REPORT TITLE:
Public Contracts


DESCRIPTION:
Adds provision for contractor penalties to the existing law that
prohibits contractors from withholding more than five 5% of the
subcontractor's contract price.  Provides that government
agencies have the authority to extend concession permits for
additional periods in the event that the premises are under
construction, renovation, or being prepared for a new use.
(SB2987 HD2)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        2987
THE SENATE                              S.B. NO.           S.D. 1
TWENTIETH LEGISLATURE, 2000                                H.D. 2
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                              PART I
 
 2      SECTION 1.  The legislature finds that for construction
 
 3 projects, the State often retains a percentage of the amount paid
 
 4 to prime contractors.  The contractors, in turn, often retain a
 
 5 higher rate from subcontractors to protect themselves, in case
 
 6 the subcontractors fail to complete their work, and from other
 
 7 contingencies.  The higher retention rates imposed upon
 
 8 subcontractors often cause cash flow problems for these
 
 9 companies.
 
10      The legislature also finds that earlier legislative action
 
11 on the issue resulted in divisive conflict between construction
 
12 industry groups.  To avoid further rancor, representatives from
 
13 various construction industry organizations established an
 
14 informal task force to reconcile differences.  After many months
 
15 of open, sometimes heated debate, the members of the task force
 
16 acquired a new respect for the unique problems facing their
 
17 counterparts and managed to craft a partial solution to the
 
18 thorny problem of retention.  The proposal provides that the
 
19 retention rate imposed upon subcontractors shall be equal to the
 
20 retention rate imposed upon their prime contractor by the State,
 

 
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 1 provided the subcontractor possesses a performance and payment
 
 2 bond.  This addresses the subcontractors' concern for equal
 
 3 retention rates, and the prime contractors' concern regarding
 
 4 liability for work completion.
 
 5      The purpose of this part is to require equal retention rates
 
 6 on state projects for subcontractors who possess a valid
 
 7 performance and payment bond or another mutually agreeable form
 
 8 of collateral.
 
 9      SECTION 2.  Section 103-32.1, Hawaii Revised Statutes, is
 
10 amended to read as follows:
 
11      "§103-32.1  Contract provision for retainage[.];
 
12 subcontractors; penalties.  (a)  Any public contract may include
 
13 a provision for the retainage of a portion of the amount due
 
14 under the contract to the contractor to insure the proper
 
15 performance of the contract; provided that:
 
16      (1)  The sum withheld by the procurement officer from the
 
17           contractor shall not exceed five per cent of the total
 
18           amount due the contractor and that after fifty per cent
 
19           of the contract is completed and progress is
 
20           satisfactory, no additional sum shall be withheld;
 
21           provided further that if progress is not satisfactory,
 
22           the contracting officer may continue to withhold as
 
23           retainage, sums not exceeding five per cent of the
 
24           amount due the contractor; and
 

 
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 1      (2)  The retainage shall not include sums deducted as
 
 2           liquidated damages from moneys due or that may become
 
 3           due the contractor under the contract.
 
 4      (b)  Where a subcontractor has provided evidence to the
 
 5 contractor of:
 
 6      (1)  A valid performance and a payment bond for the project
 
 7           that is acceptable to the contractor and executed by a
 
 8           surety company authorized to do business in this State;
 
 9      (2)  Any other bond acceptable to the contractor; or
 
10      (3)  Any other form of collateral acceptable to the
 
11           contractor;
 
12 the retention amount withheld by the contractor from its
 
13 subcontractor shall be the same percentage of retainage as that
 
14 of the contractor.  This subsection shall also apply to the
 
15 subcontractors who subcontract work to other subcontractors."
 
16                              PART II
 
17      SECTION 3.  Section 102-2, Hawaii Revised Statutes, is
 
18 amended by amending subsection (b) to read as follows:
 
19      "(b)  The bidding requirements of subsection (a) shall not
 
20 apply to concessions or space on public property set aside for
 
21 the following purposes:
 
22      (1)  For operation of ground transportation services at
 
23           airports;
 

 
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 1      (2)  For lei vendors;
 
 2      (3)  For airline and aircraft operations;
 
 3      (4)  For automatic teller machines and vending machines,
 
 4           except vending machines located at public schools
 
 5           operated by blind or visually handicapped persons in
 
 6           accordance with section 302A-412;
 
 7      (5)  For operation of concessions set aside without any
 
 8           charge;
 
 9      (6)  For operation of concessions by handicapped or blind
 
10           persons; except concessions operated in the public
 
11           schools by blind or visually handicapped persons in
 
12           accordance with section 302A-412;
 
13      (7)  For operation of concessions on permits revocable on
 
14           notice of thirty days or less; provided [that no such]
 
15           the permits shall be issued [unless the premises
 
16           covered under the permit is no longer being used for
 
17           the existing purposes, and that the permit is issued]
 
18           as a temporary use of the premises until the
 
19           governmental agency proceeds to [use the premises for a
 
20           new purpose; and provided further that no permits shall
 
21           be issued for more than one year;] lease the premises
 
22           under contract let after public advertisement for bids;
 
23           provided further that the one-year period may be
 

 
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 1           extended for additional periods in the event the
 
 2           premises are under construction, renovation, or being
 
 3           prepared for a new use;
 
 4      (8)  For operation of concessions or concession spaces for a
 
 5           beach service association dedicated to the preservation
 
 6           of the Hawaii beachboy tradition, incorporated as a
 
 7           nonprofit corporation in accordance with state law, and
 
 8           whose members are appropriately licensed or certified
 
 9           as required by law; and
 
10      (9)  For operation of concessions at county zoos, botanic
 
11           gardens, or other county parks which are
 
12           environmentally, culturally, historically, or
 
13           operationally unique and are supported, by nonprofit
 
14           corporations incorporated in accordance with state law
 
15           solely for purposes of supporting county aims and goals
 
16           of the zoo, botanic garden, or other county park and
 
17           operating under agreement with the appropriate agency
 
18           solely for such purposes, aims, and goals."
 
19      SECTION 4.  Statutory material to be repealed is bracketed.
 
20 New statutory material is underscored.
 
21      SECTION 5.  This Act shall take effect on July 1, 2000, and
 
22 shall apply to all public works contracts entered into after
 
23 June 30, 2000.