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If the local unit desires to extend a contract
under the provisions of N.J.S.A. 40A:11-15 or N.J.S.A. 18A:18A-42,
the index rate is the basis to determine the appropriate increase
in the contract price. The following are the requirements for using
this provision.
·
Contracts for services, the statutory length of which is for three
years or less, may only include provisions for no more than one
(1) two-year or two (2) one-year extensions.
·
The original bid specifications and contract must include language
that explains the possibility for an extension.
·
Prior to extending a contract, both parties must agree to the terms
and conditions of the extension, which shall remain substantially
the same as in the original contract.
·
The contract shall be awarded by resolution of the governing body
upon its finding that the services are being performed in an effective
and efficient manner.
·
If either party declines, the local unit must either advertise for
receipt of bids or secure new requests for proposals.
Application of the Index Rate to a one (1) two-year
extension or two (2) one-year extensions is as follows:
1) In the case of a one, two-year extension,
one of the two following options:
The index rate would be applied only once in the
first year for the two year period.
This permits the contracting unit and vendor to lock in the
price for two years.
OR
The index rate could be applied in the first year
based on the calculation at the time of renewal, and at the index
rate based on the calculation at the time the contract is renewed
for the second year. This
streamlines contract management for two years, but both parties
take a risk on the uncertainty of the second year. This permits the parties the greatest flexibility.
2) In the case of two, one-year extensions:
The index rate could be applied in the first year
based on the calculation at the time of renewal, and at the index
rate based on the calculation at the time the contract is renewed
for the second year.
LPCL - ABOUT
THE "INDEX RATE"
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