STAND. COM. REP. NO. 1037

                                   Honolulu, Hawaii
                                                     , 1999

                                   RE:  H.B. No. 1593
                                        H.D. 1
                                        S.D. 1




Honorable Norman Mizuguchi
President of the Senate
Twentieth State Legislature
Regular Session of 1999
State of Hawaii

Sir:

     Your Committee on Transportation and Intergovernmental
Affairs, to which was referred H.B. No. 1593, H.D. 1, entitled: 

     "A BILL FOR AN ACT RELATING TO THE HAWAII PUBLIC PROCUREMENT
     CODE,"

begs leave to report as follows:

     The purpose of this measure is to designate the heads of the
respective county water supply agencies as the chief procurement
officers.

     Testimony in support of this measure was received from the
Department of Water of the County of Kauai, Department of Water
Supply of the County of Maui, Contractors Association of Kaua'i,
and Hawaii Building and Construction Trades Council AFL-CIO.  The
State Procurement Office submitted testimony expressing
preference for House Bill No. 985, H.D. 1.

     Your Committee finds that the chief procurement officer
designations in this measure are appropriate.

     Hawaii's construction industry represents a sizable
component of Hawaii's economy but has experienced economic
declines in recent years.  The lack of business and employment
opportunities, the high cost of doing business in Hawaii, and
increased competition from foreign companies have contributed to
the declines.  Due to the importance of the construction industry

 
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to Hawaii's economy, every effort must be made to revitalize and
stabilize the industry.

     This measure and H.B. Nos. 139, H.D. 1, and 140, are being
passed out of this Committee with Senate drafts that include
various provisions from the following Senate measures: S.B.
No. 1438, S.D. 1, S.B. No. 675, S.D. 1, S.B. No. 976, S.D. 1,
S.B. No. 1556, S.D. 2, and S.B. No. 1439.  These Senate measures
represent a coherent approach to revitalizing Hawaii's
construction industry by ensuring faithful execution of the laws
intended to aid the industry, requiring out-of-state contractors
to abide by Hawaii licensing requirements, encouraging further
research and promotion of the industry, providing a general
excise tax exemption for state contractors who work on federal
military construction projects, and establishing criteria for the
use of agreements that ensure the efficiency, stability, and
quality of construction projects.

     There are existing laws intended to revitalize Hawaii's
construction industry, however, these laws are not being fully
and faithfully executed.  

     Federal law requires the contractor on a military
construction or services project to employ Hawaii residents when
Hawaii's unemployment rate exceeds the national average.
Hawaii's unemployment rate has exceeded the national average
since 1994, but the law has not been strictly enforced supposedly
due to the lack of a definition of "state resident."

     State law provides a bid preference in favor of bidders who
filed state tax returns for two successive years prior to
submitting the bid.  However, your Committee finds that local
bidders are still losing contracts to out-of-state bidders and
that those bidders who are awarded contracts pursuant to the
preference may not be employing state residents.  

     S.B. No. 1438, S.D. 1, addressed these concerns.  Therefore,
your Committee has amended this measure by inserting provisions
from S.B. No. 1438, S.D. 1, which:

     (1)  Create definitions for "state contractor", "state
          subcontractor", and "state resident" to provide federal
          and state contracting officers with clear and absolute
          definitions;

     (2)  Provide that the bid preference shall be given to state
          contractors as defined by this measure, rather than
          bidders who filed state tax returns for two successive
          years prior to submitting the bid;

 
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     (3)  Increase the bid preference in favor of state
          contractors from seven to fifteen percent on state
          public works projects for $30,000,000 or less;

     (4)  Set out the requirements needed to be satisfied by a
          state contractor in order to receive the bid
          preference; and

     (5)  Require the review of the bid preference law by
          June 30, 2005.

     In addition, your Committee finds that Hawaii's construction
industry can be further stabilized by allowing state agencies to
use project labor agreements.  Project labor agreements contain,
among other things, guarantees against strikes, lockouts, and
other work disruptions, assurances of conformity to all
applicable laws, regulations, and executive orders, procedures to
resolve labor disputes, and other labor-management matters to
ensure the efficiency, quality, and stability of the project.

     S.B. No. 1439 provides for project labor agreements.
Therefore, your Committee has amended this measure by inserting
provisions from S.B. No. 1439 with amendments which:

     (1)  Authorize the use of project labor agreements for state
          public works contracts over $10,000,000;

     (2)  Establish criteria for project labor agreements;

     (3)  Authorize a procurement officer to require a bidder to
          become a party to a project labor agreement as a
          condition to being awarded the contract; and

     (4)  Require a review of the provisions authorizing the use
          of project labor agreements by June 30, 2005.

     As affirmed by the record of votes of the members of your
Committee on Transportation and Intergovernmental Affairs that is
attached to this report, your Committee is in accord with the
intent and purpose of H.B. No. 1593, H.D. 1, as amended herein,
and recommends that it pass Second Reading in the form attached
hereto as H.B. No. 1593, H.D. 1, S.D. 1, and be referred to the
Committee on Government Operations and Housing.


 
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                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Transportation
                                   and Intergovernmental Affairs,



                                   ______________________________
                                   CAL KAWAMOTO, Chair

 
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