Almost every government subcontract contains a pay-when-paid clause: the prime pays you after the government pays the prime. Understanding how this actually works — and what protections exist — matters more than the label.
Why primes use it
The prime fronts the compliance, invoicing, and collection risk on the contract, and government agencies pay on their own clock — typically within 30 days of a proper invoice under the Prompt Payment Act. Pay-when-paid aligns the cash flow: the prime isn't financing the government's payment cycle out of pocket, and the sub's payment is tied to the same event.
The protection subs should know about
On federal contracts, FAR 52.232-40 (Providing Accelerated Payments to Small Business Subcontractors) requires primes to pay small business subcontractors within 15 days of receiving payment from the government, to the extent the prime has received those funds. A prime that commits to that 15-day clock in writing is telling you they run the standard correctly.
Questions to ask any prime before signing
- How many days after you're paid do I get paid? (The right answer is a specific number, in the subcontract.)
- What makes an invoice "proper" — what documentation do you need from me each month?
- Is the subcontract written and signed before work starts? (Handshake subcontracts on government work are a red flag.)
The realistic timeline
Government pays the prime ~30 days after invoice; a well-run prime pays you within 15 days of that. Plan working capital for roughly 45 days from your work to your money on the first cycle, tightening after that. A prime who is transparent about this timeline up front is one you can build years of work with.