Limits amount of payment that State agency as property owner may withhold from certain contractors on State construction contracts to two percent of amount due.

A1547

ASSEMBLY, No. 1547

STATE OF NEW JERSEY

222nd LEGISLATURE

�

PRE-FILED FOR INTRODUCTION IN THE 2026 SESSION

Sponsored by:

Assemblyman CLINTON CALABRESE

District 36 (Bergen and Passaic)

SYNOPSIS

���� Limits amount of payment that State agency as
property owner may withhold from certain contractors on State construction
contracts to two percent of amount due.

CURRENT VERSION OF TEXT

���� Introduced Pending Technical Review by Legislative
Counsel.

��

An Act
concerning the payment of funds for State construction
projects and amending P.L.1992, c.133.�

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

���� 1.��� Section 2 of P.L.1991,
c.133 (C.2A:30A-2) is amended to read as follows:

���� 2.� a.� If a prime contractor
has performed in accordance with the provisions of a contract with the owner
and the billing for the work has been approved and certified by the owner or
the owner's authorized approving agent, the owner shall pay the amount due to
the prime contractor for each periodic payment, final payment or retainage
monies not more than 30 calendar days after the billing date, which for a
periodic billing, shall be the periodic billing date specified in the
contract.� The billing shall be deemed approved and certified 20 days after the
owner receives it unless the owner provides, before the end of the 20-day
period, a written statement of the amount withheld and the reason for
withholding payment, except that in the case of a public or governmental entity
that requires the entity's governing body to vote on authorizations for each
periodic payment, final payment or retainage monies, the amount due may be
approved and certified at the next scheduled public meeting of the entity's
governing body, and paid during the entity's subsequent payment cycle, provided
this exception has been defined in the bid specifications and contract
documents.

���� b.��� If a subcontractor or
subsubcontractor has performed in accordance with the provisions of its
contract with the� prime contractor or subcontractor and the work has been
accepted by the owner, the owner's authorized approving agent, or the prime
contractor, as applicable, and the parties have not otherwise agreed in
writing, the prime contractor shall pay to its subcontractor and the
subcontractor shall pay to its subsubcontractor within 10 calendar days of the
receipt of each periodic payment, final payment or receipt of retainage monies,
the full amount received for the work of the subcontractor or subsubcontractor
based on the work completed or the services rendered under the applicable
contract.� In the case of ongoing work on the same project for which partial
payments are made, the amount of money owed for work already completed shall
only be payable if the subcontractor or subsubcontractor is performing to the
satisfaction of the prime contractor or subcontractor, as applicable.

���� c.��� If a payment due
pursuant to the provisions of this section is not made in a timely manner, the
delinquent party shall be liable for the amount of money owed under the
contract, plus interest at a rate equal to the prime rate plus
[
1%
]

one
percent
.� Interest on amounts due pursuant to this section shall be paid to
the prime contractor, subcontractor or subsubcontractor for the period
beginning on the day after the required payment date and ending on the day on
which the check for payment has been drawn.� The provisions of this subsection
c. shall not apply to any transportation project as defined in section 3 of
P.L. 1984, c.73 (C.27:1B-3), if that project receives federal funding and the
awarding agency has been notified by the federal government that it will be
classified as a high risk grantee pursuant to 49 C.F.R. 18.12.

���� d.��� A prime contractor,
subcontractor or subsubcontractor� may, after providing seven calendar days'
written notice to the party failing to make the required payments, suspend
performance of a construction contract, without penalty for breach of contract,
until the payment required pursuant to this section is made, if the contractor,
subcontractor or subsubcontractor: is not paid as required by this section; is
not provided a written statement of the amount withheld and the reason for the
withholding; and the payor is not engaged in a good faith effort to resolve the
reason for the withholding.� The provisions of this subsection d. shall not
apply to any transportation project as defined in section 3 of P.L. 1984, c.73
(C.27:1B-3), if that project receives federal funding and the application of
this provision would jeopardize the funding because the owner could not meet
the federal standards for financial management systems as outlined in 49 C.F.R.
18.20.

���� e.� (1) The rights, remedies
or protections provided by this section for prime contractors, subcontractors
and subsubcontractors shall be in addition to other remedies provided pursuant
to any other provision of State law.� To the extent that the provisions of this
section provide greater rights, remedies or protections for prime contractors,
subcontractors and subsubcontractors than other provisions of State law, the
provisions of this section shall supersede those other provisions.

���� (2)� No provision of this
section shall be construed as restricting in any way the rights or remedies
provided by any other applicable State or federal law to an owner who is a
resident homeowner or purchaser with respect to the real property being
improved.

���� f.���� All contracts for the
improvement of structures entered into after the effective date of P.L.2006,
c.96 between owners, prime contractors, subcontractors or subsubcontractors
shall provide that disputes regarding whether a party has failed to make payments
required pursuant to this section may be submitted to a process of alternative
dispute resolution.� Alternative dispute resolution permitted by this section
shall not apply to disputes concerning the bid solicitation or award process,
or to the formation of contracts or subcontracts.� In any civil action brought
to collect payments pursuant to this section, the action shall be conducted
inside of this State and the prevailing party shall be awarded reasonable costs
and attorney fees.

����
g.��� When a State agency,
as that term is defined in section 2 of P.L.1971, c.182 (C.52:13D-13) is the
owner of real property that is to be improved, no more than two percent of the
amount due on each partial payment owed to the contractor shall be withheld if
the contractor has provided a performance bond within 15 days of the award or
conditional award.

����
h.��� Subsection g. of this
section shall not apply when a contractor has been subject to termination of a
contract for cause at any point in the five years prior to the award or
conditional award.� In that circumstance, the State agency may, upon its
discretion, withhold partial payments exceeding two percent of the amount due
on each partial payment owed to the contractor.

(cf: P.L.2006, c.96, s.2)

���� 2.��� This act shall take
effect immediately.

STATEMENT

���� This bill prohibits State
agencies from withholding more than two percent of the amount due on each
partial payment owed to the contractor on State construction projects.� This
limitation will not apply when a contractor has had a contract terminated for
cause in the past five years prior to the contract award.