Payment on public construction is regulated by statute more than by contract.
Prompt payment. Statutes require payment within a stated period after an approved application, with interest for late payment, and require primes to pay subcontractors within days of receipt.
Retainage. Capped by statute in many states, with reductions at defined completion milestones and release on substantial completion, and in several states an option for the contractor to substitute securities.
Change orders. Written and approved by the designated official. Work performed on verbal direction is frequently unrecoverable because officials lack authority to bind informally.
Claims. A statutory or contractual claims process with short notice requirements, an administrative determination, and exhaustion before suit.
No lien rights. Public property cannot be liened, so the payment bond is the subcontractor’s security, with its own notice and suit deadlines.
Prevailing wage. Certified payrolls, apprenticeship ratios, and penalties including withholding of payment and debarment for underpayment.
Set-off. The public body’s right to withhold for liquidated damages, defective work and other claims, which is where disputes concentrate at the end of a project.
Final payment and waiver. Acceptance of final payment frequently waives claims not previously asserted, which makes the closeout documentation critical.