CHAPTER 8  LOCAL PUBLIC CONTRACTS LAW

 

 

I. GENERAL INFORMATION

 

A. INTRODUCTION

1. The basic scheme the Local Public Contracts Law (Contracts Law) envisions is a system of competitive bidding, with certain exceptions, and procedures fostering openness in local governmental activities.

2. This chapter examines those provisions of law that require a Municipal Clerk's involvement in some aspects of the public purchasing process. 9/15/10; 9/15/12

3. This chapter also examines the basic relationship between some of the more pertinent provisions of the Contracts Law and those Municipal Clerks who serve in a dual capacity of Municipal Clerk-Purchasing Agent. 9/15/10

B. TECHNICAL ASSISTANCE

    The Division of Local Government Services (DLGS) in the Department of Community Affairs is authorized by Statute to assist local contracting units in matters affecting the administration of the Local Public Contracts Law. [N.J.S.A. 40A:11-37] Guidance concerning the Contracts Law can be obtained by viewing the Division's Contracts Law Website at www.state.nj.us/dca/lgs/lpcl. 10/31/05; 9/15/08; 9/15/10; 9/15/12

 

 

II. APPLICABILITY OF THE CONTRACTS LAW AND CORRESPONDING RULES

 

The Local Public Contracts Law at N.J.S.A. 40A:11-1 et seq., and the Local Public Contracts Law Rules at N.J.A.C. 5:30-5.1 et seq., N.J.A.C. 5:30-11.1 et seq. and N.J.A.C. 5:34-1 et seq. are the controlling law and rules.  9/15/12

 

 

III. DEFINITIONS [N.J.S.A. 40A:11-2]  12/02; 9/15/08; 9/15/10; 10/1/2011]

 

"Aggregate" means the sums expended or to be expended for the purchase of any goods or services dealing with the same immediate purpose or task, or the furnishing of similar goods or services, over the course of a contract awarded by a contracting agent. 9/15/08; 10/1/11

"Bid threshold" means the dollar amount set by law, above which a contracting unit shall advertise for and receive sealed bids in accordance with procedures set forth in law. 10/1/11

"Contract" means any agreement, including but not limited to a purchase order or a formal agreement, which is a legally binding relationship enforceable by law, between a vendor who agrees to provide goods or perform services and a contracting unit which agrees to compensate a vendor. A contract also may include an arrangement whereby a vendor compensates a contracting unit for the vendor's right to perform a service, such as, but not limited to, a concession. 10/1/11

"Contract year" means the period of twelve (12) consecutive months following the award of a contract.

"Contracting agent" means the governing body of the contracting unit or its authorized designee which has the power to prepare the advertisements, to advertise for and receive bids and, as permitted by this Act, to make awards for the contracting unit in connection with purchases, contracts or agreements.  10/31/04; 9/15/08

"Contracting unit" means any county, any municipality, any board, commission, committee, authority or agency which is not a State board, commission, authority or agency and which has administrative jurisdiction over any district other than a school district, and which has statutory power to make purchases and enter into contracts awarded by a contracting agent for providing goods or performing services. 10/31/04; 9/15/08; 10/1/11; 9/15/12

"Goods and services" means any work, labor, commodities, equipment, materials, or supplies of any tangible or intangible nature, except real property or any interest therein, provided or performed through a contract awarded by a contracting agent, including goods and property subject to the Uniform Commercial Code. 10/1/11

"Lowest price" means the least possible amount that meets all requirements of the request of a contracting agent.

"Professional services" means services performed by a person authorized by law to practice a recognized profession, whose practice is regulated by law, and the performance of which services requires knowledge of an advanced type in a field of learning acquired by a prolonged formal course of specialized instruction and study as distinguished from general academic instruction or apprenticeship and training. Professional services may also mean services rendered in the performance of work that is original and creative in character in a recognized field of artistic endeavor.   9/15/08

"Proprietary" means goods or services of a specialized nature, that may be made or marketed by a person having the exclusive right to make or sell them, when the need for such goods or services has been certified in writing by the Governing Body of the contracting unit to be necessary for the conduct of its affairs. 10/1/11

"Purchase" means a transaction for a valuable consideration, creating or acquiring an interest in goods, services and property, except real property or any interest therein. 10/31/04; 9/15/08

"Purchase order" means a document issued by the contracting agent authorizing a purchase with a vendor to provide goods or perform services, which, when fulfilled in accordance with the terms and conditions of a request of a contracting agent will result in payment by the contracting unit. 10/1/11

"Purchasing agent" means the individual duly assigned the authority, responsibility, and accountability for the purchasing activity and who has such duties as are defined by an authority appropriate to the form and structure of the contracting unit and who possesses a qualified purchasing agent certificate. [N.J.S.A. 40A:11-2(30)] 9/15/10;10/1/11

"Quotation" means the response, to a formal or informal request made by a contracting agent, by a vendor for the purchase of goods or services, when the aggregate cost is less than the bid threshold.  Quotations may be in writing, or taken verbally if a record is kept by the contracting agent. 10/1/11; 9/15/12

"Responsible" means able to complete the contract in accordance with its requirements, including but not limited to requirements pertaining to experience, moral integrity, operating capacity, financial capacity, credit, and workforce, equipment, and facilities availability.

"Responsive" means conforming in all material respects to the terms and conditions, specifications, legal requirements, and other provisions of the request.

"Service or services" means the performance of work, or the furnishing of labor or time, or any combination thereof, not involving the delivery or ownership of a specified end product or a manufacturing process.  Service or services may also include an arrangement in which a vendor compensates the contracting unit for the right to operate a concession. 10/1/11

 

 

IV.         THE ESTABLISHMENT AND AUTHORITY OF A PURCHASING AGENT

 

A. The primary duties and responsibilities of a Municipal Clerk are imposed by statute and generally outlined by specific municipal ordinances and/or administrative codes. In addition to statutory duties, additional ones have been assigned by custom or tradition.  In some municipalities, public purchasing is one such responsibility. 

B. A Municipal Clerk should be aware, unless otherwise specifically delegated, the responsibility for authorizing all contracts, (remember, purchase orders are contracts) of whatever cost or kind, rests with a Governing Body.  [N.J.S.A. 40A:11-3a]

C. Establishment of Purchasing Agent [N.J.S.A. 40A:11-9]  12/00; 9/15/10

1. The Governing Body of any contracting unit may by ordinance, in the case of a municipality, designate an individual to serve as the contracting unit's purchasing agent. The individual designated as the purchasing agent shall be assigned the authority, responsibility and accountability for the purchasing activities for the contracting unit.  The purchasing agent may:

a. Prepare advertisements for receipt of bids.

b. Receive bids on behalf of the contracting unit and to award contracts as permitted by N.J.S.A. 40A:11-3a in the name of the contracting unit. 

c. Conduct any activity necessary or appropriate to the purchasing function. 

 

 

V.          BID THRESHOLD

 

A. When the cost or price of any contract awarded by the contracting agent in the aggregate does not exceed in a contract year the total sum of seventeen thousand five hundred dollars ($17,500), the contract may be awarded by a Purchasing Agent or other employee so designated by the Governing Body when so authorized by ordinance or resolution, as appropriate to the contracting unit, of the Governing Body of the contracting unit without public advertising for bids, except that the Governing Body of any contracting unit may adopt an ordinance or resolution to set a lower threshold for the receipt of public bids or the solicitation of competitive quotations. [N.J.S.A. 40A:11-4] 10/31/05; 9/15/10

B. If the Purchasing Agent is qualified, the Governing Body of the contracting unit may establish that the bid threshold may be up to, but not exceeding forty thousand dollars ($40,000).  Such authorization may be granted for each contract individually, or by a general delegation of authority by the Governing Body to the Qualified Purchasing Agent to negotiate and award contract. [N.J.S.A. 40A:11-3]   10/31/05; 9/15/08; 9/15/10; 10/1/11; 9/15/17

C. The Governor, in consultation with the Department of the Treasury, shall, no later than March 1 of every fifth (5th) year (from the year 2000), adjust the bid threshold amounts, for local contracting units. The Governor shall, no later than June 1 of every fifth (5th) year, notify each Governing Body of the adjustment. The adjustment shall become effective on July 1 of the year in which it is made.

D. Only a Governing Body, by resolution, may award contracts exceeding the bid threshold. Only a Governing Body, by resolution, can award a fair and open contract in excess of seventeen thousand five hundred ($17,500) dollars. It is the Division of Local Government Services' position that non-fair and open contracts may be awarded up to a local contracting unit's bid threshold by the purchasing agent if properly authorized by the Governing Body. [N.J.S.A. 40A:11-4] 9/15/08; 9/15/10

E. Municipal Clerks/Purchasing Agents should verify that their purchasing duties have been legally delegated by a Governing Body. [N.J.S.A. 40A:11-3a] 

F. Assignment and delegation of such responsibilities must be in the form of a written policy, and included in a purchasing ordinance.  Without such delegated authority, a Municipal Clerk cannot, in accordance with law, direct or perform public purchasing activities.  It is important to remember that a Purchasing Agent's authority and establishment of a department must be spelled out by ordinance in the case of a municipality.  [N.J.S.A. 40A:11-9]  When required by form of government, such matters must also be addressed in an administrative code.

 

 

VI. COMPETITIVE BIDDING REQUIREMENTS

 

A. Competitive bids are required for expenditures in excess of the bid threshold to be paid with, or out of, public funds. [N.J.S.A. 40A:11-4] Competitive bids and competitive contracting proposals are considered acceptable methods to use in a fair and open process. 9/15/08; 9/15/10

B. Similar goods and services must be aggregated and contracts must not be split for the purpose of staying under the bid threshold. 10/1/11

C. The Contracts Law [N.J.S.A. 40A:11-3 and 40A:11-7] requires ... periodic purchases of goods and services which are "single in character" and ... total over the formal bid threshold for a given year be bid in accordance with formal bid requirements.

D. Purchasing needs must be consolidated into bulk purchasing specifications which must be periodically advertised instead of buying goods and services on an as-needed basis throughout the year.  Purchases should be added according to what they are spent for rather than who they will be bought from or the individual nature of various components. The concept of aggregation also applies to Pay-to-Play purchase activities. [N.J.S.A. 40A:11-7] 9/15/08; 9/15/12

E. Circumventing requirements of the law by utilizing the informal quotation method for periodic purchases of similar goods and services which total over the bid threshold for any given year is prohibited.

1. If the cumulative dollar amount to be expended during the duration of a multi-year contract period exceeds the formal bid threshold, then advertisement for and receipt of formal bids are required.

2. For example, if a responsible vendor offers a low firm price of twenty-two thousand ($22,000) dollars for the first year and eighteen thousand ($18,000) dollars for the second year of a two-year contract, the solicitation of informal quotations satisfies present statutory requirements (bid threshold at forty thousand [$40,000] dollars). 10/31/05; 9/15/10; 9/15/15

3. If a cumulative dollar amount or any combination of total dollars to be expended in the first and second contract year period exceeds the present bid threshold, then advertisement for and receipt of formal bids are required.

 

 

VII. LOWEST RESPONSIBLE BIDDER

        9/15/12

 

A. Contracts Law requires all contracts or purchases in excess of the formal bid threshold be awarded to the lowest responsible bidder. [N.J.S.A. 40A:11-6.1]

B. Decisions concerning whether a bidder is responsible should include but not be limited to consideration of experience, financial ability, moral integrity, availability of facilities and equipment necessary to fulfill the terms and conditions and perform the services required in a specification. 12/02

C. Decisions concerning whether a bidder's response to a request for receipt of bids is responsive should include if a bid meets all specification requirements and applicable statutory/regulatory provisions.

D. It is not only the lowest offered price! [N.J.S.A. 40:A11-2(27)] 10/31/04

 

 

VIII. COMPETITIVE CONTRACTING  [N.J.S.A. 40A:11-4.1 to 4.5]  10/31/05; 9/15/10

 

A. PURPOSE AND PERMITTED CONTRACTS  9/15/12

1. Competitive contracting may be used by local contracting units in lieu of public bidding for the procurement of specialized goods and services that are hard to specify and the price exceeds the bid threshold for the following purposes:  12/02

a. The purchase or licensing of proprietary computer software and hardware related to the proprietary software designed for contracting unit purposes.

b. The hiring of a for-profit entity or a not-for-profit entity incorporated under Title 15A of the New Jersey Statutes for the purpose of:

(1) the operation and management of a wastewater treatment system or a water supply or distribution facility (with certain exceptions).

(2) the operation, management or administration of recreation of social service facilities or programs not including the administration of benefits under the Work First New Jersey program or under General Assistance; or

(3) the operation, management or administration of data processing services.

c. Services performed by an energy services company.

d. Homemaker-home health services.

e. Laboratory testing services.

f. Emergency medical services.

g. Contracted food services.

h. Performance of patient care services by contracted medical staff at county hospitals, correctional facilities and long-term care facilities.

i. At the option of the Governing Body, any good or service that is exempt from bidding pursuant to N.J.S.A. 40A:11-5.

j. Concessions.

k. The operation, management or administration of other services, with the approval of the Director of the Division of Local Government Services.

l. If the goods and/or services are not listed, pursuant to N.J.S.A. 40A:11-4.1, you must seek the Director's approval. If you do not, the proposed services are subject to receipt of bids.

9/15/14

2. Any of the above listed specialized goods and services shall not be considered by a contracting unit to be an extraordinary unspecifiable service.  A contracting unit can either use competitive bidding or competitive contracting.

3. Unless an exception is granted by N.J.S.A. 40A:11-15 allowing a longer contract duration, contracts awarded under competitive contracting shall not be for longer than five (5) years.

4. In order to initiate competitive contracting, a Governing Body shall pass a resolution authorizing its use each time specialized goods or services are needed.  If the desired goods and services have previously been contracted for using the competitive contracting process, then the original authorizing resolution shall suffice.

B. ADMINISTRATION

1. Competitive contracting shall be administered by a Qualified Purchasing Agent or by Legal Counsel of the contracting unit, or by an Administrator of the contracting unit.  Any contracts awarded by competitive contracting shall be made by resolution of the Governing Body of the contracting unit.

2. All competitive contracting purchases shall utilize request for proposals (RFP) documentation.

9/15/08; 9/15/10

C. REQUEST FOR PROPOSALS 9/15/10

1. A notice that RFP documentation is available shall be published in an official newspaper of the contracting unit at least twenty (20) days prior to the date for submission of proposals. 

2. The contracting unit may charge a fee for the RFP documentation that shall not exceed fifty ($50.00) dollars or the cost of reproducing the documentation, whichever is greater.

D. EVALUATION OF PROPOSALS 9/15/10

1. All proposals shall be evaluated by the Qualified Purchasing Agent, or Legal Counsel, or Administrator and proposals which are most advantageous, price and other factors may be considered.  10/31/04; 9/15/10

2. Under no circumstances shall the provisions of a proposal be subject to negotiation by the contracting unit with the vendor.  10/31/04; 9/15/10

3. The RFP may provide for interviews or presentations by vendors of its choice, and the Qualified Purchasing Agent, Legal Counsel or Administrator may appoint a committee as set forth in the statute to assist in evaluating the proposals.

4. After evaluating the proposals, the Qualified Purchasing Agent, or Legal Counsel, or Administrator shall prepare a report evaluating and recommending the award of a contract or contracts pursuant to N.J.S.A. 40A:11-4.5d. 9/15/10

5. The report shall be made public at least forty-eight (48) hours prior to the awarding of the contract, or when it is made available to the Governing Body, whichever is sooner. 

6. The Governing Body shall have the right to reject all proposals for any reason set forth in N.J.S.A. 40A:11-13.2.

E. AWARD OF CONTRACT 9/15/10

1. Award of a contract shall be:

a. By resolution of the Governing Body of the contracting unit.

b. Within sixty (60) days of the receipt of the proposals or such longer time as may be agreed upon.

c. The competitive contracting report shall become part of the public record and must reflect the final action of the Governing Body.

d. The Municipal Clerk of the contracting unit shall publish a notice in the official newspaper of the contracting unit summarizing the award of the contract, which shall include, but not be limited to:

(1) The nature, duration, and amount of the contract;

(2) The name of the vendor; and

(3) A statement that the resolution and written contract are on file and available for public inspection in the office of the Municipal Clerk of the contracting unit.

 

 

IX. CONTRACTS LAW AUTHORIZED EXCEPTIONS TO THE RECEIPT OF FORMAL BIDS 9/15/10; 9/15/12

 

A. Prior to January 1, 2006, contracts subject to N.J.S.A. 40A:11-5 that exceeded the bid threshold could have been negotiated and awarded by the Governing Body without public advertising for receipt of bids. 9/15/10

1. Some exceptions that should be of special interest to municipal clerks are the following:

a. Professional Services. [N.J.S.A. 40A:11-5(1)(a)(i)]

b. The printing of legal briefs, records and appendices. [N.J.S.A. 40A:11-5(1)(c)]

c. The printing of bonds and documents necessary to the issuance and sale of bonds. [N.J.S.A. 40A:11-5(1)(h)]

d. The printing of legal notices in newspapers as required by law. [N.J.S.A. 40A:11-5(1)(j)]

e. Those goods and services necessary or required to prepare and conduct an election. [N.J.S.A. 40A:11-5(1)(l)]

f. The printing of municipal ordinances or other services necessarily incurred in connection with the revision and codification of municipal ordinances. [N.J.S.A. 40A:11-5(1)(x)]

g. Expenses for travel and conferences. [N.J.S.A. 40A:11-5(1)(cc)]

2. Since the effective enactment (1/1/06) of the Local Unit Pay-to-Play Law, certain contracts must be awarded through a "fair and open" or "non-fair and open" process. The Local Unit Pay-to-Play Law will be discussed in the context of the Contracts Law in a separate section of this chapter. 9/15/12

B. Contracts that are entered into with the United States of America, the State of New Jersey, county or municipality or any board, agency or authority thereof or any other state or subdivision of that state. [N.J.S.A. 40A:11-5(2)]

C. NO BIDS, HIGH BIDS, NEGOTIATED CONTRACTS  9/15/10

1. A Governing Body, acting by two-thirds (2/3rds) vote of its full membership, may enter into a negotiated contract if:

a. On two (2) occasions, no bids were received; or

b. On two (2) occasions it rejected bids because they were too high or not independently arrived at; or

c. A combination of one (1) instance of each situation. [N.J.S.A. 40A:11-5(3)] 9/15/10

2. Before a contract can be negotiated, certain statutory requirements must be satisfied. [N.J.S.A. 40A:11-5(3)(i)(ii)(iii)]

D. EMERGENCY PURCHASES 9/15/10

    An event which the law [N.J.S.A. 40A:11-6] defines as a situation affecting the public health, safety and welfare requiring the immediate delivery of supplies, and goods and/or performance of work or services.  Emergency purchasing procedures are as follows:  12/01

1. The official in charge of the agency wherein the emergency occurred or such other officer or employee as may be authorized to act in place of that official, shall notify the purchasing agent, a supervisor of the purchasing agent, or a designated representative of the Governing Body, of: 10/31/04; 10/31/05

a. The need for the performance of a contract;

b. The nature of the emergency;

c. The time of its occurrence; and

d. The need for invoking an emergency purchase. 

2. If that person is satisfied that an emergency exists, that person shall be authorized to award a contract or contracts for such purposes as may be necessary to respond to the emergent needs.  It cannot be emphasized enough that a formal chain of command with designated backups is an absolute requirement.  [N.J.A.C. 5:34-6.1(b)]  Such notification shall be reduced to writing and filed with the Purchasing Agent as soon as practicable.  12/02

3. Upon the furnishing of goods or services in accordance with the terms of the contract, the contractor shall be entitled to be paid, and the contracting unit shall be obligated for said payment.  The Governing Body of the contracting unit shall take such action as shall be required to provide for the payment of the contract price.  12/02

4. A waiver of Chapter 19 (Pay-to-Play Law) is automatically granted as long as the emergency requirements of the LPCL, specifically N.J.S.A. 40A:11-6 and the rules of N.J.A.C. 5:34-6.1, are met.

Within thirty (30) days after the declaration of an emergency, a municipality must file an Emergency Procurement Report with the DLGS. A copy of the Report can be obtained by viewing the Division's Website at www.state.nj.us/dca/lgs/lpcl under Model Procurement Forms.  9/15/12

E. RESPONSES OFFERING EQUAL PRICES (TIE BIDS) 9/15/10

Whenever two (2) or more responses offer equal prices and are the lowest responsible bids or proposals, the contracting unit may award the contract to a vendor whose response, in the discretion of the contracting unit, is the most advantageous, price and other factors considered.  In such a case, the award resolution or purchase order documentation shall explain why the vendor selected is the most advantageous. [N.J.S.A. 40A:11-6.1d] 9/15/10

F. PURCHASES THROUGH THE STATE'S DIVISION OF PURCHASE AND PROPERTY 9/15/10

1. Any local contracting unit may, without advertising for bids, or having rejected all bids obtained pursuant to advertising, purchase any goods or services under any contract or contracts entered into on behalf of the State by the Division of Purchase and Property in the Department of the Treasury. [N.J.S.A. 40A:11-12(a) and N.J.A.C. 5:34–7.29]

2. Purchases made under a contract awarded under this program shall be for a term not exceeding the term of a State contract.  12/02; 9/15/12

3. Any local contracting unit using this program must authorize award of a contract by resolution of a Governing Body unless a contract is awarded by a Purchasing Agent pursuant to N.J.S.A. 40A:11-3 (below the bid threshold). 10/31/04

G. PURCHASES FROM THE U.S. GENERAL SERVICES ADMINISTRATION -FEDERAL SUPPLY SCHEDULES  9/15/08; 9/15/10

     A local contracting unit may also use, without advertising for bids, or having rejected all bids obtained pursuant to advertising, the Federal Supply Schedules of the General Services Administration. Only those Federal General Services Administration Contracts as authorized in writing by the Director of the Division of Purchase and Property are exempt from bidding.

H. NATIONALLY-RECOGNIZED AND ACCEPTED COOPERATIVE PURCHASING AGREEMENTS 9/15/12

1. Any municipality may award contracts for goods and services through the use of such national agreements that have been developed utilizing a competitive bidding process by another contracting unit within the State of New Jersey, or within any other state, when available. [N.J.S.A. 52:34-6.2(b)2]  9/15/16; 9/15/19

2. Municipal clerks should be aware of the legal advertising requirements for using such agreements. Please see LFN 2012-10, 5/14/12, pp. 7-8, and Appendix A.  9/15/16

I. QUOTATIONS TEN PERCENT (10%) LESS THAN THE STATE CONTRACT PRICE [N.J.S.A. 40A:11-5(4)]  12/00; 9/15/08; 9/15/10; 9/15/12

1. A contracting unit shall, by resolution adopted by an affirmative vote of two-thirds (2/3) of the full membership of the Governing Body, award a contract without advertising whenever the contracting unit has solicited and received at least three (3) quotations on materials, supplies or equipment for which a State contract has been issued pursuant to N.J.S.A. 40A:11-12, and the lowest responsible quotation is at least ten percent (10%) less than the price the contracting unit would be charged for the identical items, in the same quantities, under the State contract. The phrase "if practicable" does not apply. 10/31/04

2. Quotations for the contract item shall not be received from any vendor to whom the State contract has been awarded, and where such vendor has agreed to extend the contract pricing for the item to local contracting units pursuant to N.J.S.A. 52:25-16.1. [N.J.A.C. 5:34-7.30(a)1]

3. The contracting unit must file copies of the purchase order relating to any such contract; the requisition for purchase order, if applicable; documentation identifying the price of the materials, supplies or equipment under the State contract; and the State contract number with the Director of the Division of Local Government Services within five (5) working days of the award of the contract by the contracting unit.

J. GOODS OR SERVICES PURCHASED FROM A BEQUEST, LEGACY OR GIFT 9/15/10; 9/15/12

Goods or services, the payment for which utilizes only funds received by a contracting unit from a bequest, legacy or gift, shall not be subject to the provisions of the Contracts Law if such bequest, legacy or gift contain written instructions as to the specifications, manufacturer or source of supply.  [N.J.S.A. 40A:11-13.1]

 

 

X. LOCAL COOPERATIVE PURCHASING SYSTEMS 9/15/10

 

A. TYPES OF LOCAL COOPERATIVE PURCHASING SYSTEMS  9/15/10

    All of these systems are required to be registered with the DLGS. In addition, cooperative pricing, joint purchasing, county cooperative contract purchasing, regional cooperative pricing and commodity resale systems require a resolution of the Governing Body for establishing or participating in such a system, and a resolution for a formal contract. System approval is for a period of five (5) years. Contact the DLGS for further information.

1. Cooperative Pricing System [N.J.S.A. 40A:11-11(5)]

This system is different inasmuch as one (1) government agency performs the advertising and awarding of the lowest responsible bid, but separate contracts or purchase orders are executed between each participating government agency and a vendor. [N.J.A.C. 5:34-7.3]

2. Joint Purchasing System

In a joint purchasing arrangement [N.J.S.A. 40A:11-10], two (2) or more local contracting units contractually agree that one of them will serve as purchasing agent for the group, at least with respect to certain specified categories of purchases. [N.J.A.C. 5:34-7.3]

3. County Cooperative Contract Purchasing System

a. The Governing Body of a county government may establish a cooperative pricing system for the voluntary use of contracting units within the county.  [N.J.S.A. 40A:11-11(6) and N.J.A.C. 5:34-7.21 to 7.26]

b. A county government cooperative purchasing system works like the State's cooperative contracts where estimates do not have to be provided by local contracting units.

c. A county must offer potential bidders an option of participating in the program. 9/15/12

4. Regional Cooperative Pricing System

a. Two (2) or more registered cooperative pricing systems may join together for the provision and performance of goods and services, including the purchasing of energy. 9/15/12

5. Commodity Resale System

a. Under the commodity resale system [N.J.A.C. 5:34-7.15 et seq.], a local contracting unit (lead agency) may purchase gasoline, diesel fuel or snow removal chemicals, public works materials and supplies, including road and roadway construction materials or any other such materials as may be approved by the Director of the Division of Local Government Services. 10/31/04

b. The lead agency may then resell a portion of such commodity to another local contracting unit as a participating member.

 

 

XI. AWARD OF EXTRAORDINARY UNSPECIFIABLE SERVICES (EUS) CONTRACTS

 

A. "Extraordinary unspecifiable services" (EUS) means services which are specialized and qualitative in nature requiring expertise, extensive training and proven reputation in the field of endeavor. [N.J.S.A. 40A:11-2(7)] An example is the purchase of insurance coverage and consultant services. [N.J.S.A. 40A:11-5(m)]  9/15/12

1. Application of this exception must be construed narrowly in favor of open competitive bidding, where possible.

2. Before a Governing Body awards an EUS contract which exceeds the bid threshold, a designated administrative official of a local contracting unit must file a certificate with the Governing Body clearly describing the nature of the work/service to be done, stating it is not reasonably possible to draft specifications, describing the informal solicitation of quotations and describing in detail why the contract meets the provisions of the statute and rules [N.J.A.C. 5:34-2.3b]   Please refer to sample EUS certification form at the end of this Chapter.  12/02

3. A contract for EUS may be awarded upon determination in writing by the contracting agent that the solicitation of competitive quotations is impracticable. A mere recitation of the statutory language shall not be acceptable.

4. EUS contracts shall be awarded by resolution of the Governing Body.  [N.J.S.A. 40A:11-6.1(b)]

 

 

XII. SOLICITATION OF COMPETITIVE QUOTATIONS   9/15/10

 

A. Contracts below the bid threshold but fifteen percent (15%) or more of that amount

1. Contract in the aggregate below the bid threshold – two thousand six hundred twenty-five ($2,625) dollars for the seventeen thousand five hundred ($17,500) dollars threshold and six thousand ($6,000) dollars threshold for the forty thousand ($40,000) dollars threshold with a Qualified Purchasing Agent, and 10/1/11; 9/15/15

2. Contracts that are exempt from public advertising, and the receipt of bids require the contracting agent to actively solicit at least two (2) competitive quotations, if practicable.

3. Such contracts in excess of seventeen thousand five hundred ($17,500) dollars are subject to Pay-to-Play requirements.

B. Contract Award Procedures

1. Work by employees of the contracting unit, are exempt from both competitive bidding and competitive quotations.

2. Contracts awarded by competitive quotations shall be awarded to the vendor whose response is most advantageous, price and other factors considered.

3. The contracting agent must retain the record of the quotations solicited and shall include a copy of the record with the voucher used to pay the vendor.

4. If authorized by a Governing Body's resolution or ordinance, all contracts that are in the aggregate less than fifteen percent (15%) of the bid threshold may be awarded by the contracting agent without soliciting competitive quotations by using sound business judgment.

5. Sound business practices mean employing such judgment that the price charged to the contracting unit reflects current market conditions and the quantity and delivery needs of the contracting unit. 2/02 [N.J.A.C. 5:34-9.5(b)]  9/15/12

 

 

XIII. DURATION OF CONTRACTS 9/15/08; 9/15/10

 

Statutory Authorization

A. For any period not to exceed twenty-four (24) consecutive months.

B. Exceptions are specifically permitted pursuant to N.J.S.A. 40A:11-15.

C. Professional services contracts can only be awarded for a period not to exceed twelve (12) consecutive months.

D. Contracts exceeding the statutory limits of N.J.S.A. 40A:11-15 are beyond the powers conferred upon local contracting units by law.  The courts have ruled that such contracts are null and void.

 

 

XIV. CERTAIN ASPECTS CONCERNING THE STATUTORY BID PROCESS OF INTEREST TO MUNICIPAL CLERKS  12/02; 9/15/08; 9/15/10

 

A. Publication for Receipt of Bids

1. Published in the official newspaper stating:

a. The manner of submitting and receiving bids;

b. The date, time and place at which bids will be received. 10/1/11

2. In no event less than ten (10) days prior to date fixed for receiving bids. [N.J.S.A. 40A:11-23] Do not count the day of the receipt of bids. 9/15/08

3. Exception - receipt of bids for collection and disposal of municipal solid waste must be published in an official newspaper circulating in a county or municipality and in at least one (1) newspaper of general circulation published in the state.  Advertisement cannot be less than sixty (60) days prior to date fixed for receiving bids.  10/31/04

4. Publication of detailed specifications is not necessary.  A brief description of what a local contracting unit needs is acceptable.

B. Affirmative Action  10/31/05

1. All legal advertising must include as part of an advertisement the following language:

2. "Bidders are required to comply with the requirements of N.J.S.A. 10:5-31 et seq. and N.J.A.C. 17:27."  10/31/05

C. Limits on Bid Acceptance Dates

1. For all contracts, the date fixed for receiving bids shall not fall on a Monday, or any day directly following a State or federal holiday. [N.J.S.A. 40A:11-23(a)]

2. Currently, all federal holidays are also State holidays, and many of them fall on Monday.

3. The law applies whether or not the contracting unit observes a given holiday. The law supersedes local holiday observance.

4. It is the Division of  Local Government Services’ view that the law also applies to competitive contracting.

5. Annual updates are posted on the Division’s website, www.state.nj.us/dca/lgs/lpcl  9/15/12

D. Notice of Revisions  9/15/08

1. Construction Contracts:

Notice must be provided to any person who has submitted a bid or has received a bid package.  Notice shall be provided in any of the following ways no later than seven (7) days, Saturdays, Sundays or holidays excepted, prior to the date on which the bids are to be submitted:

a. In writing by certified mail; or

b. By certified fax transmission where the sender's fax machine produces a receipt showing the date and time of transmission and verification that the transmission was successful; or

c. By a delivery service that provides certification of delivery to the sender.

2. Solid Waste Disposal and Collection Contracts:  10/31/05

a. A notice must be published in an official newspaper of the contracting unit and in at least one newspaper of general circulation published in the State not later than seven (7) days, Saturdays, Sundays and holidays excepted, prior to date for acceptance of bids.  [N.J.S.A. 40A:11-23c(3)] 10/31/05; 9/15/08

b. While the Local Public Contracts Law does not specifically provide for the three (3) methods (certified mail, certified facsimile transmission or by delivery service) for these contracts, it may be a best practice to use any one of the three (3) methods. 10/31/04

3. All Other Contracts:  9/15/12

A notice must be published not later than seven (7) days, Saturdays, Sundays and holidays excepted, prior to date for acceptance of bids in an official newspaper of the contracting unit and be provided to any person who has submitted a bid or has received a bid package, using one of the following means:  10/31/05

a. In writing by certified mail; or

b. By certified fax transmission where the sender's fax machine produces a receipt showing the date and time of transmission and verification that the transmission was successful; or

c. By a delivery service that provides certification of delivery to the sender.  [N.J.S.A. 40A:11-23]

4. Failure to fully comply with requirements for notice of revision(s) or addenda will render the receipt of bids null and void and require a rebid.  12/02

 

 

XV. RECEIPT OF FORMAL BIDS  9/15/08; 9/15/10

 

A. As a general rule, state law does not allow bids to be received after the time designated in an advertisement. [N.J.S.A. 40A:11-23]   This issue has been litigated on several occasions.

B. Receipt of bids by mail:  [N.J.S.A. 40A:11-23]

1. Procedures should be established to prevent abusive practices.

2. Bids, especially those received by mail, must be properly safeguarded.  Avoid any possibility or allegation of early opening or improper handling of bids.

3. An individual who handles the received mail and hand delivered bids should not be the same individual who will officially receive and open them at the designated time. This should be avoided if at all possible. 9/15/08

4. All bids should be submitted in properly labeled, sealed envelopes to be opened only at the designated time and location.

C. Return of Rejected Bids

  Bids rejected for failing to comply with procedural requirements should not be returned to a bidder until an official action has been taken by a Governing Body.  Only a Governing Body has the power to formally award a contract or reject all bids.  [N.J.S.A. 40A:11-4]

D. Cancellation or Postponement of Receipt of Bids or Proposals

     A concern from time to time is what to do with the pending receipt of bids when some event or situation causes the advertised date to be postponed or canceled.

1. This is sometimes further complicated when there is not sufficient time to place a notice in a legal newspaper to publicly reach as many potential bidders as possible.  Does one send a fax, or use a telephone to notify everyone who may have specifications? This may not be a solution since one might not know how many vendors have specifications.  Local contracting units should maintain a record of names and contact information for potential bidders or proposers who have received a set of specifications or proposals.  9/15/08; 10/1/11

2. A worse scenario is when vendors appear for a bid opening and no local official is there to inform them of a change in date for receipt of bids.  9/15/12

3. The Contracts Law is silent on this point.  Changing a date for receipt of bids should be avoided.  However, if there is no other choice, the new date selected must comply with the requirements of the Contracts Law, the Open Public Meetings Act, and any other formal action that a Governing Body may wish to pursue.

4. While the Contracts Law is silent on this issue, your attention is called to N.J.A.C. 5:34-9.3(a) concerning the cancellation or N.J.A.C. 5:34-9.3(b) regarding the postponement of receipt of bids or proposals.  A careful review of this rule should be helpful in resolving such issues. 10/31/04; 9/15/08; 9/15/12

 

 

XVI. OPENING OF FORMAL BIDS  9/15/08; 9/15/10

 

A. At stated time and place, a properly designated Purchasing Agent must publicly receive bids, immediately proceed to unseal them and publicly announce the contents. [N.J.S.A. 40A:11-23]  If there is no properly designated Purchasing Agent, either a Municipal Administrator/Manager, Municipal Clerk, or Chief Financial Officer can be designated to receive and open bids.

B. Announcement of a bid's contents must be made in the presence of any parties bidding or their agents who are present.

C. A proper record of the prices and terms of an award to be made by resolution of a Governing Body must be recorded in the minutes of said Governing Body.

D. If an award is to be made by other than a Governing Body, a record must be kept in an appropriate book for such purpose. Such an award would apply to a quotation or an emergency pursuant to N.J.S.A. 40A:11-6.  9/15/08

E. Withdrawal of Bids for Public Works Contracts 10/1/11

1. The amendment at N.J.S.A. 40A:11-23.3, authorizes bidders on public works projects to request withdrawal of a bid due to a "mistake" on the part of the bidder after the receipt and public opening of the bids. This provision applies only to public works projects. Public works means building, altering, repairing, improving or demolishing any public structure or facility constructed or acquired by a contracting unit to house local government functions or provide water, waste disposal, power, transportation, and other public infrastructures. [N.J.S.A. 40A:11-2(34)] 10/1/11

2. A "mistake" means: "for a public works project, a clerical error that is an unintentional and substantial computational error or an unintentional omission of a substantial quantity of labor, material, or both, from the final bid computation." [N.J.S.A. 40A:11-2(42)] 10/1/11

3. If a bidder determines that their bid includes a mistake that meets the definition under the law, a bidder can make a request to withdraw the bid. To do so a bidder shall submit the withdrawal request in writing by certified or registered mail to the proper name and title of the local official at the complete address to which the bid was submitted. 10/1/11

4. The bidder shall request withdrawal of a bid within five (5) business days after the opening of the bids. Since the bid withdrawal request shall be effective as of the postmark of the certified or registered mailing, if a contracting unit plans to award a public works contract before the five-day time period expires, the appropriate local official should contact the apparent lowest responsible bidder prior to the contract award to ascertain if the bidder is going to request a bid withdrawal. If the bidder indicates a plan to withdraw, the award should be held off pending receipt of the request. 10/1/11

5. For further information and guidance regarding N.J.S.A. 40A:11-23.3, please refer to Local Finance Notice, LFN 2011-12, dated 3/18/11. 10/1/11

 

 

XVII. AWARD OF A CONTRACT IN EXCESS OF THE BID THRESHOLD  12/02; 9/15/08; 9/15/10

 

A. Guidelines should encompass a determination of who submitted the lowest bid, whether the low bidder is responsible, and if the low bid is responsive to a set of specifications.

B. Openness, impartiality and reasonableness are standards in any competitive process.

C. Bids rejected for failing to comply with certain statutory or procedural requirements and/or are determined to be non-responsive should not be returned to a bidder(s) until an official action has been taken by the Governing Body.

 

 

XVIII. REJECTION OF ALL BIDS  [N.J.S.A. 40A:11-13.2] 9/15/10

 

A. A local contracting unit may reject all bids for any of the following reasons:

1. The lowest bid substantially exceeds the cost estimates for the goods and services.

2. The lowest bid substantially exceeds the contracting unit's appropriation for the goods or services.

3. The Governing Body of the contracting unit decides to abandon the project for provision or performance of the goods or services.

4. The contracting unit wants to substantially revise the specifications for the goods and services.

5. The purposes or provisions or both of the Local Public Contracts Law are being violated.

6. The Governing Body of the contracting unit decides to use a State authorized contract as allowed by the Local Public Contracts Law.

The process has more accountability.  A local contracting unit cannot reject all bids because it simply did not like the price of a bidder or the ranking of a certain  bidder or bidders.  12/02

 

 

XIX. DISQUALIFICATION OF BIDDERS  [N.J.S.A. 40A:11-4b] 10/31/04; 9/15/10; 9/15/18

 

A. Consult with the municipal attorney;

B. The Governing Body of a contracting unit may, by resolution approved by a majority of the Governing Body, disqualify a bidder who would otherwise be determined to be the lowest responsible bidder, if the Governing Body finds that it has had prior negative experience with the bidder. 9/15/12

C. There are certain conditions that apply if a Governing Body is contemplating a disqualification based on prior negative experience [N.J.S.A. 40A:11-4c(1) through (6)].

D. Disqualification shall be for a reasonable, defined period of time which shall not exceed five (5) years. [N.J.S.A. 40A:11-4c (4)] 9/15/12

 

 

 

XX.        BID GUARANTEES AND SURETY REQUIREMENTS 12/02; 9/15/08; 9/15/10

 

A. Bid Guarantees

1. A guarantee, payable to a local contracting unit for the faithful signing and execution of a contract.

2. A bid guarantee shall be in an amount of ten percent (10%) of a bid, but not in excess of twenty thousand ($20,000) dollars. 10/31/04; 10/31/05; 9/15/08

3. If a bid guarantee is required, it may be given at the option of a bidder by certified check, cashier's check or bid bond. [N.J.S.A. 40A:11-21]

B. A Consent of Surety is given at the time bids are received that a performance bond will be given upon contract signing, if required.  12/02

C. Performance Bond - A bond provided by a surety company for a contractor's faithful performance of all provisions of the contract specification(s). [N.J.S.A. 40A:11-22]  It is suggested that the form and contents of all bonds be reviewed by a Municipal Attorney. 12/02

D. Maintenance Bond

1. Serves as security after acceptance of work performed pursuant to a contract.

2. The bond cannot be longer than two (2) years and no more than one hundred percent (100%) of project costs. [N.J.S.A. 40A:11-16.3b]

E. All bond requirements  are at the option of a local contracting unit.  The Contracts Law statutes are permissive. However, a contractor bidding on a construction, public works or utilities project in excess of one hundred thousand ($100,000) dollars shall furnish a bid guarantee and a certificate (consent of surety) from a surety company. [N.J.S.A. 40:A:11-21 and 22] 9/15/08; 9/15/12

 

 

XXI. AWARD AND SIGNING OF A CONTRACT AND RETURN OF BID SECURITY  12/02; 9/15/08; 9/15/10

 

A. A Governing Body must award a contract or reject all bids within a specified time, but it cannot exceed sixty (60) calendar days. [N.J.S.A. 40A:11-24a]

B. A Governing Body may extend beyond the sixtieth (60th) day.  A local contracting unit can request that the bids of any bidders who consent, be held for consideration for such longer period as may be agreed.

C. A local contracting unit is required to return bid security of those bidders not among the lowest three (3) bids within ten (10) days after opening of bids (Sundays and holidays excepted). [N.J.S.A. 40A:11-24a] 9/15/08

D. Within three (3) days, (Sundays and holidays excepted) after an award and signing of a contract, and approval of a contractor's performance bond, the bid security of any remaining unsuccessful bidders must be returned. [N.J.S.A. 40A:11-24a]

E. All parties within the time limit set forth in specifications must sign a contract. [N.J.S.A. 40A:11-24b]

1. The time limit must not exceed twenty one (21) days (Sundays and holidays excepted) after award of a contract.

2. All parties to a contract may agree to extend the time limit set forth in specifications beyond the twenty-one (21) day limit.

3. A contractor, upon written request to a local contracting unit, is entitled to receive, within seven (7) days of the request, an authorization to proceed pursuant to terms of the contract on the date set forth in a contract for work to commence.

4. If no date is set forth in the contract, then work proceeds upon receipt of authorization from the contracting unit.

 

 

XXII.    ALL CONTRACTS IN WRITING 9/15/08; 9/15/10

 

A. The Contracts Law specifically requires all contracts to be in writing. [N.J.S.A. 40A:11-14]

 

B. The form in which contracts may be made and executed may be prescribed by the Governing Body.

 

C. For purchases over and under the formal bid threshold, a purchase order may serve as a contract if properly designed, signed and executed.

 

 

XXIII. SALE OR DISPOSITION OF PUBLIC  PERSONAL PROPERTY [N.J.S.A. 40A:11-36] 9/15/08; 9/15/10

 

A. A Governing Body by resolution may authorize by sealed bids or public auction the: 9/15/08

1. Sale of public personal property no longer needed for public use. [N.J.S.A. 40A:11-36]

2. If the estimated fair value of the personal property to be sold exceeds fifteen percent (15%) of the bid threshold in any one (1) sale and it is neither livestock nor perishable goods, it shall be sold at public sale to the highest bidder. 

3. Sold at public sale to highest bidder except when a sale is made to certain other governmental agencies. [N.J.S.A. 40A:11-36(2)]

4. A public advertisement must include a notice of the date, time and place of a public sale, together with a description of items to be sold and terms and conditions of a sale. [N.J.S.A. 40A:11-36(3)]

5. A sale must be held not less than seven (7) nor more than fourteen (14) days after latest publication of a notice. [N.J.S.A. 40A:11-36(3)]

6. If no bids are received, the personal property may then be sold at private sale without further publication or notice, but in no event for less than the estimated fair value; or the contracting unit may, if it so chooses, reoffer the property at a public sale. 

7. A contracting unit may reject all bids if it determines such rejection to be in the public interest. Where all bids have been rejected at a second public sale, than the personal property can be sold, without further publication or notice at a private sale. In no event shall the negotiated price at private sale be less than the highest price of any bid rejected at the preceding two public sales and provided further that in no event the terms or conditions of sale be changed or amended.

8. By resolution of the Governing Body, a contracting agent may include the sale of personal property no longer needed for public use as part of specifications to offset the price of a new purchase. This is the trade-in provision. [N.J.S.A. 40A:11-36(7)] 10/1/11

9. "Estimated fair value" means the market value of the property between a willing seller and a willing buyer less the cost to the contracting unit to continue storage or maintenance of any personal property not needed for public use.

10. These provisions of law does not govern public (real) property transactions. The Local Lands and Buildings Law [N.J.S.A. 40A:12-1 et seq.] is covered in the Miscellaneous Duties Chapter.

 

 

XXIV. CHANGE ORDERS  9/15/10

 

A. APPLICATION OF CHANGE ORDERS  9/15/08

1. A Change Order is a properly prepared document that must be authorized by a Governing Body.

2. It authorizes a contractor, consultant or vendor performing work to change the quantity or character of work, service, materials and supplies to be performed or delivered from that originally specified or estimated.

3. There will be a corresponding change in payment(s) due.

4. Quantities of items or work shall not be changed in such a manner as to nullify the effect of a competitive bid or the determination of lowest responsible price which was made at the time of contract award, if at such time changes could have been reasonably foreseen.

5. The rules also apply to Change Orders for construction, reconstruction and major repair contracts. [N.J.A.C. 5:30-11.8] 10/31/04

6. Change Orders can only be used to change the numbers of units or items originally advertised and contracted for provided that:

a. Unit prices or a price methodology were sought in an original set of specifications and included in a contract; and

b. An original set of specifications and a contract included a provision that unit prices could be used.

c. If a. and b. above were not included in an original set of specifications, a change order cannot be issued.

7. Before authorizing any Change Orders resulting in additional expenditures, availability of funds shall be certified in writing by a Chief Financial Officer in accordance with N.J.A.C. 5:30-5.1 et seq.

8. Change Order authorizations shall not be withheld until completion of an entire project.

B. Twenty percent (20%) Change Order Limitation:

1. Total number of Change Orders executed for a particular contract shall not cause an originally awarded contract price to be exceeded by more than twenty percent (20%) unless otherwise authorized by the Change Order rules.

2. If proposed Change Orders do exceed the twenty percent (20%) limitation, no work shall be performed or purchases made until the procedures of N.J.A.C. 5:30-11.1 et seq. have been completed.  If a Governing Body determines issuance of a Change Order is not justifiable, a new contract shall be executed in accordance with the procedures of the Contracts Law.

3. The twenty percent (20%) limitation shall not apply to emergency situations as defined within N.J.S.A. 40A:11-6.

4. A Governing Body shall pass a resolution authorizing a written amended contract to be entered into covering change(s) to be made. 

a. A resolution shall be passed before execution of a Change Order.

b. Governing Body shall cause to be printed once, in an official newspaper, a brief notice indicating the additional amount to be expended, the original contract price, the nature of the original and additional work, and why it is necessary to expend the additional funds.  A copy of the advertisement shall also be filed with the Municipal Clerk and be available for inspection by the public.  12/01  [N.J.A.C. 5:30-11.9(c)6]

c. The Municipal Clerk of the Governing Body shall report to the Director, on an appendix to the contracting unit's annual budget, all change orders from the previous fiscal year which exceeded the twenty percent (20%) limitation.  This report shall be made on a form provided by the Director.  A summary of the report shall be included as supplemental materials in the annual audit of the contracting unit.  [N.J.A.C. 5:30-11.9(d)]

 

 

XXV. BUSINESS REGISTRATION OF PUBLIC CONTRACTORS CERTIFICATE   9/15/08; 9/15/10; 9/15/12

 

A. Introduction

1. All business organizations that do business with a local contracting unit are required to be registered with the State and provide proof of that registration to the local contracting unit before it may enter into a contract with the business.

B. Application of the Law

1. A contractor shall provide the local contracting unit with the business registration certificate of the contractor and that of any named subcontractor (construction contracts) prior to the time a contract, purchase order, or other contract document is awarded or authorized.

2. For bids and requests for proposals, the local contracting unit must retain the proof of business registration in the file where documents relating to the contract are maintained. For all other contracts, proofs of business registration shall be maintained in an alphabetical order.

C. Non-Bid Contracts

1. Proof of registration for non-bid contracts (i.e. purchase orders under the bid threshold) must be received before the contract is issued.

2. In situations of an emergent nature, a local contracting unit may enter into a contract with a business organization, provided the contractor agrees to provide the BRC within two (2) weeks of the execution of the contract.

D. Important Information Concerning the Law

1. Individual contractors or vendors must also obtain a certificate and submit it in order to receive a contract. Contracts with a value of less than fifteen percent (15%) of the contracting agency's bid threshold do not have to comply with the law.

 

 

XXVI.    THE NEW JERSEY LOCAL UNIT PAY-TO-PLAY LAW 9/15/10

 

A. Background of P.L. 2004, c.19

1. On January 1, 2006, N.J.S.A. 19:44A-20.4 et seq. took effect. The Law affects all "municipalities and counties and their agencies and instrumentalities," concerning certain business entities and county political party committees.

a. The law affects all contracting units subject to the Local Public Contracts Law that enter into contracts with an anticipated value in excess of seventeen thousand five hundred ($17,500) dollars.

b. Contracts in excess of seventeen thousand five hundred ($17,500) dollars that are exempt from the receipt of bids are covered. Therefore, those exceptions, N.J.S.A. 40A:11-5(1)(a) through 40A:11-5(1)(hh), are subject to the statutory requirements of the "fair and open" or "non-fair and open" (The Alternate) process. 9/15/12

c. Contracts with a value over seventeen thousand five hundred ($17,500) dollars are not linked to a public agency's bid threshold. 9/15/12

2. Contracts Covered by the Law

a. Contracts covered are those awarded by formal public bidding, competitive contracting, cooperative purchasing, informal quotations and contracts that are exempt from the bidding process or for professional or extraordinary unspecifiable services.

b. Contracts issued by purchase orders, as well as by more formal contractual agreements are covered, and are subject to the concept of aggregation. Also, the Law applies to multi-year contracts.

B. The Fair and Open Process

1. The minimum requirements of a fair and open process are:

a. Publicly advertised (a minimum of ten (10) calendar days) either conventionally in newspapers or on the internet website maintained by the public entity, in sufficient time to give notice in advance of the contract; 10/1/11; 9/15/12

b. Awarded under a process that provides for public solicitation of proposals or qualifications; 10/1/11

c. Established on the basis of an award and disclosure process under criteria established in writing by the public entity prior to the solicitation of proposals or qualifications; and 10/1/11

d. Publicly opened and announced when awarded by the Governing Body. 10/1/11

Note: The decision of a public entity as to what constitutes a fair and open process shall be final. 10/1/11

2. Awards of fair and open contracts will be approved by resolution of the Governing Body.

3. All resolutions awarding contracts over the seventeen thousand five hundred ($17,500) dollars threshold should include wording indicating that the contract is awarded pursuant to a fair and open process or to an "alternative" process, i.e. non-fair and open process. 10/1/11

4. The requirement of "sufficient time to give notice" is met, at a minimum, by the standard for newspaper publication of bids—ten (10) calendar days. This applies for either newspaper or website advertising.

5. The following guidance supersedes any prior guidance to the contrary regarding the placement of a "Notice of Award" in the newspaper when professional services or EUS contracts are awarded:

a. "Window Contracts." A professional services or EUS "window" contract is a contract between seventeen thousand five hundred ($17,500) dollars and a contracting unit's bid threshold (not to exceed forty thousand ($40,000) dollars). In these cases, there is no requirement to publish a notice of award because the value is less than the contracting unit's bid threshold and the professional services bid exception is not used. Window contracts, however, are still subject to the provisions of political contribution disclosure requirements as they are contracts over seventeen thousand five hundred ($17,500) dollars. 10/1/11; 9/15/17

b. Over the bid threshold. If a professional services or EUS contract is over the contracting unit's bid threshold, regardless of whether a fair and open or the "alternate" (non-fair and open) process is used, the contract must be awarded by Governing Body resolution. A notice of award must be published as the amount of the contract exceeds the bid threshold and the professional services bid exception is used. Please refer to N.J.S.A. 40A:11-5(1)(a)(i) for the statutory requirements for publication.

c. Less than $17,500. Professional services contracts that are less than seventeen thousand five hundred ($17,500) dollars are not subject to the requirement of a published notice of contract award.

C. The "Non-Fair and Open" (Alternate) Process 9/15/12

1. An "alternate " process can only be used when goods and services are exempt from public bidding [N.J.S.A. 40A:11-5].

2. The non-fair and open process does not require the competitive elements of the fair and open process.

3. The Law requires that for a non-fair and open contract to be awarded:

a. The contractor must certify that no reportable contributions exceeding three hundred ($300) dollars per election cycle were made during the one year preceding the award of the contract [N.J.S.A. 19:44A-20.5]. 9/15/12

b. The contractor may not make a reportable contribution during the term of the contract.

4. A model Business Entity Disclosure Certification (BED-C) has been developed by the DLGS for use by municipalities. It contains the information necessary to comply with the statutory requirements of certifying that no reportable contributions were made in the year prior to the award of contract.

a. The governing body cannot award a contract without having the completed certification on file.

b. The Municipal Clerk must obtain the names of the political party and candidate committees and individual officials from the elected officials of the municipality, and provide the information to the individual responsible for the contract.

D. Background of P.L. 2005, c.271

1. On January 1, 2006, P.L. 2005, c.271 was signed into law. Key elements of the law are:

a. Permits municipalities and their agencies to formally adopt local pay-to-play restrictions. All local pay-to-play policies must be filed with the Secretary of State.

b. Requires that businesses receiving non-fair and open contracts submit a list of contributions made to a broader range of elected officials.

c. Requires that businesses awarded contracts in excess of fifty thousand ($50,000) dollars a year file an annual disclosure of contributions with ELEC.

2. Disclosure of contributions to local units

a. P.L. 2005, c.271 created a new disclosure requirement for businesses and public contracts with a value exceeding seventeen thousand five hundred ($17,500) dollars awarded pursuant to a non-fair and open process.

b. Businesses receiving these contracts must submit a "Chapter 271 Political Contribution Disclosure" to the municipality no later than ten (10) days prior to the contract being awarded. (Disclosure Form has been developed by DLGS).

c. This disclosure is in addition to the BED-C required under Chapter 19 that must be on file prior to award.

d. The business must disclose all reportable political contributions that exceed three hundred ($300) dollars (per election cycle) made during the twelve-month period preceding the award of the contract.

e. Both disclosure forms shall be kept on file with other documents related to the contract.

NOTE:  For a basic understanding of the Pay-to-Play Law, please review the "Local Unit Pay-to-Play Decision Tree," at the end of this section and consult with the municipal attorney.  9/15/12; 9/15/18

 

 

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EXHIBIT

SAMPLE STANDARD CERTIFICATION DECLARATION FOR AN

EXTRAORDINARY UNSPECIFIABLE SERVICE

 

TO:                       Members of the Governing Body

FROM:   Name and Title of the Contracting Unit's

Designated Administrative Official

DATE:   ___________________

 

SUBJECT:                       This is a contract for_________________________________________

 

This is to request your approval of a resolution authorizing a contract to be executed as follows:

 

Firm _____________________________________________

 

Cost     _____________________________________________

 

Duration_____________________________________________

 

Purpose_____________________________________________

 

This is to request an award of a contract without the receipt of formal bids as an Extraordinary Unspecifiable Service [N.J.S.A. 40A:11-5(1)(a)(ii) and N.J.A.C. 5:34-2.3(b)].  I do hereby certify to the following:

 

1.                Provide a clear description of the nature of the work to be done:

 

(Provide a complete description)

                              

2. Describe in detail why the contract meets the provisions of the statute and rules:

 

(Do not just rewrite or paraphrase the statute or rule, or merely state a desire to have a reliable job performed - provide a complete explanation.  However, pursuant to N.J.S.A. 40A:11-5(I)(m), it is permissible by law that insurance contracts and/or services can cite the statutory provision)

 

3. The service(s) is of such a specialized and qualitative nature that the performance of the service(s) cannot be reasonably described by written specifications because:

 

(Describe why it is "qualitative in nature requiring the need for expertise, extensive training and proven reputation."  Provide a complete explanation of why it is not reasonably possible to draft specifications.  Please note this provision does not apply to insurance contracts and/or services and should thus be marked as non-applicable.)

 

4. Describe the informal solicitation of quotations:

 

(List vendors contacted, prices and terms provided.  If this has not been done, explain in detail.  The lowest quotation is: If no quotation(s) is received, explain why in detail)

 

5. I have reviewed the rules of the Division of Local Government Services pursuant to N.J.A.C. 5:34-2.1 et seq. and certify that the proposed contract may be considered an extraordinary unspecifiable service in accordance with the requirements thereof.

 

 

 

Respectfully,

 

 

 

Name____________________________________

(Signature)

 

Title_______________________________

 

[Original to be retained by Governing Body's Clerk with the affirmed copy of the resolution; signed duplicate to be kept by appropriate official.]

 

 

CHAPTER 8 LOCAL PUBLIC CONTRACTS LAW
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