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.
The bill presents significant changes to the existing framework of payment practices in state construction projects by amending a previous law, P.L.1992, c.133. It establishes a clearer guideline for contractors and subcontractors regarding the timelines and conditions for payments, effectively aiming to prevent undue delays in reimbursement. This legislative change is expected to foster a more reliable and efficient payment system, thereby benefiting the entire construction industry in New Jersey by facilitating smoother operational processes for contractors engaged in state projects.
Senate Bill 4028 aims to regulate the payments made by state agencies to contractors involved in construction projects. It specifically limits the amount that state agencies can withhold from partial payments to contractors to a maximum of two percent of the total payment due. This regulation is intended to provide more stability and predictability for contractors who rely on timely payments to manage their cash flow and fulfill their contractual obligations. Additionally, the legislation stipulates that payments must be made to contractors within 30 days of billing, with a 10-day requirement for subcontractors upon receipt of payment from the prime contractor.
However, the bill does come with notable points of contention. One core stipulation is that the limit on withheld payments does not apply if a contractor has a history of contract termination for cause within the past five years. This condition has raised concerns among various stakeholders regarding its potential for abuse—primarily from state agencies that might still invoke withholdings beyond the stipulated limits. The balance between protecting contractors and ensuring that quality standards are met in state-funded projects remains a point of debate among legislators, contractors, and industry advocates.