Bill Text: NJ A5335 | 2026-2027 | Regular Session | Introduced
Bill Title: Prohibits withholding of partial payments to contractors by public entities for de minimis clerical, administrative, or technical errors.
Sponsorship: Partisan Bill (Democrat 1)
Status: (Introduced) 2026-06-28 - Introduced, Referred to Assembly State and Local Government Committee [A5335 Detail]
Download: New_Jersey-2026-A5335-Introduced.html
Sponsored by:
Assemblyman CLINTON CALABRESE
District 36 (Bergen and Passaic)
SYNOPSIS
Prohibits withholding of partial payments to contractors by public entities for de minimis clerical, administrative, or technical errors.
CURRENT VERSION OF TEXT
As introduced.
An Act prohibiting the withholding of partial payments to contractors by public entities for de minimis clerical, administrative, or technical errors, amending various parts of the statutory law, and supplementing Title 52 of the Revised Statutes.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. Section 2 of P.L.1991, c.133 (C.2A:30A-2) is amended to read as follows:
2. a. If a prime contractor has performed in accordance with the provisions of a contract with the owner and the billing for the work has been approved and certified by the owner or the owner's authorized approving agent, the owner shall pay the amount due to the prime contractor for each periodic payment, final payment or retainage monies not more than 30 calendar days after the billing date, which for a periodic billing, shall be the periodic billing date specified in the contract. The billing shall be deemed approved and certified 20 days after the owner receives it unless the owner provides, before the end of the 20-day period, a written statement of the amount withheld and the reason for withholding payment, except that in the case of a public or governmental entity that requires the entity's governing body to vote on authorizations for each periodic payment, final payment or retainage monies, the amount due may be approved and certified at the next scheduled public meeting of the entity's governing body, and paid during the entity's subsequent payment cycle, provided this exception has been defined in the bid specifications and contract documents.
b. If a subcontractor or subsubcontractor has performed in accordance with the provisions of its contract with the prime contractor or subcontractor and the work has been accepted by the owner, the owner's authorized approving agent, or the prime contractor, as applicable, and the parties have not otherwise agreed in writing, the prime contractor shall pay to its subcontractor and the subcontractor shall pay to its subsubcontractor within 10 calendar days of the receipt of each periodic payment, final payment or receipt of retainage monies, the full amount received for the work of the subcontractor or subsubcontractor based on the work completed or the services rendered under the applicable contract. In the case of ongoing work on the same project for which partial payments are made, the amount of money owed for work already completed shall only be payable if the subcontractor or subsubcontractor is performing to the satisfaction of the prime contractor or subcontractor, as applicable.
c. If a payment due pursuant to the provisions of this section is not made in a timely manner, the delinquent party shall be liable for the amount of money owed under the contract, plus interest at a rate equal to the prime rate plus [1%] 1 percent. Interest on amounts due pursuant to this section shall be paid to the prime contractor, subcontractor or subsubcontractor for the period beginning on the day after the required payment date and ending on the day on which the check for payment has been drawn. The provisions of this subsection c. shall not apply to any transportation project as defined in section 3 of P.L. 1984, c.73 (C.27:1B-3), if that project receives federal funding and the awarding agency has been notified by the federal government that it will be classified as a high risk grantee pursuant to 49 C.F.R. 18.12.
d. A prime contractor, subcontractor or subsubcontractor may, after providing seven calendar days' written notice to the party failing to make the required payments, suspend performance of a construction contract, without penalty for breach of contract, until the payment required pursuant to this section is made, if the contractor, subcontractor or subsubcontractor: is not paid as required by this section; is not provided a written statement of the amount withheld and the reason for the withholding; and the payor is not engaged in a good faith effort to resolve the reason for the withholding. The provisions of this subsection d. shall not apply to any transportation project as defined in section 3 of P.L. 1984, c.73 (C.27:1B-3), if that project receives federal funding and the application of this provision would jeopardize the funding because the owner could not meet the federal standards for financial management systems as outlined in 49 C.F.R. 18.20.
e. (1) The rights, remedies or protections provided by this section for prime contractors, subcontractors and subsubcontractors shall be in addition to other remedies provided pursuant to any other provision of State law. To the extent that the provisions of this section provide greater rights, remedies or protections for prime contractors, subcontractors and subsubcontractors than other provisions of State law, the provisions of this section shall supersede those other provisions.
(2) No provision of this section shall be construed as restricting in any way the rights or remedies provided by any other applicable State or federal law to an owner who is a resident homeowner or purchaser with respect to the real property being improved.
f. All contracts for the improvement of structures entered into after the effective date of P.L.2006, c.96 between owners, prime contractors, subcontractors or subsubcontractors shall provide that disputes regarding whether a party has failed to make payments required pursuant to this section may be submitted to a process of alternative dispute resolution. Alternative dispute resolution permitted by this section shall not apply to disputes concerning the bid solicitation or award process, or to the formation of contracts or subcontracts. In any civil action brought to collect payments pursuant to this section, the action shall be conducted inside of this State and the prevailing party shall be awarded reasonable costs and attorney fees.
g. Notwithstanding any law, rule, or regulation to the contrary, when a public or governmental entity is the owner of real property that is under contract to be improved, such entity shall not withhold a partial payment otherwise due pursuant to this section solely on the basis of a de minimis clerical, administrative, or technical error, provided that:
(1) the work associated with the payment has been satisfactorily performed in accordance with the contract;
(2) the error does not affect the cost, scope, safety, insurance coverage, bonding, or eligibility of the work;
(3) the error is not related to fraud, misrepresentation, or a material contractual requirement; and
(4) the payment is not the final payment due pursuant to the contract.
The entity shall provide written notice to the contractor identifying the clerical, administrative, or technical error and shall require correction of such error within a reasonable cure period, not to exceed 10 business days. Failure to cure the error within the specified time period may result in the withholding of subsequent payments by the entity or any other remedies available to the entity pursuant to the contract or law.
For the purposes of this subsection, "clerical, administrative, or technical error" means an unintentional error, omission, defect, or minor mathematical discrepancy in a payment application or supporting documentation that does not materially affect the amount due, the contractor's performance of the contract, or the public or governmental entity's ability to lawfully make the payment.
(cf: P.L.2006, c.96, s.2)
2. Section 3 of P.L.1987, c.343 (C.18A:18A-40.3) is amended to read as follows:
3. a. With respect to any contract entered into by a board of education pursuant to section 1 of P.L.1987, c.343 (C.18A:18A-40.1) for which the contractor shall agree to the withholding of payments pursuant to section 2 of P.L.1987, c.343 (C.18A:18A-40.2), [5%] 5 percent of the amount due on each partial payment shall be withheld by the board of education pending completion of the contract if the contractor does not have a performance bond. If the contractor does have a performance bond, [2%] 2 percent of the amount due on each partial payment shall be withheld by the board of education when the outstanding balance of the contract exceeds $500,000, and [5%] 5 percent of the amount due on each partial payment shall be withheld by the board of education when the outstanding balance of the contract is $500,000 or less.
b. Notwithstanding any law, rule, or regulation to the contrary, a board of education shall not withhold a partial payment otherwise due pursuant to subsection a. of this section solely on the basis of a de minimis clerical, administrative, or technical error, provided that:
(1) the work associated with the payment has been satisfactorily performed in accordance with the contract;
(2) the error does not affect the cost, scope, safety, insurance coverage, bonding, or eligibility of the work;
(3) the error is not related to fraud, misrepresentation, or a material contractual requirement; and
(4) the payment is not the final payment due pursuant to the contract.
The board of education shall provide written notice to the contractor identifying the clerical, administrative, or technical error and shall require correction of such error within a reasonable cure period, not to exceed 10 business days. Failure to cure the error within the specified time period may result in the withholding of subsequent payments by the board or any other remedies available to the board pursuant to the contract or law.
For the purposes of this subsection, "clerical, administrative, or technical error" means an unintentional error, omission, defect, or minor mathematical discrepancy in a payment application or supporting documentation that does not materially affect the amount due, the contractor's performance of the contract, or the board of education's ability to lawfully make the payment.
(cf: P.L.1999, c.440, s.76)
3. Section 3 of P.L.2013, c.147 (C.18A:64-76.4) is amended to read as follows:
3. a. With respect to any contract entered into by a State college pursuant to section 2 of P.L.2013, c.147 (C.18A:64-76.3) for which the contractor shall agree to the withholding of payments pursuant to section 1 of P.L.2013, c.147 (C.18A:64-76.2), [2%] 2 percent of the amount due on each partial payment shall be withheld by the State college pending completion of the contract.
b. Upon acceptance of the work performed pursuant to the contract for which the contractor has agreed to the withholding of payments pursuant to subsection a. of this section, all amounts being withheld by the State college shall be released and paid in full to the contractor within 45 days of the final acceptance date agreed upon by the contractor and the State college, without further withholding of any amounts for any purpose whatsoever, provided that the contract has been completed as indicated. If the State college requires maintenance security after acceptance of the work performed pursuant to the contract, such security shall be obtained in the form of a maintenance bond. The maintenance bond shall be no longer than two years and shall be no more than [100%] 100 percent of the project costs.
c. Notwithstanding any law, rule, or regulation to the contrary, a State college shall not withhold a partial payment otherwise due pursuant to this section solely on the basis of a de minimis clerical, administrative, or technical error, provided that:
(1) the work associated with the payment has been satisfactorily performed in accordance with the contract;
(2) the error does not affect the cost, scope, safety, insurance coverage, bonding, or eligibility of the work;
(3) the error is not related to fraud, misrepresentation, or a material contractual requirement; and
(4) the payment is not the final payment due pursuant to the contract.
The State college shall provide written notice to the contractor identifying the clerical, administrative, or technical error and shall require correction of such error within a reasonable cure period, not to exceed 10 business days. Failure to cure the error within the specified time period may result in the withholding of subsequent payments by the State college or any other remedies available to the State college pursuant to the contract or law.
For the purposes of this subsection, "clerical, administrative, or technical error" means an unintentional error, omission, defect, or minor mathematical discrepancy in a payment application or supporting documentation that does not materially affect the amount due, the contractor's performance of the contract, or the State college's ability to lawfully make the payment.
(cf: P.L.2013, c.147, s.3)
4. R.S.27:7-34 is amended to read as follows:
27:7-34. a. Contracts shall provide for partial payments at least once each month or from time to time as the work progresses on work of construction or maintenance. Two [per centum] percent of the amount due on partial payments of the total contract price shall be withheld from the contractor pending completion of the contract, but upon substantial completion of the contract, as defined by rules or regulations of the department [1%] 1 percent shall be withheld. At any time during the performance of the work, if work is not progressing, as defined by the "New Jersey Department of Transportation Standard Specifications for Road and Bridge Construction," the commissioner may at the commissioner's discretion, increase the withholding to [4%] 4 percent of the payment due. No retainage shall be withheld on service contracts including, but not limited to, mowing, sweeping, tree trimming and similar contracts. Any partial payments made after substantial completion of the contract shall be made only upon certification by the general contractor to the department that all subcontractors have been paid in the same proportion that he has been paid; however, should the amount owed by a general contractor to a subcontractor be in dispute the department shall be empowered to advance to the general contractor the amount in dispute after a determination by the commissioner.
Contracts may also provide for partial payments at least once in each month or from time to time as the work progresses on all materials placed along or upon the site, or stored at locations approved by the commissioner, which are suitable for the use and execution of the contract, provided the contractor furnishes releases of liens for all materials furnished at the time each estimate of work is submitted for payment, but such partial payments shall not exceed the cost of the material.
When the contract provides that a portion of the work may be deferred with the approval of the commissioner, the sum withheld from the contractor may not be less than [25%] 25 percent of the value of said work.
Any money heretofore or hereafter withheld from contract payments as provided for herein shall be paid by the State to any contractor entitled thereto who shall deposit under terms of an escrow agreement, in a banking institution located in this State and approved by the commissioner, negotiable bonds, acceptable to the commissioner, issued by the State or any political subdivision thereof, said bonds having value equal to the amount of money to be paid to any such contractor. For purposes of this section, value shall mean par value or market value, whichever is lower.
b. Notwithstanding any law, rule, or regulation to the contrary, the department shall not withhold a partial payment otherwise due pursuant to subsection a. of this section solely on the basis of a de minimis clerical, administrative, or technical error, provided that:
(1) the work associated with the payment has been satisfactorily performed in accordance with the contract;
(2) the error does not affect the cost, scope, safety, insurance coverage, bonding, or eligibility of the work;
(3) the error is not related to fraud, misrepresentation, or a material contractual requirement; and
(4) the payment is not the final payment due pursuant to the contract.
The department shall provide written notice to the contractor identifying the clerical, administrative, or technical error and shall require correction of such error within a reasonable cure period, not to exceed 10 business days. Failure to cure the error within the specified time period may result in the withholding of subsequent payments by the department or any other remedies available to the department pursuant to the contract or law.
For the purposes of this subsection, "clerical, administrative, or technical error" means an unintentional error, omission, defect, or minor mathematical discrepancy in a payment application or supporting documentation that does not materially affect the amount due, the contractor's performance of the contract, or the department's ability to lawfully make the payment.
(cf: P.L.2005, c.356, s.1)
5. R.S.27:14-16 is amended to read as follows:
27:14-16. a. Contracts may provide for partial payments at least once each month or from time to time as the work progresses on work of construction or maintenance. Ten [per centum] percent of the amount due on partial payments on the first [50%] 50 percent of the total contract price shall be withheld from the contractor pending completion of the contract. Thereafter, on the remaining [50%] 50 percent of the total contract price, no [per centum] percentage of the partial payments shall be withheld from the contractor pending such completion.
Contracts may also provide for partial payments at least once in each month or from time to time as the work progresses on all materials placed upon the site which are suitable for the use and execution of the contract, provided the contractor furnishes releases of liens for all material furnished at the time each estimate of work is submitted for payment, but such partial payments shall not exceed [80%] 80 percent of the value of the material.
b. Notwithstanding any law, rule, or regulation to the contrary, the board of county commissioners shall not withhold a partial payment otherwise due pursuant to this section solely on the basis of a de minimis clerical, administrative, or technical error, provided that:
(1) the work associated with the payment has been satisfactorily performed in accordance with the contract;
(2) the error does not affect the cost, scope, safety, insurance coverage, bonding, or eligibility of the work;
(3) the error is not related to fraud, misrepresentation, or a material contractual requirement; and
(4) the payment is not the final payment due pursuant to the contract.
The board of county commissioners shall provide written notice to the contractor identifying the clerical, administrative, or technical error and shall require correction of such error within a reasonable cure period, not to exceed 10 business days. Failure to cure the error within the specified time period may result in the withholding of subsequent payments by the board or any other remedies available to the board pursuant to the contract or law.
For the purposes of this subsection, "clerical, administrative, or technical error" means an unintentional error, omission, defect, or minor mathematical discrepancy in a payment application or supporting documentation that does not materially affect the amount due, the contractor's performance of the contract, or the board of county commissioners' ability to lawfully make the payment.
(cf: P.L.1958, c.7, s.2)
6. Section 1 of P.L.2007, c.180 (C.27:23-6.3) is amended to read as follows:
1. a. Contracts entered into by the New Jersey Turnpike Authority for roadway construction and maintenance shall provide for partial payments at least once each month or from time to time as the work progresses on work of construction or maintenance. Two [per centum] percent of the amount due on partial payments of the total contract price shall be withheld from the contractor pending completion of the contract, but upon substantial completion of the contract, as defined by rules or regulations of the authority, [1%] 1 percent shall be withheld. At any time during the performance of the work, if work is not progressing, as defined by the "New Jersey Turnpike Authority Standard Specifications," the authority may, in its discretion, increase the withholding to [4%] 4 percent of the payment due. No retainage shall be withheld on service contracts including, but not limited to, mowing, sweeping, tree trimming and similar contracts. Any partial payments made after substantial completion of the contract shall be made only upon certification by the general contractor to the authority that all subcontractors have been paid in the same proportion that he has been paid; however, should the amount owed by a general contractor to a subcontractor be in dispute the authority shall be empowered to advance to the general contractor the amount in dispute after a determination by the authority.
Contracts may also provide for partial payments at least once in each month or from time to time as the work progresses on all materials placed along or upon the site, or stored at locations approved by the authority, which are suitable for the use and execution of the contract, provided the contractor furnishes releases of liens for all materials furnished at the time each estimate of work is submitted for payment, but such partial payments shall not exceed the cost of material.
When the contract provides that a portion of the work may be deferred with the approval of the authority, the sum withheld from the contractor may not be less than [25%] 25 percent of the value of the work.
Any money heretofore or hereafter withheld from contract payments as provided for herein shall be paid by the authority to any contractor entitled thereto who shall deposit under terms of an escrow agreement, in a banking institution located in this State and approved by the authority, negotiable bonds, acceptable to the authority, issued by the State or any political subdivision thereof, the bonds having value equal to the amount of money to be paid to any such contractor. For purposes of this section, value shall mean par value or market value, whichever is lower.
b. Notwithstanding any law, rule, or regulation to the contrary, the authority shall not withhold a partial payment otherwise due pursuant to subsection a. of this section solely on the basis of a de minimis clerical, administrative, or technical error, provided that:
(1) the work associated with the payment has been satisfactorily performed in accordance with the contract;
(2) the error does not affect the cost, scope, safety, insurance coverage, bonding, or eligibility of the work;
(3) the error is not related to fraud, misrepresentation, or a material contractual requirement; and
(4) the payment is not the final payment due pursuant to the contract.
The authority shall provide written notice to the contractor identifying the clerical, administrative, or technical error and shall require correction of such error within a reasonable cure period, not to exceed 10 business days. Failure to cure the error within the specified time period may result in the withholding of subsequent payments by the authority or any other remedies available to the authority pursuant to the contract or law.
For the purposes of this subsection, "clerical, administrative, or technical error" means an unintentional error, omission, defect, or minor mathematical discrepancy in a payment application or supporting documentation that does not materially affect the amount due, the contractor's performance of the contract, or the authority's ability to lawfully make the payment.
(cf: P.L.2007, c.180, s.1)
7. Section 2 of P.L.1979, c.464 (C.40A:11-16.3) is amended to read as follows:
2. a. With respect to any contract entered into by a contracting unit pursuant to section 1 of P.L.1979, c.464 (C.40A:11-16.2) for which the contractor shall agree to the withholding of payments pursuant to P.L.1979, c.152 (C.40A:11-16.1), [2%] 2 percent of the amount due on each partial payment shall be withheld by the contracting unit pending completion of the contract.
b. Upon acceptance of the work performed pursuant to the contract for which the contractor has agreed to the withholding of payments pursuant to subsection a. of this section, all amounts being withheld by the contracting unit shall be released and paid in full to the contractor within 45 days of the final acceptance date agreed upon by the contractor and the contracting unit, without further withholding of any amounts for any purpose whatsoever, provided that the contract has been completed as indicated. If the contracting unit requires maintenance security after acceptance of the work performed pursuant to the contract, such security shall be obtained in the form of a maintenance bond. The maintenance bond shall be no longer than two years and shall be no more than [100%] 100 percent of the project costs.
c. Notwithstanding any law, rule, or regulation to the contrary, a contracting unit shall not withhold a partial payment otherwise due pursuant to this section solely on the basis of a de minimis clerical, administrative, or technical error, provided that:
(1) the work associated with the payment has been satisfactorily performed in accordance with the contract;
(2) the error does not affect the cost, scope, safety, insurance coverage, bonding, or eligibility of the work;
(3) the error is not related to fraud, misrepresentation, or a material contractual requirement; and
(4) the payment is not the final payment due pursuant to the contract.
The contracting unit shall provide written notice to the contractor identifying the clerical, administrative, or technical error and shall require correction of such error within a reasonable cure period, not to exceed 10 business days. Failure to cure the error within the specified time period may result in the withholding of subsequent payments by the contracting unit or any other remedies available to the contracting unit pursuant to the contract or law.
For the purposes of this subsection, "clerical, administrative, or technical error" means an unintentional error, omission, defect, or minor mathematical discrepancy in a payment application or supporting documentation that does not materially affect the amount due, the contractor's performance of the contract, or the contracting unit's ability to lawfully make the payment.
(cf: P.L.1999, c.440, s.26)
8. (New section) Notwithstanding any law, rule, or regulation to the contrary, with respect to any contract entered into by a State agency for which the contract contains a provision for the withholding of payments, a State agency shall not withhold a partial payment otherwise due pursuant to the contract solely on the basis of a de minimis clerical, administrative, or technical error, provided that:
(1) the work associated with the payment has been satisfactorily performed in accordance with the contract;
(2) the error does not affect the cost, scope, safety, insurance coverage, bonding, or eligibility of the work;
(3) the error is not related to fraud, misrepresentation, or a material contractual requirement; and
(4) the payment is not the final payment due pursuant to the contract.
The State agency shall provide written notice to the contractor identifying the clerical, administrative, or technical error and shall require correction of such error within a reasonable cure period, not to exceed 10 business days. Failure to cure the error within the specified time period may result in the withholding of subsequent payments by the State agency or any other remedies available to the State agency pursuant to the contract or law.
As used in this section:
"Clerical, administrative, or technical error" means an unintentional error, omission, defect, or minor mathematical discrepancy in a payment application or supporting documentation that does not materially affect the amount due, the contractor's performance of the contract, or the State agency's ability to lawfully make the payment.
"State agency" means the same as that term is defined in section 2 of P.L.1971, c.182 (C.52:13D-13).
9. This act shall take effect immediately.
STATEMENT
This bill prohibits the withholding of partial payments to contractors by public entities for de minimis clerical, administrative, or technical errors.
This bill promotes efficiency in public contracting by prohibiting public and governmental entities from withholding partial payments to contractors solely because of de minimis clerical, administrative, or technical errors in payment applications or supporting documentation. Minor paperwork errors can create unnecessary payment delays, disrupt project timelines, and increase administrative burdens for both contractors and public and governmental entities. This bill is intended to streamline the payment process for public construction projects while preserving the ability of public and governmental entities to withhold payments for material issues affecting contract compliance, project safety, fraud, or legal eligibility for payment.
Under the bill, a public or governmental entity, including but not limited to a board of education, a State college, the Department of Transportation, the board of county commissioners, the New Jersey Turnpike Authority, and certain contracting units, entering into a contract pursuant to current law will not be permitted to withhold a partial payment otherwise due pursuant to the law solely on the basis of a de minimis clerical, administrative, or technical error, provided that: the work associated with the payment has been satisfactorily performed in accordance with the contract; the error does not affect the cost, scope, safety, insurance coverage, bonding, or eligibility of the work; the error is not related to fraud, misrepresentation, or a material contractual requirement; and the payment is not the final payment due pursuant to the contract.
The bill also provides that, with respect to any contract entered into by a State agency for which the contract contains a provision for the withholding of payments, a State agency will not be permitted to withhold a partial payment otherwise due pursuant to the contract solely on the basis of a de minimis clerical, administrative, or technical error, provided that: the work associated with the payment has been satisfactorily performed in accordance with the contract; the error does not affect the cost, scope, safety, insurance coverage, bonding, or eligibility of the work; the error is not related to fraud, misrepresentation, or a material contractual requirement; and the payment is not the final payment due pursuant to the contract.
The public or governmental entity, as well as a State agency, is required to provide written notice to the contractor identifying any clerical, administrative, or technical errors. Upon notice, the entity or agency will require the contractor to correct such errors within a reasonable cure period, not to exceed 10 business days. Failure to cure an error within the specified time period may result in the withholding of subsequent payments by the entity or agency or any other remedies available to the entity or agency pursuant to the contract or law.
