Bill could increase costs of government building

By Sean Ruppert and Maria Prato-Gaines
   Local officials are concerned that proposed legislation that would require government agencies to pay for increased building materials costs could leave taxpayers footing the bill or force agencies to renegotiate their contracts.
   The New Jersey Material Price Stabilization Act was introduced in the Senate on Nov. 29. It would allow contractors to charge public agencies when the cost of materials increases beyond estimates used to set contract prices. Contractors also would be required to refund money to public agencies should prices fall.
   Officials in South Brunswick, Cranbury, Jamesburg and Monroe all say the bill could make hiring contractors more difficult and would cost taxpayers more money. They say contractors should be estimating for increases when they bid on work.
   The Building Contractors Association of New Jersey supports the bill, which is sponsored by state Sen. Joseph Coniglio (D-Bergen), whose term in office expires at the end of the current legislative cycle on Jan. 8.
   According to the bill, material costs would have to be 5 percent greater or 5 percent less than estimates included in contracts before the provision kicks in.
   The bill says that “no price adjustment upward or downward shall be made for any item not identified as an eligible item by the contractor at the time of the bid.”
   It also says that, if there is a change in materials requested after the bid was placed, those items could be eligible, as well.
   ”It seems to me that when you sign a contract, you agree to the terms of that contract,” South Brunswick Mayor Frank Gambatese said. “If I was a contractor and this bill passed, I would take two or three years to do anything, so I could go back and get more money.”
   Adoption of the legislation could have repercussions for a number of large upcoming projects, including the renovations to the South Brunswick Community center. In Monroe, the new high school and District 2 firehouse could be affected, as well as the renovations to Lakeview: Buckelew Mansion in Jamesburg and construction of new affordable housing in Cranbury.
   ”This bill is babying a constituency that does not need babying. I think it is terrible legislation,” South Brunswick Councilman Charlie Carley said. “As a civil engineer, I have experience in bidding on government contracts. A responsible bidder should take into account the real possibility that the price of materials can go up over the duration of a project, and reflect that in their bid. A mature contractor should be able to do this.”
   In April the South Brunswick Township Council approved an ordinance authorizing the use of $1 million in county grants for renovations to the community center, which will add a new gym, more classroom and office space, and a new heating, ventilation and air conditioning system to the 29-year-old facility on New Road. The total funds for the project are $2 million, including $1 million that was borrowed for the project by the council in 2005.
   Councilman Joe Camarota says he expects the project to go out to bidding in early January.
   Monroe Schools Superintendent Ralph Ferrie said the New Jersey Association of School Business Administrators is “vehemently against” the bill.
   ”It’s a bad bill. It certainly is not a bill favorable to public entities,” Dr. Ferrie said. “If the prices of materials escalate, where are school districts going to get the extra money?”
   Dr. Ferrie said that, if the bill passes, he is most concerned about the increasing cost of steel, copper and petroleum used in plastics.
   The district already was forced to ask voters for more money for its planned 365,000-square-foot high school because of rising costs and the slow pace of approvals for a controversial land exchange with Middlesex County that required state approval. The high school will be located on a 35-acre portion of Thompson Park, which was purchased with state Green Acres money.
   The project originally was approved by voters in December 2003 with an estimated price tag of $82.9 million. During the last four years, however, the cost of the project has grown to nearly $125 million. Voters approved a $41.9 million referendum earlier this month to cover the difference.
   The inclusion of the refund provision in the bill is unlikely to be much help for public entities, Dr. Ferrie said. Decreases in material costs have not been a recent industry trend, he said.
   Glen Borsuk, chairman of Monroe District 2 Board of Fire Commissioners, said he is skeptical that the bill will even pass.
   ”I’m not sure that it would really work,” he said. “It could be a never ending loop.”
   The bill would change how municipalities present expected costs to the public.
   ”It totally blows that right out of the water,” Mr. Borsuk said.
   He said that, with the recent and dramatic increases in the price of steel and concrete, the firehouse very likely could be subject to renegotiating with a bidder if the bill goes into effect.
   The 14,890-square-foot station, a facility that will be shared with the township’s Emergency Medical Services, will cost about $5.9 million, and will sit on a 3-acre parcel near the intersection of Applegarth and Halsey Reed roads once it opens in early 2009.
   Township Business Administrator Wayne Hamilton said the bill is going to cause a number of difficulties in the bidding process.
   ”It dilutes the meaning and purpose of going out to public bid,” he said. “How do you provide an adequate budget?”
   Jamesburg Mayor Tony LaMantia said he is concerned with the impact on Lakeview: Buckelew Mansion, as well as on a number of sidewalk projects.
   ”Contractors aren’t going to suffer. Towns are going to suffer,” he said. “Some people in the state take care of business at the cost of taxpayers.”
   Unlike surrounding towns, Jamesburg also has different circumstances to consider with regard to how most of its projects are funded, Mayor LaMantia said.
   ”All of our projects are strictly grant money,” he said “If there’s an increase I’m not going have the money to pay for it.”
   The mansion closed in September for repairs to its foundation, structural work, electrical upgrades and the installation of a new roof. It is expected to be closed for at least two years.
   The work, which is expected to cost about $900,000, is being funded by the Middlesex County Board of Chosen Freeholders’ Parks and Recreation Program.
   Cranbury Mayor David Stout said he is concerned with its effects on the township’s affordable housing projects.
   ”It puts more burden on the taxpayer,” he said. “It will take more time and revenue to make contracts.”
   Mayor Stout said he is also skeptical about the bill’s refunding policy for materials that have dropped in price.
   ”I’m not seeing where it would save taxpayers money,” he said. “That’s the world of inflation.”