SENATE, No. 725

STATE OF NEW JERSEY

INTRODUCED FEBRUARY 15, 1996

By Senator LIPMAN

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. Disputes between parties to State contracts and persons performing subcontracts to such contracts shall be resolved by mandatory arbitration. Every State contract shall contain a provision that any disputes arising under a subcontract to the contract shall be resolved by mandatory arbitration.

    4. This act shall take effect immediately.

STATEMENT

    This bill supplements the "New Jersey Prompt Payment Act", P.L.1987, c.184 (C.52:32-32 et seq.). That act requires any agency of the State (including the Legislative branch of State government and any agency thereof) that receives or uses goods or services provided under contract with a business concern other than a public utility to pay interest on amounts due to the concern that are not paid on or before the required payment date under the act (N.J.S.A.52:32-34). Under the bill, if a business concern that is party to such a contract enters a subcontract with another to perform part of that contract, the subcontract is to provide for the payment by the contractor of interest on any amount due the subcontractor that is not paid on or before the required payment date. The rate of interest applicable to such late payments is to be the same as the rate established by the State Treasurer with respect to late payments by the State to the contractor, or such higher rate as may be specified in the subcontract.

    The bill also supplements a 1991 law that requires a prime contractor under a construction contract with a State agency to pay interest, at the prime rate plus 1%, on any amount due to a subcontractor or supplier that is not, without good cause, timely paid after the contractor has been paid by the State agency. The bill similarly requires the State agency to pay an interest penalty on late payments to the prime contractor under the construction contract.

    Finally, the bill requires mandatory arbitration as the means of resolving disputes between parties to State contracts and persons performing subcontracts thereto. It also requires that each State contract provide that disputes under a subcontract to the contract are to be resolved through the use of mandatory arbitration.

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