STAND. COM. REP. NO. 1596

                                   Honolulu, Hawaii
                                                     , 1999

                                   RE:  H.B. No. 1593
                                        H.D. 1
                                        S.D. 2




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

Sir:

     Your Committee on Government Operations and Housing, to
which was referred H.B. No. 1593, H.D. 1, S.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:

     (1)  Designate the heads of the respective county water
          supply agencies as the chief procurement officers;

     (2)  Authorize the use of and establish criteria for the use
          of project labor agreements intended to ensure the
          efficiency, stability, and quality on state public
          works contracts over $10,000,000;

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

     (4)  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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     (5)  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;

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

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

     Testimony in support of this measure was received from the
Board of Water Supply of the City and County of Honolulu,
International Brotherhood of Electrical Workers Local Union 1186,
Laborers' International Union of North America Local 368 AFL-CIO,
Hawaii State Teachers Association.

     The State Procurement Office, Department of Water Supply of
the County of Hawaii, Department of Water of the County of Kauai,
and Department of Water Supply of the County of Maui submitted
testimony in support of this measure with recommended amendments.

     Testimony in opposition to this measure was received from
the Construction Industry Legislative Organization, Inc., General
Contractors Association of Hawaii, Building Industry Association
of Hawaii, Henry's Equipment Rental & Sales, Inc., CC Engineering
& Construction, Inc., Associated Builders and Contractors, Inc.,
Jas. W. Glover, Ltd., and Alaka'i Mechanical.

     Your Committee finds that the water supply authorities of
the respective counties are semi-autonomous agencies that
generate their own revenues and make independent expenditure
decisions.  Therefore, designating the respective managers or
directors as the chief procurement officers is appropriate.

     Your Committee further finds that provisions in this measure
relating to project labor agreements, the definitions of "state
contractor", "state subcontractor" and "state resident", and the
bid preference will help stabilize and revitalize Hawaii's
construction industry.

     Your Committee distributed a proposed Senate Draft of this
measure that:

     (1)  Redefines the definition of "state contractor" and
          "state subcontractor" for purposes of the employment
          and bid preferences provided in federal and state law
          by:


 
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          (A)  Requiring an individual to have paid all of the
               amounts owing on a tax return filed in the
               preceding year;

          (B)  Requiring a business entity to be a domestic
               corporation, partnership, or business organized or
               formed under the laws of the State;

          (C)  Requiring a business entity to maintain its
               principal place of business within the State for
               at least two-hundred consecutive days prior to the
               submission of a bid;

          (D)  Requiring a business entity to have filed a Hawaii
               resident income tax and all other applicable tax
               returns for the preceding tax year and have paid
               all amounts owing on those tax returns;

          (E)  Requiring a business entity to have complied with
               all applicable Hawaii employment, insurance, and
               worker's compensation laws;

          (F)  Deleting the provisions that require a minimum
               percentage of state residents as owners,
               principals, partners, and employees depending on
               the form of the business entity;

          (G)  Requiring an employer with one or more employees
               to have one-hundred per cent of those employees
               qualify as "state residents"; and

          (H)  Requiring a business entity that is a joint
               venture be composed entirely of entities that
               qualify as "state residents"; and

     (2)  Clarifies the intent of the bid preference for state
          contractors and subcontractors; and

     (3)  Amends the bid preference of fifteen per cent in favor
          of state contractors on state public works projects to
          $8,000,000 or less from $30,000,000.

     Your Committee has amended this measure by replacing its
contents with the proposed Senate Draft and requiring the
procurement policy board to establish rules in accordance with
chapter 91, Hawaii Revised Statutes, for determining when a
procurement officer may require the use of a project labor
agreement.


 
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     As affirmed by the record of votes of the members of your
Committee on Government Operations and Housing that is attached
to this report, your Committee is in accord with the intent and
purpose of H.B. No. 1593, H.D. 1, S.D. 1, as amended herein, and
recommends that it pass Third Reading in the form attached hereto
as H.B. No. 1593, H.D. 1, S.D. 2.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Government
                                   Operations and Housing,



                                   ______________________________
                                   ROD TAM, Chair

 
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