Construction payment terms that hold up

2026-09-04 · 6 min read

Geometric abstraction of four squares along a rule ending in green — Cut-off, certification, net terms — the real gap is the sum.

Five terms in the payment article decide whether a profitable job is also a survivable one. Read them together, compute the real gap, and strike the six clauses below at award.

The five terms that set your cash position

A subcontract's payment article is short and it decides everything. Five terms do the work: the billing cycle, the net terms, the retainage rate and release, the change-order pricing mechanism, and the conditionality of payment on the owner. Everything else is decoration.

Read them together rather than separately. A 30-day net term looks fine until you notice the cycle cuts off on the 25th and certification takes ten days — which makes the real gap closer to seventy.

Geometric abstraction of two blocks joined by a rule — Four squares on a rule, and one green end.

Cycle plus terms is the real number

Where the days actually go
Stage	Typical	Question to ask
Work performed	Through the 25th	When is the cut-off?
Application submitted	By the 25th	Is late = next cycle?
Certification	5-10 days	Who certifies, and by when?
Net terms	30 days from certification	From submission or certification?
Actual gap	50-70 days	Compute it before you sign

“Net 30 from approval” and “net 30 from submission” are not close to the same clause. Ask which, in writing, and put the answer in the schedule you use to plan payroll.

Clauses worth striking

Pay-if-paid conditionality — see the separate guide.
Any waiver of statutory lien or bond rights.
Retainage with no stated release date.
Unilateral backcharge rights with no notice or cure period.
Change orders priced only after the work is directed.
“Time is of the essence” running one way only.

On federal work, statute already supplies dates the contract cannot simply ignore: a progress payment is due 14 days after a proper request, and retained amounts are released by the date the contract names or the 30th day after final acceptance.

Change orders are a payment term

Most cash-flow damage on a healthy job comes from change-order work performed before it is priced. The mechanism matters more than the markup: a clause that lets you bill directed work at agreed rates while pricing is finalised protects you; one that requires full execution before any billing does not.

Whatever the clause says, put approved change orders into the schedule of values as their own lines rather than folding them into existing ones. The schedule of values builder keeps the audit trail, and the pay application generator carries them into line 2.

Geometric abstraction of three rising bars with a red tick — Directed work, priced work, and the gap between them.

Sources

FAR 52.232-27(a)
On a federal construction contract, a progress payment is due 14 days after the designated billing office receives a proper payment request; an improper invoice must be returned within 7 days with reasons.
Read 2026-09-04
31 U.S.C. § 3903(a)(6)
Retained amounts on a federal contract must be released by the date the contract specifies or, if it specifies none, by the 30th day after final acceptance.
Read 2026-09-04
Tex. Prop. Code § 53.101
Texas requires the owner to reserve 10 percent of the contract price (or 10 percent of the value of the work) during the job and for 30 days after completion — statutory retainage.
Read 2026-09-04