Prompt payment

Pennsylvania prompt payment act and retainage rules

Pennsylvania has two prompt pay laws. CASPA covers private jobs with a 20-day owner deadline, 14-day sub flow-down, and 1 percent monthly interest. The Commonwealth Procurement Code covers public jobs, caps retainage at 10 percent, and halves it at 50 percent complete.

Maurice Francois Writer and editor June 29, 2026 5 min read

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Pennsylvania splits its prompt payment act rules by owner. Private work runs under the Contractor and Subcontractor Payment Act (CASPA), Act 7 of 1994 as amended in 2018. Unless the parties agree otherwise, the owner pays within 20 days after the end of the billing period or delivery of the invoice, whichever is later, and each GC or sub pays its own subs 14 days after it is paid. Public work runs under Chapter 39 of the Commonwealth Procurement Code (62 Pa.C.S.), which defaults to 45 days for the agency, 14 days for the flow-down, and a retainage cap of 10 percent until the job is half done.

Pennsylvania payment and retainage rules at a glance
Rule	Private work (CASPA)	Public work (62 Pa.C.S. Ch. 39)
Owner pays prime	Per contract; default 20 days after the billing period ends or the invoice is delivered, whichever is later (§ 5(c))	Per contract; default 45 calendar days after the pay application is received (§ 3932(b))
Prime pays sub	14 days after receiving payment or the sub's invoice, whichever is later (§ 7(c))	14 days after receiving a progress payment (§ 3933(c))
Late interest	1% per month, starting the eighth day after the owner's due date (§ 5(d)); subs from the day after their due date (§ 7(d))	Rate the Secretary of Revenue sets for overdue taxes under the Fiscal Code (§ 3932(c)); no interest if paid within 15 days of the due date when the contract has no grace period
Retainage cap	No percentage cap in CASPA; set by contract	10% until 50% complete; then half is returned and no more than 5% is held (§ 3921(a)); DGS jobs 6%, then 3% (§ 3921(b))
Retainage release	30 days after final acceptance; subs paid within 14 days of receipt (§ 9)	Final inspection within 30 days of request; if substantially complete, payment in full within 45 days, less 1.5 times the cost of minor open items (§ 3941)
Security in lieu	Maintenance bond for 120% of retainage held, once your own scope is substantially complete (§ 9(a.1))	Bond can replace extra retainage held for multi-prime delay disputes (§ 3921(a))
Bad faith penalty	1% per month on amounts wrongfully withheld, plus attorney fees to the substantially prevailing party (§ 12)	1% per month on amounts withheld in bad faith; attorney fees if bad faith (§ 3935)

Private work under CASPA

CASPA covers any construction contract for real property in Pennsylvania, written or oral, except projects with six or fewer residential units under construction at the same time, and owners buying materials for work on their own property. Since the 2018 amendments, parties cannot waive the act's provisions by contract unless the act itself allows it. The payment deadlines and the interest rate are the main terms the parties can still change, because those sections open with "except as otherwise agreed."

The flow-down has a disclosure trap built in. Before a subcontract is signed, the GC must tell the sub when the owner's payments are due. If the GC gets that wrong, it owes the sub as though the owner had paid on CASPA's default schedule. Then the 14-day clock runs from the later of the GC's receipt of payment or the sub's invoice.

Withholding has to be in writing, and fast

An owner can hold money for deficiency items, but the amount must be reasonable and the owner must send a written good faith explanation within 14 calendar days after receiving the invoice. Miss that and the right to withhold is waived, and the invoice must be paid in full. GCs face the same rule when they hold money from a sub, with notice to both the sub and the owner. Invoice errors are handled separately: the recipient gives written notice within 10 working days and then pays the correct amount on the normal due date.

Suspension: a contractor or sub that is not paid may suspend work without penalty. The statutory path requires written notice of nonpayment after 30 days, another 30 days, and then 10 days' notice by certified mail before stopping.
Penalty: a court or arbitrator must add 1 percent per month on money wrongfully withheld. Money held in reasonable relation to a good faith claim, with proper notice, is not wrongful.
Fees: the substantially prevailing party is awarded attorney fees and expenses, regardless of what the contract says.

Retainage on private jobs

CASPA does not cap private retainage. It controls timing. Retainage due at final completion must be paid within 30 days after final acceptance of the work, and each tier must pass a sub's share down within 14 days of receiving it. Once a contractor or sub has substantially completed its own scope, it can get its retainage released early by posting a maintenance bond for 120 percent of the amount held. Holding retainage past 30 days after final acceptance, or unreasonably refusing to accept the work, triggers 1 percent monthly interest and the act's penalty and fee provisions.

Public work under the Procurement Code

For government agencies, § 3921 caps retainage at 10 percent of the amount due until the job is 50 percent complete. At that point, with the architect or engineer approving the pay application and the contractor making satisfactory progress, half of what has been held is returned and the agency may hold no more than 5 percent of the value of completed work. When the Department of General Services is the owner, the limits are 6 percent of total estimates, then 3 percent of the original contract amount. The contractor pays its subs their earned share within 20 days of receiving payment under § 3922, and the Subchapter D flow-down sets 14 days for progress payments.

At the end of the job, the architect or engineer must make a final inspection within 30 days of the contractor's request. If the work is substantially complete, the agency pays in full within 45 days, less 1.5 times the cost of any minor open items. That final payment then bears interest at 10 percent per year on contracts with retainage and 6 percent on contracts without it, or the bond rate if the agency financed the work with bonds and that rate is lower, but never less than the legal rate. Some distressed municipalities and school districts and metropolitan transportation authorities are outside Chapter 39, and the agency's interest duty does not apply when nonpayment comes from a missing state budget or unpaid federal or state funds.

Pay-if-paid clauses in Pennsylvania

Neither statute expressly addresses pay-if-paid clauses. Both say a sub that performs is entitled to payment from the party it contracted with, and CASPA bars waiving its terms by contract. How a contingent payment clause plays against those rules is a question for counsel. Protect your lien position in the meantime; see Pennsylvania mechanics lien deadlines.

Pennsylvania's 14-day withholding notice is the deadline most offices miss. Smart Business Automator tracks invoice receipt dates, payments, and retainage by job and by sub, so notice and release dates do not slip. See construction accounts receivable automation.

Frequently asked questions

What is the Pennsylvania prompt payment act for private projects?

It is the Contractor and Subcontractor Payment Act (CASPA), Act 7 of 1994 as amended in 2018. It sets default payment deadlines, 1 percent monthly interest, a 1 percent monthly penalty for wrongful withholding, and mandatory attorney fees for the substantially prevailing party.

How long does a Pennsylvania owner have to pay?

On private work, 20 days after the end of the billing period or delivery of the invoice, whichever is later, unless the contract says otherwise. On public work without a contract term, 45 calendar days after the pay application is received.

Is there a cap on retainage in Pennsylvania?

On public jobs, yes: 10 percent until 50 percent complete, then no more than 5 percent, with lower limits on Department of General Services jobs. CASPA has no cap for private jobs but requires release within 30 days after final acceptance.

Can a Pennsylvania sub get retainage released before the project ends?

Under CASPA, once its own scope is substantially complete, a contractor or sub can post a maintenance bond for 120 percent of the retainage held to release it early.

Does CASPA apply to homes?

Not to projects with six or fewer residential units under construction at the same time.

Sources

Laws and rates change. Confirm current requirements with the state agency before you bid, file, or pay. This page is general information, not legal advice.

Written and edited by Maurice Francois

Maurice Francois writes and edits construction operations guides for Smart Business Automator. More from Maurice on the Scaling Legends podcast.