Understanding the Arkansas Contractor Prompt Payment Law

Timely payments are essential for maintaining healthy business relationships and ensuring construction projects are completed without unnecessary delays. For contractors working on public projects in Arkansas, understanding the Arkansas Contractor Prompt Payment Law (Arkansas Code § 19-4-1411) is crucial.

This law ensures prompt payment for work completed on public improvement contracts, protecting contractors and subcontractors from unreasonable delays in receiving payment. However, it’s important to note that this law applies exclusively to public projects and does not extend to private construction.

Who Does the Law Apply To?

The Arkansas Contractor Prompt Payment Law covers contractors and subcontractors working on public construction projects funded by government entities, such as state buildings, schools, or infrastructure projects.

Private projects fall outside the scope of this law, leaving contractors on private projects to rely on the terms of their individual contracts to address payment timelines.

If you’re working on a government-funded project, however, this law sets clear expectations for when payments must be made and the consequences for failing to meet these deadlines.

How Does the Law Work?

The law is designed to eliminate payment delays by establishing set timelines within which contractors and subcontractors must be paid. Once a contractor submits a properly completed invoice or payment application for work that has been approved, public agencies must process and disburse payment within a specific period.

The goal is to ensure that money flows smoothly from public agencies to the general contractor, and then to subcontractors, fostering fairness and efficiency across the industry.

Deadlines for Payment

The Arkansas Contractor Prompt Payment Law includes the following payment deadlines:

1. Payment to Prime Contractors
   Public agencies must pay prime contractors within 10 business days after they receive funding earmarked for the project. This means the clock starts ticking once the agency gets the money to cover the work under the specific payment application.
2. Payment from Prime Contractors to Subcontractors
   The law also sets a deadline for payments to subcontractors. Prime contractors have 7 business days to pay subcontractors after receiving the funds from the public agency.

It’s important for contractors and subcontractors to be aware of these timeframes to ensure they can track and enforce compliance if delays occur.

What Happens if Payment is Late?

If payments aren’t made within the deadlines set by the Arkansas Contractor Prompt Payment Law, interest begins to accrue on the unpaid amount. Specifically, the law mandates that public agencies and prime contractors who fail to make payments on time must pay 1% interest per month on the outstanding balance.

This penalty serves as an incentive for timely payments and provides some relief to contractors and subcontractors waiting on delayed funds. For example, if a public agency owes a contractor $100,000 and fails to pay within the required time, the contractor could claim $1,000 per month (1% of $100,000) as interest until the debt is settled.

Why Understanding This Law Is Critical

Knowing the specifics of the Arkansas Contractor Prompt Payment Law can help contractors and subcontractors protect their financial interests when working on public projects.

If you’re a contractor operating in Arkansas, you should take the time to familiarize yourself with this law and ensure your invoices are properly submitted to maximize your chances of receiving timely payments.

It’s also a good idea to communicate these legal requirements to subcontractors so everyone involved has a clear understanding of their rights and responsibilities.

For contractors working on private projects, this law unfortunately does not apply. Instead, private project payment terms will generally be governed by written contracts, making it essential to include fair payment clauses before starting work.

Final Thoughts

The Arkansas Contractor Prompt Payment Law provides strong safeguards for contractors and subcontractors collaborating on public construction projects. By clearly defining payment deadlines and holding agencies or contractors accountable through interest penalties, it helps to maintain trust and fairness in the industry.

If you’re unsure about your rights or whether your project falls under the scope of this law, give us a call at 713-715-7334 to ensure you’re fully protected. Timely payment isn’t just about cash flow—it’s about keeping your business running smoothly and growing confidently.