A2023

An Act providing equitable relief to government contractors who have sustained unanticipated expenses due to increases for construction materials and making an appropriation.

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

1. The Legislature finds and declares that:

a. It is in the vital interest of the general public that public works throughout the State of New Jersey be administered efficiently and at a reasonable and equitable cost.

b. The unforeseen emergency of unanticipated increases in construction material costs has imposed substantial inequity upon government contractors awarded contracts after public bidding.

c. Such inequity has threatened the ability of contractors to fulfill the contracts awarded to them.

d. It is imperative that the benefits derived by the general public from the existing system of public bidding and the orderly performance of contracts awarded as a result of such public bidding continue in an efficient manner.

e. It is therefore in the best interest of the State to provide equitable relief to those government contractors who have sustained damages from the unforeseen increases in construction material costs.

2. a. (1) Notwithstanding the provisions of any law, rule, or regulation to the contrary, whenever the terms and conditions of a construction contract awarded by a contracting agency of the State require a contractor to furnish materials in that contract pertaining to such construction, the terms and conditions of the contract may be adjusted upon a determination by the director of the appropriate division in the Department of the Treasury that there has been an increase in the cost of acquisition of those materials by the contractor, subcontractor, or supplier of the materials in excess of five percent, determined as of the time of the award of the contract.

The determination by the director shall be based upon the available evidence, including, but not limited to, an appropriate nationally recognized economic index published by the United States Department of Labor or another appropriate organization. Any such increase shall be subject to the approval of the State Treasurer.

Any contractor, subcontractor, or supplier of such materials who receives an increase in the cost of construction materials shall also be subject to a downward adjustment in construction material costs for subsequent decreases that may result in a cost being lower than the original bid. Any subsequent decrease shall be upon a determination by the director. The determination shall be based upon the available evidence, including, but not limited to, an appropriate nationally recognized economic index published by the United States Department of Labor or another appropriate organization.

Any State contractor requesting an adjustment shall submit an application in writing by submitting documentary evidence to the State Contract Manager for such contract establishing the increase in accordance with the requirements of the director. The evidence shall be subject to public inspection during regular business hours.

Upon the agreement of the parties, the terms and conditions of the contract may be amended in writing to reflect the increased or decreased cost of acquisition of construction materials to the extent as the costs exceed five percent thereof and the contract amendment shall state the amount of adjustment and basis therefor, but in no event shall direct labor costs, additional profit, or overhead be part of such adjustment. No adjustment shall be granted in an amount which, together with any other sum obligated under the contract, shall exceed the money appropriated or otherwise lawfully available for the project.

(2) The provisions of this subsection shall apply only to contracts awarded by a contracting agency that are valued at $25 million or less and are based upon bids submitted prior to December 1, 2021, but only for which materials shall have been purchased or invoiced after March 1, 2020.

b. (1) The director is authorized, with the approval of the State Treasurer, to terminate or suspend for a part of its term any State contract award for the purchase of commodities upon written application to the State Contract Manager for such termination or suspension by the contractor, when extraordinary and unforeseen general market conditions have caused increases in the contractor’s costs for construction materials or other physical elements consisting of construction materials to be sold under the contract.

A contractor shall submit, in writing, evidence as required and deemed to be sufficient by the director, that as the direct and sole result of those increases during the term of the contract, that exceed five percent of the contractor’s aggregate acquisition costs determined as of the time of the award, the contractor has incurred or will incur an actual net loss on such contract from the estimated sales made under the contract and the contractor would continue to incur those net losses unless the contract is suspended or terminated.

Such determination for a termination or suspension under this subsection shall be made by the director. The determination by the director shall be based upon the available evidence, including, but not limited to, an appropriate nationally recognized economic index published by the United States Department of Labor or another appropriate organization.

(2) The director is authorized, following the determination made pursuant to the provisions of paragraph (1) of this subsection, that the contractor has incurred or will incur an actual net loss on such contract from the sales made under the contract, to grant an increase for the costs of the commodities specified by the contract, in amounts necessary to prevent further net losses to the contractor on such contract from deliveries to be made thereafter under the contract, as compensation for and not exceeding increases of the contractor’s acquisition costs during the contract term. Any increase in contract costs shall be subject to the approval of the State Treasurer.

Any contractor who receives an increase for the cost of the commodities shall also be subject to a downward adjustment in the cost of the commodities for subsequent decreases that may result in a cost being lower than the original bid. Any subsequent decrease shall be upon a determination by the director that there has been a subsequent decrease in the cost of acquisition of such construction materials by the contractor, subcontractor, or supplier of materials. A determination shall be based upon the available evidence, including, but not limited to, an appropriate nationally recognized economic index published by the United States Department of Labor or another appropriate organization.

(3) The provisions of this subsection shall apply only to contracts awarded by a contracting agency that are valued at $25 million or less and are based upon bids submitted prior to December 1, 2021, but only for which materials shall have been purchased or invoiced after March 1, 2020.

c. All records, books, and documents of the contractor that are related or useful to the determinations made by the director under this section shall be subject to audit and examination by the director.

3. a. (1) Notwithstanding the provisions of any law, rule, or regulation to the contrary, whenever the terms and conditions of a construction contract awarded by a contracting unit of any political subdivision of this State require a contractor to furnish materials in that contract pertaining to such construction, the terms and conditions of the contract may be adjusted upon a determination by the contracting unit that there has been an increase in the cost of acquisition of those materials by the contractor, subcontractor, or supplier of the materials in excess of five percent, determined as of the time of the award of the contract.

The determination by the contracting unit shall be based upon the available evidence, including, but not limited to, an appropriate nationally recognized economic index published by the United States Department of Labor or another appropriate organization. Any such increase shall be subject to the approval of the governing body of the political subdivision.

Any contractor, subcontractor, or supplier of such materials who receives an increase in the cost of construction materials shall also be subject to a downward adjustment in construction material costs for subsequent decreases that may result in a cost being lower than the original bid. Any subsequent decrease shall be upon a determination by the contracting unit. The determination shall be based upon the available evidence, including, but not limited to, an appropriate nationally recognized economic index published by the United States Department of Labor or another appropriate organization.

Any contractor requesting an adjustment shall submit an application in writing by submitting documentary evidence to the contracting unit establishing the increase in accordance with the requirements of the political subdivision. The evidence shall be subject to public inspection during regular business hours.

(2) The provisions of this subsection shall apply only to public contracts awarded by a contracting unit that are valued at $25 million or less and are based upon bids submitted prior to December 1, 2021, but only for which materials shall have been purchased or invoiced after March 1, 2020.

b. (1) The contracting unit, with the approval of the governing body of the political subdivision, is authorized to terminate or suspend for a part of its term any public contract award for the purchase of commodities upon written application to the contracting unit for such termination or suspension by the contractor, when extraordinary and unforeseen general market conditions have caused increases in the contractor’s costs for construction materials or other physical elements consisting of construction materials to be sold under the contract.

A contractor shall submit, in writing, evidence as required and deemed to be sufficient by the contracting unit, that as the direct and sole result of those increases during the term of the contract, that exceed five percent of the contractor’s aggregate acquisition costs determined as of the time of the award, the contractor has incurred or will incur an actual net loss on such contract from the estimated sales made under the contract and the contractor would continue to incur those net losses unless the contract is suspended or terminated.

Such determination for a termination or suspension under this subsection shall be made by the contracting unit. The determination by the contracting unit shall be based upon the available evidence, including, but not limited to, an appropriate nationally recognized economic index published by the United States Department of Labor or another appropriate organization.

(2) The contracting unit is authorized, following the determination made pursuant to the provisions of paragraph (1) of this subsection, that the contractor has incurred or will incur an actual net loss on such contract from the sales made under the contract, to grant an increase for the costs of the commodities specified by the public contract, in amounts necessary to prevent further net losses to the contractor on such contract from deliveries to be made thereafter under the contract, as compensation for and not exceeding increases of the contractor’s acquisition costs during the contract term. Any increase in contract costs shall be subject to the approval of the governing body of the political subdivision.

Any contractor who receives an increase for the cost of the commodities shall also be subject to a downward adjustment in the cost of the commodities for subsequent decreases that may result in a cost being lower than the original bid. Any subsequent decrease shall be upon a determination by the contracting unit that there has been a subsequent decrease in the cost of acquisition of such construction materials by the contractor, subcontractor, or supplier of materials. A determination shall be based upon the available evidence, including, but not limited to, an appropriate nationally recognized economic index published by the United States Department of Labor or another appropriate organization.

(3) The provisions of this subsection shall apply only to public contracts awarded by a contracting unit that are valued at $25 million or less and are based upon bids submitted prior to December 1, 2021, but only for which materials shall have been purchased or invoiced after March 1, 2020.

c. All records, books, and documents of the contractor that are related or useful to the determinations made by the contracting unit under this section shall be subject to audit and examination by the contracting unit.

d. The governing body of the political subdivision may request a reimbursement by the State for additional costs incurred as a result of implementing this section. Any such request shall be submitted to the Department of the Treasury with such information as the State Treasurer shall require. The reimbursement shall be subject to approval by the State Treasurer and the Director of the Division of Budget and Accounting in the Department of the Treasury.

4. a. (1) Notwithstanding the provisions of any law, rule, or regulation to the contrary, whenever the terms and conditions of a construction contract awarded by a State authority, commission, board, or instrumentality require a contractor to furnish materials in that contract pertaining to such construction, the terms and conditions of the contract may be adjusted upon a determination by the officer of the appropriate State authority, commission, board, or instrumentality that there has been an increase in the cost of acquisition of those materials by the contractor, subcontractor, or supplier of the materials in excess of five percent, determined as of the time of the award of the contract.

The determination by the officer shall be based upon the available evidence, including, but not limited to, an appropriate nationally recognized economic index published by the United States Department of Labor or another appropriate organization. Any such increase shall be subject to the approval of the governing body of the authority, commission, board, or instrumentality.

Any contractor, subcontractor, or supplier of such materials who receives an increase in the cost of construction materials shall also be subject to a downward adjustment in construction material costs for subsequent decreases that may result in a cost being lower than the original bid. Any subsequent decrease shall be upon a determination by the officer. The determination shall be based upon the available evidence, including, but not limited to, an appropriate nationally recognized economic index published by the United States Department of Labor or another appropriate organization.

Any contractor requesting an adjustment shall submit an application in writing by submitting documentary evidence to the officer establishing the increase in accordance with the requirements of the director. The evidence shall be subject to public inspection during regular business hours.

(2) The provisions of this subsection shall apply only to public contracts awarded by a State authority, commission, board, or instrumentality that are valued at $25 million or less and are based upon bids submitted prior to December 1, 2021, but only for which materials shall have been purchased or invoiced after March 1, 2020.

b. (1) The officer is authorized, with the approval of the governing body of the State authority, commission, board, or instrumentality, to terminate or suspend for a part of its term any public contract award for the purchase of commodities upon written application to the officer for such termination or suspension by the contractor, when extraordinary and unforeseen general market conditions have caused increases in the contractor’s costs for construction materials or other physical elements consisting of construction materials to be sold under the contract.

A contractor shall submit, in writing, evidence as required and deemed to be sufficient by the officer, that as the direct and sole result of those increases during the term of the contract, that exceed five percent of the contractor’s aggregate acquisition costs determined as of the time of the award, the contractor has incurred or will incur an actual net loss on such contract from the estimated sales made under the contract and the contractor would continue to incur those net losses unless the contract is suspended or terminated.

Such determination for a termination or suspension under this subsection shall be made by the officer. The determination shall be based upon the available evidence, including, but not limited to, an appropriate nationally recognized economic index published by the United States Department of Labor or another appropriate organization.

(2) The officer is authorized, following the determination made pursuant to the provisions of paragraph (1) of this subsection, that the contractor has incurred or will incur an actual net loss on such contract from the sales made under the contract, to grant an increase for the costs of the commodities specified by the public contract, in amounts necessary to prevent further net losses to the contractor on such contract from deliveries to be made thereafter under the contract, as compensation for and not exceeding increases of the contractor’s acquisition costs during the contract term. Any increase in contract costs shall be subject to the approval of the governing body of the State authority, commission, board, or instrumentality.

Any contractor who receives an increase for the cost of the commodities shall also be subject to a downward adjustment in the cost of the commodities for subsequent decreases that may result in a cost being lower than the original bid. Any subsequent decrease shall be upon a determination by the officer that there has been a subsequent decrease in the cost of acquisition of such construction materials by the contractor, subcontractor, or supplier of materials. A determination shall be based upon the available evidence, including, but not limited to, an appropriate nationally recognized economic index published by the United States Department of Labor or another appropriate organization.

(3) The provisions of this subsection shall apply only to public contracts awarded by a State authority, commission, board, or instrumentality that are valued at $25 million or less and are based upon bids submitted prior to December 1, 2021, but only for which materials shall have been purchased or invoiced after March 1, 2020.

c. All records, books, and documents of the contractor that are related or useful to the determinations made by the officer under this section shall be subject to audit and examination by the officer.

d. The governing body of the State authority, commission, board, or instrumentality may request a reimbursement by the State for additional costs incurred as a result of implementing this section. Any such request shall be submitted to the Department of the Treasury with such information as the State Treasurer shall require. The reimbursement shall be subject to approval by the State Treasurer and the Director of the Division of Budget and Accounting in the Department of the Treasury.

5. a. (1) Notwithstanding the provisions of any law, rule, or regulation to the contrary, whenever the terms and conditions of a construction contract awarded by an interstate agency require a contractor to furnish materials in that contract pertaining to such construction, the terms and conditions of the contract may be adjusted upon a determination by the officer of the appropriate interstate agency that there has been an increase in the cost of acquisition of those materials by the contractor, subcontractor, or supplier of the materials in excess of five percent, determined as of the time of the award of the contract.

Any contractor, subcontractor, or supplier of such materials who receives an increase in the cost of construction materials shall also be subject to a downward adjustment in construction material costs for subsequent decreases that may result in a cost being lower than the original bid. Any subsequent decrease shall be upon a determination by the officer. The determination shall be based upon the available evidence, including, but not limited to, an appropriate nationally recognized economic index published by the United States Department of Labor or another appropriate organization.

(2) The provisions of this subsection shall apply only to public contracts awarded by an interstate agency that are valued at $25 million or less and are based upon bids submitted prior to December 1, 2021, but only for which materials shall have been purchased or invoiced after March 1, 2020.

b. (1) The officer is authorized, with the approval of the governing body of the interstate agency, to terminate or suspend for a part of its term any public contract award for the purchase of commodities upon written application to the officer for such termination or suspension by the contractor, when extraordinary and unforeseen general market conditions have caused increases in the contractor’s costs for construction materials or other physical elements consisting of construction materials to be sold under the contract.

Any contractor who receives an increase for the cost of the commodities shall also be subject to a downward adjustment in the cost of the commodities for subsequent decreases that may result in a cost being lower than the original bid. Any subsequent decrease shall be upon a determination by the officer that there has been a subsequent decrease in the cost of acquisition of such construction materials by the contractor, subcontractor, or supplier of materials. A determination shall be based upon the available evidence, including, but not limited to, an appropriate nationally recognized economic index published by the United States Department of Labor or another appropriate organization.

(3) The provisions of this subsection shall apply only to public contracts awarded by an interstate agency that are valued at $25 million or less and are based upon bids submitted prior to December 1, 2021, but only for which materials shall have been purchased or invoiced after March 1, 2020.

d. The governing body of the interstate agency may request a reimbursement by the State for additional costs incurred as a result of implementing this section. Any such request shall be submitted to the Department of the Treasury with such information as the State Treasurer shall require. The reimbursement shall be subject to approval by the State Treasurer and the Director of the Division of Budget and Accounting in the Department of the Treasury.

e. This section shall not be applicable or implemented until the adoption of substantially similar legislation by the states that are parties to the interstate agency provided, however, that if such states have previously adopted substantially similar legislation at the time that this act, P.L. , c. (pending before the Legislature as this bill), takes effect, this section shall be applicable and implemented upon the effective date.

6. There is appropriated from the General Fund to the Department of the Treasury the sum of $25,000,000 for the costs and reimbursements incurred under the provisions of this act, P.L. , c. (C. ) (pending before the Legislature as this bill).

7. This act shall take effect immediately and shall expire on June 30, 2024.

STATEMENT

This bill provides equitable relief to government contractors who have sustained unanticipated expenses due to increases for construction materials.

The unforeseen emergency of unanticipated increases in construction material costs has imposed substantial inequity upon government contractors awarded contracts after public bidding. Such inequity has threatened the ability of contractors to fulfill the contracts awarded to them. It is in the best interest of the State, its political subdivisions, its authorities, commissions, boards, or instrumentalities, and interstate agencies of which the State is a participant to provide equitable relief to those government contractors who have sustained damage from the unforeseen increases of construction material costs.

This bill applies to State agencies, political subdivisions of the State, State authorities, commissions, boards, and instrumentalities, and, under certain circumstances, interstate agencies of which the State is a participant. This bill allows for the terms and conditions for certain contracts to be amended to adjust for the rising costs of construction materials. The determination of the adjustment would be made by the delegated person based upon the available evidence. The bill also provides for adjustments if there are decreases in costs. The adjustments would apply only to contracts valued at $25 million or less awarded by a contracting agency based upon bids submitted prior to December 1, 2021, but only for materials purchased or invoiced after March 1, 2020.

This bill also authorizes the termination or suspension of any contract award for the purchase of commodities upon written application for such termination or suspension by the contractor, where extraordinary and unforeseen general market conditions have caused increases in the contractor’s costs for construction materials or other physical elements consisting of construction materials to be sold under the contract. Such a determination would be made by the delegated person based upon the available evidence.

The bill appropriates $25 million to the Department of the Treasury for the reimbursement of government contract costs to State agencies, political subdivisions, State authorities, commissions, boards, and instrumentalities, and, under certain circumstances, interstate agencies of which the State is a participant.

The provisions of this bill would expire on June 30, 2024.