This was an article that was published in the Bergen Record on Sept. 12th :
Tuesday, September 12, 2006
The Bergen Record
By HUGH R. MORLEY
STAFF WRITER
For building contractors, "the check will be in the mail" is no longer
enough.
A new law requires property owners and developers to pay construction
contractors and subcontractors within 30 days of the time they submit an
invoice for the work done.
The law gives a developer or property owner 20 days from the date an invoice
is submitted to determine whether the work is acceptable. If it is, payment
is due within 10 more days, according to the law.
Contractors who aren't paid in a timely fashion can demand a binding
arbitration hearing to enforce their claim. If they win, the new law awards
them the amount they are owed plus interest - set at one percentage point
above the prime rate. They can also seek compensation for the expense of
pursuing the claim.
The law, which was signed by Governor Corzine on Sept. 1, has divided the
construction community and the political parties. Two big builders'
associations took opposing positions. And Democrats in the Legislature
backed the law, while most Republicans opposed it.
Corzine signed the law at a Labor Day observance. "When project funds flow
promptly, bottlenecks are eliminated, projects run smoothly and everyone
from subcontractors to laborers gets paid on time," the governor said.
Yet a few weeks earlier, his transportation commissioner, Kris Kolluri,
testified against the bill. Kolluri said he was concerned that the rigidity
may cause the loss of federal funding.
Though the bill was changed to exempt federally-funded projects in that
situation, Senate Republicans said Kolluri's unease made them uncomfortable
with the measure, according to Sen. Leonard Lance, R-Hunterdon.
The law took effect immediately, but does not apply to contracts entered
into before Sept. 1.
Prior to the changes, the so-called "prompt payment law" did not apply to
property owners and developers. It was mainly a tool to compel prime
contractors to pay their subcontractors in a timely fashion.
Sen. Steve Sweeney, D-Gloucester, who sponsored the bill, said he wrote it
in part to help small contractors who don't have the cash to pay bills and
salaries while awaiting a delayed invoice payment.
"A lot of the little guys go out of business because of it," said Sweeney,
who is also a business agent for an ironworkers union.
The law covers private and public work because government agencies are among
the most tardy payers, he said.
Jack Koscis, CEO of the Building Contractors Association of New Jersey, said
his membership of commercial and industrial contractors -- many of whom do
government work -- strongly supported the law.
"This is a fairness issue," he said. "And most people that don't want to pay
their bills don't see it that way."
He said some of his members, especially those who do public contracts, had
to wait 90 or even 120 days to be paid.
But Patrick O'Keefe, CEO of the New Jersey Builders Association, whose
members predominantly build residential units, said the issue is more
complex. There are legitimate reasons why a builder might delay payment to a
contractor, he said.
For instance, he said, if the municipal housing inspector takes time to
inspect and sign off on work, the builder will delay the payment to
contractors. A developer won't want to pay for work until it's approved, but
the law will require payment anyway, he said.
"We thought the legislation imposed rigidities on a rather fluid system of
construction," he said. "Those rigidities don't reflect the reality of
day-to-day business."
The state's two biggest trade groups, New Jersey Business and Industry
Association and New Jersey State Chamber of Commerce, said they did not take
a position on the bill because their members did not feel strongly about it.
Michael Egenton, vice president at the Chamber of Commerce, said it appeared
there is enough flexibility in the bill to make it acceptable "if there is
communications and dialogue" between customers and contractors.
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I agree with most of the others. This is smoke and mirrors. If the chances of you getting paid on time were slim before the bill goes into effect ther're not going to change much afterwards. This bill is primarily for those who do a lot of bid and public work where it is customary to get paid 120 days after you submit an invoice. I'm not a Corzine fan but I give him a thumbs up for trying anyway.
