[First Reprint]

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, ¹[60 calendar days from the receipt by the State of a properly executed State invoice or]¹ 60 days from the ¹[acceptance of the completed work] approval of an invoice¹ by the State ¹[, whichever is later]¹.

    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 ¹[a rate equal to the prime rate plus 1%.] 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).

    d. The State Treasurer shall have the right to waive the interest payment for delinquencies due to circumstances beyond the control of the State agency, including but not limited to strikes and natural disasters, and for contracts entered into prior to the effective date of this act.

    e. The contract shall also provide that if there exists a valid basis under the terms of the contract to withhold payment from the contractor, the State may withhold such payment without the accrual of interest. If the State withholds payment from a contractor, the State shall provide to the contractor written notice detailing the reason for withholding payment and stating the amount of payment withheld. A copy of the notice shall be provided to the bonding company providing the performance bond for the contractor.

    f. Nothing in this section shall be construed as permitting the accrual of prejudgment interest in the case of a disputed contract brought pursuant to the "New Jersey Contractual Liability Act," N.J.S.59:13-1 et seq.¹

    3. Disputes between ¹[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.] prime contractors and subcontractors to State contracts shall be submitted to a mandatory alternate dispute resolution process. Each contract between the prime contractor and a subcontractor to a State contract shall contain a provision specifying the alternate dispute resolution process to be used by the parties. Cost of the alternate dispute resolution process shall be shared equally by the parties.¹

    4. This act shall take effect immediately.

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