a single dollar arrives. These plain-English pages take one payment or financing method at a time — the invoice and the Prompt Payment Act, progress payments and performance-based payments, commercial financing, construction retainage, the cost-reimbursement voucher, payment by EFT through SAM, electronic invoicing through WAWF and IPP, assigning your receivables to a bank, and the contract debts and offsets that can quietly shrink an expected payment. Each has an at-a-glance card, its controlling FAR citation, when it’s used, how to get paid, and the small-business cash-flow angle — the map of where the money is and when it reaches you.

Last updated Update cadence: Quarterly, plus on FAR amendment

Compiled from: Federal Acquisition Regulation (Title 48 CFR, Part 32 — Contract Financing) · FAR 52.216-7 (Allowable Cost and Payment) and FAR Subpart 42.7 (indirect rates) · Prompt Payment Act (5 CFR Part 1315), Assignment of Claims Act (41 U.S.C. § 6305), and DFARS 252.232-7003 (WAWF)

Change log (1)
  1. LaunchedPublished the federal contract financing & payment methods reference covering how an SDVOSB gets paid — invoice payment and the Prompt Payment Act (FAR Subpart 32.9 / 52.232-25), progress payments based on cost (FAR Subpart 32.5 / 52.232-16), performance-based payments (FAR Subpart 32.10 / 52.232-32), commercial product & service financing (FAR Subpart 32.2 / 52.232-29 & -30), construction progress payments and retainage (FAR 32.103 / 52.232-5 & -27), cost-reimbursement and T&M public vouchers (FAR 52.216-7 / Subpart 42.7), payment by electronic funds transfer through SAM (FAR Subpart 32.11 / 52.232-33), electronic invoicing via WAWF and IPP (FAR 32.905 / DFARS 252.232-7003), assignment of claims for bank financing (FAR Subpart 32.8 / 52.232-23), and contract debts and government offsets (FAR Subpart 32.6 / 52.232-17) — each with an at-a-glance quick-facts card, a when-it's-used list, a key-features table, an SDVOSB cash-flow angle, a how-to-get-paid checklist, watch-outs, FAQPage, Article, Dataset, and BreadcrumbList structured data, primary-source citations, and cross-links into the glossary, how-to guides, FAQ, contract types, clauses, forms, thresholds, and the price-to-win and limitations-on-subcontracting calculators.

Fixed-Price Payment & Financing

Prompt Payment
Invoice Payment & the Prompt Payment ActThe default way you get paid on a fixed-price contract: you submit a proper invoice for supplies delivered or services rendered, and the Prompt Payment Act generally requires the government to pay within 30 days of a proper invoice — or owe you interest.
Progress Payments
Progress Payments Based on CostContract financing that pays you a percentage of the costs you incur as you perform a long-lead or high-cost fixed-price contract, before you deliver anything — customarily 80% for large firms and 85% for small businesses, later liquidated against your delivery invoices.
PBP
Performance-Based PaymentsThe government's preferred fixed-price financing method: instead of paying a percentage of cost, it pays you when you complete measurable events or milestones in a negotiated schedule — decoupling your cash from your cost records.
Commercial Financing
Commercial Product & Service FinancingFinancing tailored to commercial-item (FAR Part 12) contracts — interim payments tied to performance milestones and, less commonly, advance payments — negotiated on terms consistent with customary commercial practice rather than the cost-based government rules.
Construction Payments
Construction Progress Payments & RetainageHow fixed-price construction contractors get paid — monthly progress payments for work in place based on a schedule of values, subject to retainage the government may hold until satisfactory progress, and governed by a faster 14-day construction prompt-payment cycle.

Cost-Reimbursement & Time-and-Materials Payment

Vouchers
Cost-Reimbursement & T&M VouchersHow you get paid on cost-reimbursement and time-and-materials contracts — you submit public vouchers (SF 1034/1035) for allowable, allocable, and reasonable costs incurred, billed at provisional indirect rates and later trued up to final rates that DCAA audits.

How the Money Reaches You

EFT / SAM
Payment by Electronic Funds Transfer — SAMFederal payments are made electronically by EFT to the bank account in your SAM.gov registration — so your registration and its banking details must be active and correct or your money can't reach you.
eInvoicing
Electronic Invoicing — WAWF & IPPMost agencies require you to submit invoices and receiving reports electronically — DoD through Wide Area Workflow (WAWF/iRAPT in PIEE) and many civilian agencies through Treasury's Invoice Processing Platform (IPP) — instead of paper or email.

Financing, Interest & Debts

Assignment of Claims
Assignment of Claims (Bank Financing)A financing tool that lets you assign the money owed to you under a federal contract to a bank or other financing institution as collateral for a loan — the mechanism behind most government-contract working-capital lines.
Contract Debts
Contract Debts & Government OffsetsThe flip side of getting paid — when you owe the government money (overpayments, unliquidated financing, disallowed costs, price adjustments), FAR Subpart 32.6 lets it demand payment, charge interest, and offset the debt against amounts otherwise due to you.

Price the work so the cash-flow gap doesn’t sink you

The firms that survive federal contracting price in the weeks they finance the work before payment arrives, and know which financing tools close the gap. Model your rates, check your self-performance limits, and let the weekly Brief surface the set-asides that fit your certification.

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