November 29, 2011
Re: Guidance on New Law Regarding National Contracts
On November 7, 2011 Governor Christie signed A-2786, which permits local units to participate in cooperative purchasing agreements, into law. P.L. 2011, c. 139 affects public contracting laws for all government contracting agencies by permitting agencies to use contracts awarded by “national” or “regional” cooperatives or other states that were competitively bid.
The Division of Local Government Services has issued Local Finance Notice 2011-35 to provide guidance on the new law. The Division intends to issue additional guidance in the near future as state agencies are currently reviewing the new law.
The Division cautions that until the additional guidance is issued, municipalities should proceed with prudence to ensure their actions are compliant with the law. Pending additional guidance, contracting units should take into account the following as local circumstances dictate.
- In applying the law, consider that there is no stated intent that NJ businesses should be put at a disadvantage because of differences between NJ public contracting law and that of jurisdictions that awarded the cooperative contract.
- Local procurement procedures should continue to ensure the public trust. Laws relating to disclosure of political contributions, non-collusion, and ethics should continue to be followed.
- Contracting officials should be cautious to ensure that the new authority is not abused. Local officials continue to have responsibility to choose vendors in an open and transparent manner to ensure public confidence in the integrity of government spending. Further, if a national contract is used, membership and participation rules of the national cooperative should be reviewed and followed.
- Best practices should include ensuring that pricing under the national model is competitive and that economy in the form of low pricing is not unduly compromised by the possible efficiency of national contractors. To that extent, contracting units should review State and local cooperative system contracts to see if there are other available contracts that provide lower prices.
- When using online ordering systems, local officials must establish and maintain internal controls to ensure quote and bid thresholds are maintained, encumbrances are established, purchases are documented, and there is an audit trail. Procurement and fiscal staff are reminded that all purchases with a dollar volume over the contracting units bid threshold require award by the governing body.
- The new law does not make changes to previous law concerning U.S. General Services Administration Federal Supply Contracts. GSA/FSS contract use is not authorized by contracting units unless the contracts are issued as State contracts by the Division of Purchase and Property (N.J.A.C. 17:12-1A.5). While it is possible that some GSA/FSS vendors are part of national cooperative contracts and contracts may be available through them, the new law does not change the existing limits on GSA contracts.
- Contracting units that previously awarded contracts for goods or services that may be covered by a national cooperative contract are obligated to fulfill those contracts until they expire. Using a national contract in the presence of an awarded contract could constitute a charge of breach of contract by that vendor.
The Division further cautions that municipalities choosing to move forward with such purchases in advance of additional guidance should carefully review vendor claims of compliance with the new law with their legal counsel to ensure that they are consistent with the law.
Very truly yours,
William G. Dressel, Jr.