Illinois Prompt Payment Act: Deadlines, Interest, and Enforcement

The Illinois Prompt Payment Act (30 ILCS 540) gives state agencies 90 days to pay a proper bill on a state-funded contract, with interest of 1% per month accruing automatically after that. Once a contractor receives state funds, it must pass payment down to subcontractors and material suppliers within 10 business days or 15 calendar days, whichever is shorter, or owe 2% per month on the unpaid amount. A separate statute, the Contractor Prompt Payment Act (815 ILCS 603), sets shorter deadlines and a lower interest rate for private construction work.

Who the Act Covers

The State Prompt Payment Act reaches any state official or agency authorized to pay from state funds, including public universities and other entities that contract for goods, services, or construction using state money.¹ Its protections do not stop at the prime contract. Section 7 names subcontractors and material suppliers, including suppliers who furnish goods but no labor, and puts separate deadlines on contractors who receive state funds and must pay down the chain.²

The 90-Day Deadline for State Agencies

Since fiscal year 2012, a state agency has 90 days from the receipt of a proper bill or invoice to issue payment. That replaced the earlier 60-day window. If the agency misses the deadline, interest starts accruing the day after the 90 days expire and runs until payment issues.¹

The clock only starts when the bill is “proper.” A proper bill matches the written contract on amount, work or goods delivered, and required documentation, and it complies with the agency’s submission rules under Section 3-3. A bill with errors or missing information does not start the 90-day clock. Getting the paperwork right the first time is the single most effective way to speed up payment.

When the Agency Finds a Problem With Your Bill

If an agency finds a defect that prevents it from processing your bill, it must notify you as soon as possible. For construction-related bills, the written notice has to come within 30 days of the original submission and must identify the specific defect and the additional information needed to fix it.¹

Where only some items on a construction bill are disapproved, the agency still has to pay the portion that is not in dispute. It cannot hold the entire payment because of a problem with one line item.¹

Flow-Down Deadlines to Subcontractors and Suppliers

Once a prime contractor is paid by the state, it must pay each subcontractor and material supplier within 10 business days or 15 calendar days, whichever comes first. Electronic payments must transfer within that window. Printed checks must be postmarked inside it.²

Payments passed down have to be proportional to the work each sub or supplier completed, based on their pay application or estimate. They must also include any interest the contractor received from the state for late payment. A contractor cannot keep the interest penalty and shortchange the subs. The same obligations apply at every tier, so a second-tier supplier has the same protections as a first-tier subcontractor.²

Written Notice When a Contractor Refuses to Pay

A contractor that decides to withhold payment from a sub or supplier after receiving funds has five calendar days to provide written notice of the refusal. The notice must identify the contract, the subcontract or material purchase agreement, a detailed reason for withholding, the dollar amount held back, and what the sub or supplier needs to do to get paid.²

Interest Rates for Late Payment

The Act carries two different penalty rates.

A state agency that misses the 90-day window owes 1% per month on the unpaid balance, or 0.033% per day for partial months. Interest accrues automatically starting the day after the 90-day period expires.¹

A contractor that gets state funds and then fails to pay subs or suppliers within the 10-business-day or 15-calendar-day window owes 2% per month on the unpaid amount. That is double the rate charged to agencies.²

How to Actually Collect the Interest

Not every interest payment arrives automatically. Illinois administrative rules set three tiers based on the amount owed:

$50 or more: the agency must calculate and pay the interest on its own, with no request from you.
$5 to $49.99: you must submit a written request specifically asking for the interest penalty, ideally within 90 days of receiving the late payment.
Under $5: the state will not pay interest.

If the amount falls in that middle band and you never ask in writing, you will not see it. Track payment dates and run the math yourself.³

Enforcement

Administrative Hearings for Subcontractors and Suppliers

When a contractor gets state funds and withholds payment without reasonable cause, the unpaid sub or supplier can file a written notice and request for an administrative hearing directly with the state agency overseeing the project. The request has to identify the public construction contract, name the contractor, state the amount owed, and include a sworn statement verifying the claim’s accuracy. A copy also goes to the contractor.²

The agency must hold a hearing within 15 calendar days of receiving the request. An administrative law judge presides, and both sides can bring counsel, cross-examine witnesses, and challenge documents. If the judge finds the contractor withheld payment without reasonable cause, the agency can order payment of the amount owed plus interest. A prevailing sub or supplier can also petition the agency for reasonable attorney fees and costs within 30 days of the order.²

Court Action

Contractors owed money by a state agency can file a civil action to recover unpaid amounts plus accrued interest. Courts can order the release of funds when an agency fails to comply with the Act’s deadlines. Litigation is the primary route for disputes directly between a contractor and a state agency, since the Section 7 administrative hearing process is designed for sub and supplier claims against contractors.

When the Standard Timeline Bends

The Act builds in some flexibility. On a construction bill with a mix of approved and disputed items, extended review applies only to the disputed portion; the undisputed portion is still due on schedule.¹

Contingent or conditional contracts can also fall outside the standard 90 days. Where the state’s obligation to pay depends on receiving funds from another source, such as a federal grant or conditional revenue, the payment obligation aligns with the state’s actual receipt of those funds. A contractor on a federally funded state project may face a longer timeline than the ordinary 90 days.

Retainage Caps Coming in 2027

Retainage, the portion of each progress payment an agency holds back until a project is complete, has long pressured contractors’ cash flow. Illinois enacted HB 1224 during the 104th General Assembly, setting firm caps on retainage for public works contracts entered into on or after June 1, 2027:

Before 50% completion: retainage cannot exceed 10% of any progress payment.
After 50% completion: retainage drops to no more than 5% of any subsequent payment.

These limits apply to state agencies and local governments, with the exception of the Department of Transportation.⁴

Private Construction: A Different Statute

If your project is privately funded, the State Prompt Payment Act does not apply. The Contractor Prompt Payment Act (815 ILCS 603) governs private construction contracts for design, construction, alteration, or repair of Illinois real property. It does not cover contracts funded by public money, and it does not cover single-family homes or small residential buildings with 12 or fewer units.⁵

Key rules under the private-sector statute:

The owner must pay the contractor within 15 calendar days after approving a payment application.
If the owner does not respond to a payment application within 25 days, it is deemed approved, unless the owner has already issued a written statement identifying the amount withheld and the reason before that deadline.
A contractor must pay its subcontractors within 15 calendar days of receiving payment from the owner.
A subcontractor must pay lower-tier subs within 15 calendar days of receiving payment.
Interest on late payments runs at 10% per year, well below the 2% per month penalty on public projects.⁵

The 25-day deemed-approval rule matters on private jobs. An owner that sits on a payment application without a written objection has effectively approved it, and the 15-day payment clock then runs.

1
Illinois General Assembly. Illinois Compiled Statutes 30 ILCS 540/3-2
2
Illinois General Assembly. Illinois Compiled Statutes 30 ILCS 540/7
3
Legal Information Institute. Illinois Administrative Code Title 74 Section 900.90
4
LegiScan. Illinois HB1224 104th General Assembly Enrolled
5
Justia. Illinois Code 815 ILCS 603 – Contractor Prompt Payment Act