SENATE, No. 3768







Sponsored by:


District 7 (Burlington)


District 16 (Hunterdon, Mercer, Middlesex and Somerset)


Co-Sponsored by:

Senator Oroho






     Requires shared service agreements to include certain provisions.



     As introduced.


An Act requiring certain provisions in shared service agreements and amending P.L.2007, c.63.


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


     1.    Section 7 of P.L.2007, c.63 (C.40A:65-7) is amended to read as follows:

     7.    a.  An agreement made pursuant to section 4 of P.L.2007, c.63 (C.40A:65-4) shall specify:

     (1)   the specific services to be performed by one or more of the parties as agent for any other party or parties;

     (2)   standards of the level, quality, and scope of performance, including performance evaluation criteria, with assignment and allocation of responsibility for meeting those standards between or among the parties;

     (3)   the estimated cost of the services throughout the duration of the agreement, with allocation of those costs to the parties, in dollar amounts or by formula, including a time schedule for periodic payment of installments for those allocations, and in the case of a shared service agreement between pilot municipalities, an estimate of the cost savings anticipated to be achieved by the local units that are the parties to the agreement.  The specification may provide for the periodic modification of estimates or formulas contained therein in the light of actual experience and in accordance with procedures [to] for determining any changes in costs, which procedures shall be specified in the agreement;

     (4)   the duration of the agreement, which shall be 10 years, unless otherwise agreed upon by the parties, but in no case shall the duration of any agreement between pilot municipalities be less than two years; [and]

     (5)   the procedure for payments to be made under the contract;

     (6)   alternative dispute resolution procedures; and

     (7)   exit procedures to govern the dissolution of the agreement.

     b.    In the case when all of the participating local units are municipalities, the agreement may provide that it shall not take effect until submitted to the voters of each municipality, and approved by a majority of the voters of each municipality voting at the referendum.

     c.     The agreement may provide for binding arbitration or for binding fact-finding procedures to settle any disputes or questions which may arise between the parties as to the interpretation of the terms of the agreement or the satisfactory performance by any of the parties of the services and other responsibilities required by the agreement.

     d.    For the purposes of sections 4 through 13 of P.L.2007, c.63 (C.40A:65-4 through C.40A:65-13), any party performing a service under a shared service agreement is the general agent of any other party on whose behalf that service is performed pursuant to the agreement, and that agent-party has full powers of performance and maintenance of the service contracted for, and full powers to undertake any ancillary operation reasonably necessary or convenient to carry out its duties, obligations and responsibilities under the agreement.  These powers include all powers of enforcement and administrative regulation which are, or may be, exercised by the party on whose behalf the agent-party acts pursuant to the agreement, except as the powers are limited by the terms of the agreement itself, and except that no contracting party shall be liable for any part or share of the cost of acquiring, constructing, or maintaining any capital facility acquired or constructed by an agent-party unless that part or share is provided for in the agreement, or in an amendment thereto ratified by the contracting parties in the manner provided in sections 1 to 37 of P.L.2007, c.63 (C.40A:65-1 et al.) for entering into an agreement.

     e.     Except as the terms of any agreement may explicitly or by necessary implication provide, any party to an agreement entered into pursuant to section 4 of P.L.2007, c.63 (C.40A:65-4) may enter into another agreement or agreements with any other eligible parties for the performance of any service or services pursuant to sections 1 to 37 of P.L.2007, c.63 (C.40A:65-1 et al.).  The participation in one agreement shall not bar participation with the same or other parties in any other agreement.

     f.     Payment for services performed pursuant to an agreement shall be made by and to the parties, and at such intervals, as shall be provided in the agreement.

     g.    In the event of any dispute as to the amount to be paid, the full amount to be paid as provided in subsection a. of this section shall be paid; but if through subsequent negotiation, arbitration or other alternative dispute resolution mechanism, or litigation the amount due shall be determined, agreed, or adjudicated to be less than was actually so paid, then the party having received the payment shall forthwith repay the excess.

(cf: P.L.2013, c.166, s.6)


     2.    This act shall take effect immediately.





     This bill would require that shared service agreements between local governments include certain provisions.  Specifically, and in addition to provisions required under current law, the bill requires such an agreement to include: (1) performance evaluation criteria; (2) procedures for determining any fee adjustments; (3) alternative dispute resolution procedures; and (4) exit procedures to govern the dissolution of the agreement.  Requiring these items to be addressed at the outset will help avoid, and make easier to resolve, potential issues that may arise over the course of such an agreement.