Doing Business with Municipalities: What Vendors Need to Know

An Overview of How the Purchasing Process Works

Towns in New Jersey have several options when purchasing products and services. The process that is used depends on the cost and complexity of the project, and is guided by Local Public Contracts Law. Towns may choose to:

• Utilize state contracts;
• Participate in cooperative purchasing;
• Conduct their own public procurement process; or
• Buy goods/services directly.

State Contracts

To obtain a State contract, vendors compete for an award by responding to a Request for Proposal (RFP) when issued by the Division of Purchase and Property. RFPs are posted on the Division's website.

RFPs are also posted on the NJSTART website. NJSTART is the Division's new eProceurement system, which allows vendors to submit electronic proposals. Vendors may also choose to receive email notifications when contracts are being procured.

A full brochure outlining the State's process, published by the Division of Purchase and Property, is available on their website; Doing Business with the State of New Jersey (PDF)

Questions about obtaining a State contract?
Contact the Department of the Treasury's Division of Purchase & Property's Procurement Division contact form.

Cooperative Purchasing

Some state contracts are made available to municipalities through the Cooperative Purchasing Program. Cooperative Purchasing Program participants may choose to use state contracts, but are not required too; municipalities may conduct their own public procurement process. 

Once a company has a state contract, municipalities can buy off that contract without going out to bid, so it’s a popular route to facilitate a sale.

For more information on the cooperative purchasing process (PDF), read the May 2019 Finance Center: "Cooperative Purchasing - What is It? Should I use it?", published in NJ Municipalities magazine.

Procurement Process

Overview
The method by which a municipality purchases good and/or services depends on the projected cost of the project, and follows the bid thresholds established by the State using a price inflater. Thresholds are established every five years. However, municipalities can establish lower thresholds based on local needs.

The Statue establishes a ceiling on thresholds based on town’s purchasing official. Municipalities may choose to employ a Purchasing Agent (non-QPA) or a Qualified Purchasing Agent (QPA); this decision is at their discretion. The difference between a non-QPA and QPA: A QPA has a state certification. For municipalities with a QPA, the threshold is higher.

Table of Thresholds
Please note: The chart below is valid as of May 2017, and the next increase will be in effect July 1, 2020. Visit the NJDCA's website for the most current threshold numbers.

Projects Above the Bid Threshold

• Bid Process
  Towns are required to publish a notice in a newspaper advertising for the Receipt of Bids. You may also view a list of current notices on the New Jersey Press Association's website. This notice must be at least 10 days before the due date (or the "receipt of bid"). A bid notice includes the date, time, and location in which bids must be received.
  
  A bid packet will include specifications and requires the vendor to complete certain documents, some of which, if not included in the bid packet, will disqualify the bidder.
  
  Bids are awarded by the governing body by resolution to the lowest responsible responsive bidder. The governing body is required to award the contract within 60 days of receipt of bids. However, the lowest responsible responsive bidders and municipality can both agree to extend the 60 days.
  
  
• Competitive Contracting
  Competitive contracting can be used when a project is over the bid threshold in limited circumstances (established in statute). Request for proposals award is based on established criteria and awarded to consider price and other factors in awarding contracts for specialized goods or services. A Contracting Unit must enumerate these criteria and the evaluation methodology in the specifications, typically called the Request for Proposals (RFP). Generally, a contract awarded through competitive contracting cannot exceed five years unless it is one of the statutorily limited exceptions for longer contract duration.
  
  
• Exceptions
  • If a project falls under a certain category, a town can do competitive contracting instead of going out to bid.
  • In circumstances where a town issues a bid on two separate occasions and does not receive any bids, or the governing body had rejected all bids because they found the price unreasonable, the town can then negotiate with vendors.

Projects Within 15% of the Bid Threshold

• Quote Process: A more informal process requiring towns to solicit two quotes from vendors. Quotes can be by phone, email, or writing, and are awarded either by the purchasing agent or the governing body(depending on local policy). This process still requires certain state forms (i.e., business registration).
• Request for Proposals (RFP): Some towns may opt to request proposals depending on the threshold in an attempt to contract with a vendor whose response is the most advantageous, in price and other factors considered. The RFP process is used in Fair and Open and Competitive Contracting. The RFP outlines the goods and/or services the town is procuring, and establishes the criteria for awarding. RFP notices are published in newspapers, and often times will also be posted on a municipality's website. You may also sometimes find RFPs on the League's classified web page; you can sign up to receive alerts via email when RFPs are posted on the League's classified web page.

Projects Below the 15% Bid Threshold

• Purchasing Outright: For anything below the 15% bid threshold, municipalities may purchase outright using sound business practices.

Important Terms Defined

• Pay to Aggregation: The total value of purchases over the course of a year. Sometimes a single purchase will be below the 15% bid threshold, however, when totaling purchases over the course of a year, the total purchase exceeds the 15% bid threshold.
  
  Example: Copy paper. While buying the first ream lands below the thresholds, over the course of the year the town could spend over the bid threshold, thus creating the need to bid. When a town is uncertain, once they hit the threshold they would then need to take that item to bid. (The purpose of aggregation is to ensure that a contracting unit purchase in bulk as a means of lowering unit costs, does not divide contracts to avoid its bid threshold, and to ensure openness in the public contracting process.)
• Fair and Open (Pay to Play): This is not defined in the Local Public Contracts Law, however, it directly impacts procurement. Any contract over $17,500 is subject to Pay to Play. Pay to Play regulations.
  
  Two options: Fair and Open or Non-Fair and Open. Fair and Open is a more formal bidding process, more formal request for proposal, or competitive contract. Non-Fair and Open do not involve bidding, and it requires vendors to complete disclosure forms.
• Prevailing Wage: When a project includes the work of laborers, the contractor must compensate their employees at the prevailing wage set by the State. Prevailing wage rates can be found on the Department of Labor and Workforce Development website. In March 2019, the prevailing wage threshold for municipalities was $15,444.
• Business Registration Certificate (BRC): This is not defined in the Local Public Contracts Law, but vendors must be certified in order to qualify for government contracts (regardless of threshold).
  
  Business organizations or individuals doing business in New Jersey are required to register with the Department of the Treasury, Division of Revenue. Registration is free and is a one-time action. However, vendors need to update their contact and tax eligibility information as needed. Registration is required to conduct most business with any state, county, municipal, local board of education, charter school, county college, authority, or state college or university. The contracting agency may be required to have a copy of the “proof of registration certificate” submitted as part of a public bid or prior to issuing a purchase order.
  
  Information on the Business Registration Certificate.

More Details

If you would like to read more about this complicated process, and go in-depth on the laws surrounding the public procurement process, consider visiting the Department of Treasury's website.

The League also provides the following tools:

• Read the Finance Center, published in NJ Municipalities magazine: 
  The Finance Center is a regular column that appears in each issue of the League's magazine. For your reading, the following are samples:
  • May 2017 Finance Center (PDF): Purchasing Myths and Truths (PDF)
  • January 2018 Finance Center (PDF): Gearing Up to Finance a Resurgence (PDF)
  • May 2018 Finance Center (PDF): Procurement Utilizing New Jersey State Contracts (PDF)
  • June 2018 Finance Center (PDF): OSC's Procurement Oversight for Health Insurance & Insurance Brokers (PDF)
  • May 2019 Finance Center (PDF): Cooperative Purchasing - What is It? Should I use it (PDF)
• League Publications: Two leagues publications are currently available for purchase
  • Primer on LPCL
  • Competitive Contracting: Offers a detailed analysis, including case law and sample procurement forms.
• Attend NJLM Seminars & Conference Sessions: Seminars are offered throughout the year and often include the topic of purchasing. Visit the Seminars page for a current list of topics. Throughout the year a series of in-person and webinars are offered. The Annual League Conference is a three day event held in Atlantic City each November. For more information on the Conference, visit the Conference web page.
• Online Finance Resource Center: Visit the League's Finance Center.

Laws Governing Local Government Purchasing

Local Public Contracts Law and Regulations, available from who? The law with hyperlinks to regulations. Detailed analysis including case law, sample procurement forms

Benefits of Advertising & Exhibiting

Municipalities need to know that the product or service you offer exists. You may offer a solution to their problem, but they don't even know that it exists.

When municipalities are familiar with a vendor, they are more likely to call them when collecting quotes for projects under the threshold. Or when issuing an RFP or going out to bid, they can send the notice your way and ask you to submit.