REPORT TITLE:
Preference for State Residents


DESCRIPTION:
Defines "state contractor," "state subcontractor," and "state
resident"; increases the bid preference to state residents.
(SD1)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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THE SENATE                              S.B. NO.           S.D. 1
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO THE HAWAII PUBLIC PROCUREMENT CODE.



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

 1      SECTION 1.  Beginning with section 8078 of the United States
 
 2 Defense Appropriations Act of 1986, all subsequent Defense
 
 3 Appropriations Acts require the contractor on a military
 
 4 construction or services project to employ Hawaii residents when
 
 5 Hawaii's unemployment rate exceeds the national average.  The
 
 6 unemployment rate in Hawaii has been above the national average
 
 7 since 1994, but the federal law has not been strictly enforced.
 
 8 Many defense construction and service contracts have been awarded
 
 9 to out-of-state contractors that hire individuals that move to
 
10 Hawaii just to work on these particular federal contracts.  This
 
11 apparently is within the scope of the law, though clearly not the
 
12 intent of section 8078.  One reason given for the failure to
 
13 strictly enforce the requirement to employ Hawaii residents is
 
14 that the term "state resident" is not defined in section 8078, in
 
15 its related provisions, or in the Federal Acquisition
 
16 Regulations.
 
17      The purpose of this Act is to assure compliance with the
 
18 federal and state laws regarding employment and bid preferences
 
19 for state residents.  This Act establishes a definition of "state
 

 
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 1 resident" that will provide a clear, objective, measurable
 
 2 standard in the state procurement code that can be easily
 
 3 followed, copied, and enforced by federal contracting officers in
 
 4 enforcing the preference provisions in federal law.  A clear
 
 5 definition of "state resident" in the state procurement code will
 
 6 help keep profits and wages from military construction projects
 
 7 in the State.
 
 8      The further purpose of this Act is to define "state
 
 9 contractor" and "state subcontractor" to provide state
 
10 contracting officers with clear and absolute definitions in order
 
11 that the contractors who are granted a bid preference are those
 
12 that have:
 
13      (1)  Fully availed themselves of the laws of the State; and
 
14      (2)  Committed themselves to contributing to the economy of
 
15           the State by establishing and maintaining a business
 
16           within the State and employing state residents.
 
17      In addition, this Act increases the bid preference in favor
 
18 of state contractors from seven to fifteen per cent on state
 
19 public works contracts for $10,000,000 or less, and requires a
 
20 review of the bid preference law by June 30, 2006.
 
21      SECTION 2.  Section 103D-1001, Hawaii Revised Statutes, is
 
22 amended by adding two new definitions to be inserted and to read
 
23 as follows:
 

 
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 1      ""State contractor" and "state subcontractor" means a person
 
 2 that:
 
 3      (1)  Is licensed as a contractor pursuant to chapter 444;
 
 4      (2)  Is licensed to conduct business in this State pursuant
 
 5           to section 237-9;
 
 6      (3)  Submits a bid under the name appearing on the person's
 
 7           current contracting or business license;
 
 8      (4)  Is a domestic corporation, partnership, or business
 
 9           organized or formed under the laws of the State;
 
10      (5)  Has maintained its principal place of business within
 
11           the State for at least two-hundred consecutive days
 
12           prior to the submission of a bid;
 
13      (6)  Has filed a Hawaii state income tax and all other
 
14           applicable tax returns for the preceding tax year and
 
15           has paid all amounts owing on those tax returns;
 
16      (7)  Has complied with all applicable Hawaii employment,
 
17           insurance, and worker's compensation laws;
 
18      (8)  If an employer with one or more employees, eighty-five
 
19           per cent of its employees are state residents; and
 
20      (9)  If a joint venture, is composed entirely of entities
 
21           that qualify under paragraphs (1) to (8).
 
22      "State resident" means an individual who:
 
23      (1)  Resides in the State at least two hundred days of the
 

 
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 1           year; and
 
 2      (2)  Has filed a Hawaii state income tax return in the
 
 3           taxable year immediately preceding a bid for a state
 
 4           contract by the individual's employer or business that
 
 5           is a state contractor and has paid all amounts owing on
 
 6           that tax return; provided that an individual who was a
 
 7           state resident, left the State to attend school or
 
 8           serve in the armed forces of the United States of
 
 9           America, and returned to the State to work for a state
 
10           contractor is a state resident, even though the
 
11           individual has not yet resided in the State for at
 
12           least two hundred days or filed a Hawaii state income
 
13           tax return or paid all amounts owing on that tax
 
14           return."
 
15      SECTION 3.  Section 103D-1007, Hawaii Revised Statutes, is
 
16 amended to read as follows:
 
17      "[[]§103D-1007[]]  Preference to bidders on state agency
 
18 contracts.(a)  The requirements in this section are in addition
 
19 to any other applicable requirements provided in this chapter.
 
20      (b)  The preference in this section may not be used in
 
21 combination with any other preference otherwise available to a
 
22 bidder under state or federal law[.] and shall be interpreted to
 
23 enable a state agency to increase the opportunity for more state
 

 
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 1 contractors to succeed in their bids for state contracts and to
 
 2 more widely distribute state contracts among all state
 
 3 contractors that are qualified to bid.
 
 4      (c)  In any section 103D-302 or 103D-303 contract for a
 
 5 public works project[,] for $10,000,000 or less, a state agency
 
 6 shall award the contract to an offeror who [has filed all state
 
 7 tax returns due to the State and paid all amounts owing on such
 
 8 returns for two successive years] is a state contractor prior to
 
 9 submitting the offer; provided that the amount of that offer is
 
10 not more than [seven] fifteen per cent higher than the amount
 
11 offered by any competing contractor who [has not filed or paid
 
12 all applicable state taxes, and the amount of the offer by the
 
13 state tax paying offeror is $5,000,000 or less.] is not a state
 
14 contractor.
 
15      [(d)  In any section 103D-302 or 103D-303 contract for a
 
16 public works project, a state agency shall award the contract to
 
17 an offeror who has filed all state tax returns due to the State
 
18 and paid all amounts owing on such returns for four successive
 
19 years prior to submitting the offer; provided that the amount of
 
20 that offer is not more than seven per cent higher than the amount
 
21 offered by any competing contractor who has not filed or paid all
 
22 applicable state taxes, and the amount of the offer by the state
 
23 tax paying offeror is more than $5,000,000.]
 

 
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 1      (d)  A state contractor is qualified for the full preference
 
 2 under this section when the state contractor:
 
 3      (1)  Submits its offer with an attestation that it will
 
 4           perform all of the work required to be performed on the
 
 5           contract without any subcontract; or
 
 6      (2)  Submits its offer with an attestation that it will
 
 7           perform all of the work required to be performed on the
 
 8           contract using state subcontractors, and attaches to
 
 9           the offer a list of state subcontractors that the state
 
10           contractor intends to use on the project covered by the
 
11           offer.
 
12      (e)  A state contractor is qualified for a portion of the
 
13 full preference under this section when the state contractor:
 
14      (1)  Submits its offer with an attestation that it is able
 
15           to perform some of the work required to be performed
 
16           using state subcontractors that the state contractor
 
17           intends to use on the project covered by the offer,
 
18           together with a list of nonstate subcontractors that it
 
19           intends to use, the cost of those subcontractors, and a
 
20           statement as to why state subcontractors cannot be
 
21           used; provided that the statement is based on fact and
 
22           is approved by the state agency; or
 
23      (2)  Submits its offer with an attestation that it is unable
 

 
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 1           to perform the work required to be performed on the
 
 2           contract with state subcontractors, together with a
 
 3           list of nonstate subcontractors that the state
 
 4           contractor intends to use on the project covered by the
 
 5           offer, the total cost of those subcontractors, and a
 
 6           statement as to why state subcontractors cannot be
 
 7           used; provided that the statement is based on fact and
 
 8           is approved by the state agency.
 
 9      (f)  The preference to state contractors shall be reduced
 
10 for qualified state contractors under subsection (e)(1) and (2)
 
11 by a percentage that the cost of the nonstate subcontractor's
 
12 contract bears to the total amount of the state contractor's
 
13 offer on the state project covered by the offer.
 
14      [(e)] (g)  If two or more [contractors who have paid state
 
15 and county taxes or were required to submit a filing regarding
 
16 state and county taxes] state contractors are bidding on a public
 
17 works contract, [and those contractors meet the criteria outlined
 
18 in subsection (c) or (d),] the state agency shall award the
 
19 contract to the state contractor among them who has submitted the
 
20 lowest bid.
 
21      [(f)] (h)  If any federal statute or regulation precludes
 
22 the granting of federal assistance or reduces the amount of that
 
23 assistance for a particular public works project because of
 

 
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 1 preference awarded by this section, this section shall not apply
 
 2 insofar as its application would preclude or reduce federal
 
 3 assistance for that work."
 
 4      SECTION 4.  No later than twenty days prior to the convening
 
 5 of the regular session of the 2002 legislature, the comptroller
 
 6 shall submit a report to the legislature evaluating the
 
 7 preference structure of 103D-1007, Hawaii Revised Statutes, in
 
 8 general by providing data on contracts involving this preference.
 
 9      SECTION 5.  If any provision of this Act, or the application
 
10 thereof to any person or circumstance is held invalid, the
 
11 invalidity does not affect other provisions or applications of
 
12 the Act which can be given effect without the invalid provision
 
13 or application, and to this end the provisions of this Act are
 
14 severable.
 
15      SECTION 6.  This Act does not affect rights and duties that
 
16 matured, penalties that were incurred, and proceedings that were
 
17 begun, before its effective date.
 
18      SECTION 7.  Statutory material to be repealed is bracketed.
 
19 New statutory material is underscored.
 
20      SECTION 8.  This Act shall take effect on July 1, 2000;
 
21 provided that section 3 shall be reviewed by June 30, 2006.