ASSEMBLY, No. 375

STATE OF NEW JERSEY

Introduced Pending Technical Review by Legislative Counsel

PRE-FILED FOR INTRODUCTION IN THE 1996 SESSION

By Assemblyman T. SMITH

An Act concerning prompt payment under State contracts and supplementing P.L.1987, c.184 (C.52:32-32 et seq.) and P.L.1991, c.507 (C.52:32-40).

    Be It Enacted by the Senate and General Assembly of the State of New Jersey:

    1. a. Whenever a business concern, as defined in section 2 of P.L.1987, c.184 (C.52:32-33), enters into a contract to provide goods or services directly to a using agency or to a designated third party and also enters into a subcontract with any person to perform a specific part of the contract between the business concern and the State, the subcontract shall provide for the payment of interest on the amount due the subcontractor if the required payment is not made on or before the required payment date.

    b. The required payment date shall be the date specified in the subcontract or, if no date is specified, 60 calendar days from the receipt by the business concern of a properly executed invoice or 60 calendar days from the receipt by the business concern of goods or services, whichever is later.

    c. Interest on amounts due shall be paid by the business concern to the subcontractor for the period beginning on the day after the required payment date and ending on the date on which the check for payment is drawn. Interest shall be paid at the same rate established by the State Treasurer for late payments by the State to a business concern under a State contract pursuant to section 4 of P.L.1987, c.184 (C.52:32-35) or at a higher rate if specified in the subcontract.

    2. a. Whenever a State agency, as defined in section 1 of P.L.1991, c.507 (C.52:32-40), enters into a construction contract with any person, the contract shall provide for the payment of interest on the amount due the person if the required payment is not made on or before the required payment date.

    b. The required payment date shall be the date specified in the contract or, if no date is specified, 60 calendar days from the receipt by the State of a properly executed State invoice or 60 days from the acceptance of the completed work by the State, whichever is later.

    c. Interest on amounts due shall be paid by the State for the period beginning on the day after the required payment date and ending on the date on which the check for payment is drawn. Interest shall be paid at a rate equal to the prime rate plus 1%.

    3. The State Treasurer shall develop and implement an expedited method of resolving disputes between parties to State contracts and persons performing subcontracts to such contracts. Every State contract shall contain a provision that any disputes arising under a subcontract to the contract shall be resolved in the manner prescribed by the State Treasurer.

    4. This act shall take effect immediately.

STATEMENT

    This bill would implement one of the recommendations made by the Governor's Study Commission on Discrimination in Public Works Procurement and Construction Contracts in its report of February 22, 1993. Existing law requires the State to pay an interest penalty on late payments to a party providing goods or services under a State contract. The bill would extend this requirement to require such a party to pay interest on late payments to a person performing a subcontract to the State contract. Current law also requires prime contractors under State construction contracts to pay an interest penalty on late payments to subcontractors. The bill would require the State to similarly pay an interest penalty on late payments to a prime contractor under a construction contract. In addition, the bill directs the State Treasurer to develop an expedited method for resolving disputes between parties to State contracts and persons performing subcontracts thereto.

Concerns the prompt payment of parties to State contracts and subcontracts.