Cash flow is the lifeblood of every construction project. Contractors must pay employees, subcontractors, suppliers, equipment costs, insurance premiums and other project expenses long before the project is complete. When a progress payment is delayed, the consequences can quickly spread throughout the entire contracting chain.
Sometimes, however, payment is delayed not because the work is defective, incomplete, or disputed, but because the contractor’s payment application contains a minor paperwork error.
A missing attachment, an incorrect reference number, an immaterial mathematical discrepancy, or another technical defect which can result in the rejection of an entire payment application. Even when the contractor quickly corrects the problem, the payment may be pushed into the public entity’s next review, approval or payment cycle.
A recently introduced New Jersey bill seeks to prevent that result.
The Proposed Legislation
New Jersey Assembly Bill A5335 was introduced on June 28, 2026, and referred to the Assembly State and Local Government Committee. As of July 21, 2026, the bill remains pending and has not become law.
If enacted, A5335 would prohibit public and governmental entities from withholding an otherwise-due partial payment solely because a contractor’s payment application or supporting documentation contains a de minimis clerical, administrative or technical error.
The bill would apply broadly to public construction contracts involving entities that include boards of education, State colleges, the New Jersey Department of Transportation, county governments, the New Jersey Turnpike Authority, local contracting units and State agencies.
What Would Qualify as a Minor Error?
The bill defines a clerical, administrative, or technical error as an unintentional error, omission, defect, or minor mathematical discrepancy in a payment application or its supporting documentation.
The protection would apply only when the error does not materially affect:
- The amount due
- The contractor’s performance of the contract
- The public entity’s legal ability to issue the payment.
The bill does not identify every mistake that would qualify as de minimis. That determination would likely depend on the particular payment application, contract requirements, project circumstances and reason given by the public entity for withholding payment.
Examples might include an incorrect invoice reference, an immaterial discrepancy in supporting calculations, or an omitted document that can be supplied without changing the amount sought or the public entity’s ability to verify and lawfully approve the payment.
Contractors should not assume that every paperwork problem will be considered minor. A defect that prevents an owner from verifying the amount due, confirming insurance or bonding, complying with a statutory payment requirement, or determining whether the contractor is legally eligible for payment may fall outside the bill’s protection.
The Bill Contains Important Limitations
A5335 would not require public entities to overlook material contract violations or legitimate payment disputes.
Under the proposal, a public entity would be prohibited from withholding payment solely because of a minor error only if all of the following conditions are satisfied:
- The work associated with the payment was 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 does not involve fraud, misrepresentation, or a material contractual requirement
- The requested payment is not the final payment due under the contract
These limitations are significant. The bill would not prevent an owner from withholding payment because of defective work, incomplete performance, a legitimate dispute over quantities or pricing, a failure to maintain required insurance, a bonding deficiency, a safety violation, suspected fraud or another material instance of noncompliance.
The proposal also applies only to partial or progress payments. Final payment would remain subject to the contract’s closeout requirements and any applicable statutory requirements.
In other words, the bill would not eliminate an owner’s right to enforce its contract. It would instead require the owner to distinguish between a material deficiency and a harmless paperwork mistake.
Written Notice and an Opportunity to Cure
When a payment application contains a qualifying clerical, administrative, or technical error, the public entity would be required to provide written notice identifying the problem.
The contractor would then receive a reasonable period to correct it, not to exceed 10 business days. If the contractor fails to make the correction within the specified period, the public entity could withhold subsequent payments or pursue other remedies available under the contract or applicable law.
The proposed language indicates that a minor error should not stop the otherwise-due current progress payment. At the same time, it does not allow contractors to ignore documentation requirements indefinitely. Contractors would still have an obligation to correct the identified deficiency promptly and failing to do so could place future payments at risk.
The legislation therefore attempts to balance two interests: maintaining cash flow for satisfactorily completed work while preserving the public entity’s ability to require accurate and complete documentation.
Why the Proposal Matters
On a private project, a contractor may be able to communicate directly with an owner or project representative and correct a minor error before the payment cycle closes.
Public projects can be less flexible.
Payment applications may pass through a construction manager, architect, engineer, purchasing department, finance department, legal department, governing body and other levels of review. Missing one approval deadline can delay payment for weeks, even when the underlying issue takes only a few minutes to correct.
The consequences do not end with the prime contractor. When the public owner delays payment to the prime contractor, payment to subcontractors and suppliers may also be delayed. The resulting cash-flow strain can affect staffing, material procurement, scheduling and performance throughout the project.
A5335 recognizes that public owners have a legitimate interest in receiving accurate payment applications, but that rejecting an entire payment because of a harmless technical error may be disproportionate to the problem.
Potential Areas of Dispute
Although the proposal appears straightforward, its application could generate disputes.
For example, parties may disagree over whether:
- The error was truly de minimis
- The contractor satisfactorily performed the work
- The mistake affected the amount legally due
- The omitted information involved a material contractual requirement
- The entity could lawfully make payment without the corrected documentation
- The paperwork issue was the sole reason for withholding payment
That final issue may become especially important. The bill would prohibit withholding payment “solely” because of a minor error. A public entity may therefore contend that payment was also withheld because of incomplete work, disputed quantities, defective performance, insufficient supporting documentation or another independent contractual basis.
Clear and contemporaneous written communications will be essential for both sides.
Practical Steps for Contractors
Even if A5335 becomes law, contractors should not relax their payment-application procedures. Preventing the error remains more efficient than disputing whether an error was minor.
Contractors performing public work should consider:
- Using a project-specific payment checklist. Public contracts often contain detailed submission requirements that differ from project to project. The checklist should identify every certification, release, schedule, invoice, payroll record, subcontractor document and supporting exhibit required with each application.
- Maintaining proof of submission and receipt. Contractors should preserve the complete payment package, the date it was transmitted, the recipient and proof that it was received. These records may become critical when calculating statutory deadlines or determining whether the public entity provided timely notice.
- Requesting a specific written explanation. When payment is withheld, the contractor should ask the public entity to identify the exact deficiency, the contractual or statutory requirement involved, the amount being withheld and whether any other basis for withholding exists.
- Correcting minor errors immediately. Even where the contractor believes the payment should not have been withheld, the most practical response may be to cure the deficiency immediately while preserving the contractor’s legal position.
- Tracking the downstream consequences. Prime contractors should evaluate how delayed owner payments affect their obligations to subcontractors and suppliers. Subcontractors should likewise preserve notices, payment records and communications concerning work accepted but not paid.
Public Entities Should Also Prepare
If the proposal becomes law, public entities may need to update their payment-review procedures.
Reviewers should be trained to distinguish between a defect that is merely technical and one that materially affects the entity’s ability to approve payment. Written notices should clearly identify the error and the applicable cure period rather than simply rejecting the payment application as incomplete.
Public entities should also document any independent basis for withholding payment. A vague or generalized rejection may create unnecessary disputes over whether the payment was withheld solely because of a minor paperwork issue.
The Bottom Line
A harmless paperwork mistake should not create a project-wide cash-flow crisis.
A5335 would provide contractors with meaningful protection when they have satisfactorily performed the work and an otherwise due progress payment is threatened solely because of a minor clerical, administrative or technical error.
But the proposed protection has limits. It would not excuse defective work, material noncompliance, inaccurate billing, insurance or bonding deficiencies, fraud or failure to satisfy legitimate payment requirements. Contractors would also remain responsible for correcting identified errors within the permitted cure period.
For contractors and public entities alike, the best approach remains the same: carefully review the contract, maintain disciplined payment procedures, communicate deficiencies promptly and in writing and distinguish genuine compliance issues from technical mistakes that do not justify stopping payment.
