New Jersey Adopts Prompt Payment Law

New Jersey contractors now have leverage to ensure timely payment for completed work. Also, New York City’s School Construction Authority outlines new measures to smooth agency-contractor relations.

New Prompt Payment Law

A new law in New Jersey will put the onus on owners and contractors to ensure prompt payment of general contractors and subcontractors per their contract terms.

The new law, which Gov. Jon Corzine signed in September, applies to both public and private contracts, and directs its provisions to owners, general contractors, and even subcontractors who have responsibility for payment on construction projects. Several industry groups played critical roles in supporting the legislation, including the Building Contractors Association of New Jersey, the American Subcontractors Association of New Jersey, and various labor councils in the state.

“The new statue merely requires of construction owners what is already expected of all of us in our daily lives – to pay our bills in a timely manner,” said Doreen Siegel, executive director of the state’s ASA.

The law corrects inequities that existed in state law, which already required contractors and subcontractors that have received payment to pay others under subcontract to them within 10 days, but had no similar provision to require private owners to pay the general contractor. Though public owners already were required to pay contractors within 60 days, the existing law had limited penalties for late payments.

The new law requires both public and private owners to pay contractors within 30 days of billing after the satisfactory completion of work as established by the project contract.

The law allows contractors who have not received required payments within these 30-day and 10-day windows to stop work without facing breach-of-contract claims, though such contractors still must give a seven-day written notice before suspending work.

In addition, the law establishes provisions for interest to accrue on delayed payments at the prime rate plus one percent.

Transit Village for New Jersey

A new project in North Brunswick, N.J., is trying to align a “transit village” plan with the state’s “Smart Growth” principles adopted last year – partly in a bid to reverse land use patterns that have led to development that is overly dependent on automobiles.

North Brunswick TOD Associates, an affiliate of Garden Homes and Garden Commercial Properties of Kendall Park, N.J., is developing a master plan to develop 1.2 million sq. ft. of warehouse, office, and laboratory buildings on a 212-acre property that used to house a Johnson & Johnson facility and borders Route 1 and the Northeast Corridor railway lines.

A short-term plan would lease the property to temporary tenants, while a long-term plan has used input from public workshops to create a mixed-use, pedestrian-friendly village model that concentrates development around stations on New Jersey Transit’s Northeast Corridor line. Hillier Architecture of Princeton, N.J., and various public officials joined with local residents in the workshops.

The plan calls for office, retail, residential, hotel, and restaurant spaces, as well as a new rail station and a layout that especially would accommodate residents without young children. The developer will next work with the town on zoning issues and seek “transit village” designation from the state in order to further its plans to build the rail station.

SCA Cleans House

In the current 2007 fiscal year alone, the New York City School Construction Authority plans to build 13 new schools and complete more than 700 capital improvement projects around the five boroughs – part of a multiyear $9 billion plan to build 100 new schools and execute 2,000 capital projects overall.

But it also is pushing hard to smooth the path for contractors working with the agency, which had historically been a swamp of slow payment, grueling change order processing, and archaic design guidelines. At a recent industry briefing in Manhattan, Sharon Greenberger, the agency’s president and CEO, said the agency is making improvements to payment, project close-out, and other contractor management procedures.

Greenberger and Chester Yee, the agency’s vice president of project management, who also spoke at the event, outlined improvements, such as the use of total building commissioning techniques in the project close-out stage to assure quality and faster processing.

In addition, the SCA now allows project managers to approve changes under $25,000, and for change orders of more than that amount, it is requiring the change order unit to speed up negotiations. For change orders the parties can’t resolve quickly, the SCA will now issue a unilateral payment that the contractor can bill against until they settle on a final price. The measures aim to keep both payments and work moving along on the projects.

 “I’d say the SCA is now the best-run agency in the city and state of New York,” said Louis Coletti, president and CEO of the Building Trades Employers’ Association, a group that represents more than 1,500 union contractors in the city.