REPORT TITLE:
Public Contracts


DESCRIPTION:
Penalizes contractors on a public contract who do not pay a
subcontractor within 10 days of job completion by establishing
fines and debarment from bidding on future public contracts.
(SD2)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        1005
THE SENATE                              S.B. NO.           S.D. 2
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
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                   A  BILL  FOR  AN  ACT

RELATING TO PUBLIC CONTRACTS. 


BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 1      SECTION 1.  The legislature finds that too often contractors
 
 2 performing on government contracts fail to pay subcontractors on
 
 3 a timely basis.  Currently, there are no penalties for a
 
 4 contractor who does not disburse moneys in accordance with the
 
 5 terms of the subcontract.  The legislature further finds that
 
 6 prompt payment to contractors and subcontractors performing on a
 
 7 government contract stimulates economic growth. 
 
 8      The purpose of this Act is to add penalties to the existing
 
 9 law that requires contractors to pay subcontractors on a timely
 
10 basis.     
 
11      SECTION 2.  Section 103-10.5, Hawaii Revised Statutes, is
 
12 amended to read as follows:
 
13      "[[]§103-10.5[]]  Prompt payment.  (a)  Any money, other
 
14 than retainage, paid to a contractor shall be dispersed to
 
15 subcontractors within ten days after receipt of the money in
 
16 accordance with the terms of the subcontract[,]; provided that
 
17 the subcontractor has met all the terms and conditions of the
 
18 subcontract and there are no bona fide disputes.  Upon final
 
19 payment to the contractor, full payment to the subcontractor,
 

 
Page 2                                                     1005
                                     S.B. NO.           S.D. 2
                                                        
                                                        

 
 1 including retainage, shall be made within ten days after receipt
 
 2 of the money[,] pursuant to rules adopted by the comptroller;
 
 3 provided there are no bona fide disputes over the subcontractor's
 
 4 performance under the subcontract.
 
 5      (b)  Failure of a contractor to pay a subcontractor in
 
 6 accordance with this section shall render the contractor subject
 
 7 to a $5,000 fine for the first offense, $10,000 fine for the
 
 8 second offense, and $25,000 fine and suspension for bidding on
 
 9 public contracts for three years for the third offense; provided
 
10 that a contractor that fails to pay a subcontractor in accordance
 
11 with this section may be permitted to submit bids on public
 
12 contracts by submitting and complying with a subcontractor
 
13 payment plan to be approved by the comptroller prior to
 
14 submission of a bid.  The comptroller shall adopt rules pursuant
 
15 to chapter 91 that may be necessary to implement this section."
 
16      SECTION 3.  This Act does not affect rights and duties that
 
17 matured, penalties that were incurred, and proceedings that were
 
18 begun, before its effective date.
 
19      SECTION 4.  Statutory material to be repealed is bracketed.
 
20 New statutory material is underscored.
 
21      SECTION 5.  This Act shall take effect upon its approval.