REPORT TITLE:
Procurement


DESCRIPTION:
Imposes penalties on contractors for failing to properly pay
amounts owed to subcontractors.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        2988
THE SENATE                              S.B. NO.           
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO PUBLIC CONTRACTS AND PROCUREMENT. 


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

 1      SECTION 1.  The weakness of the State's economy emphasizes
 
 2 the need for subcontractors to pay their employees in a timely
 
 3 manner.  This need is circumvented by contractors who improperly
 
 4 withhold payment from their subcontractors.
 
 5      The purpose of this Act is to impose penalties against
 
 6 contractors who improperly withhold payment from their
 
 7 subcontractors.
 
 8      SECTION 2.  Section 103D-501, Hawaii Revised Statutes, is
 
 9 amended by amending subsection (c) to read as follows:
 
10      "(c)  The policy board shall adopt rules requiring the
 
11 inclusion in contracts of clauses providing for prompt payment by
 
12 contractors to subcontractors.  The rules shall provide that:
 
13      (1)  Any money, other than retainage, paid to a contractor
 
14           shall be dispersed to subcontractors within ten days
 
15           after receipt of the money in accordance with the terms
 
16           of the subcontract; provided that the subcontractor has
 
17           met all the terms and conditions of the subcontract and
 
18           there are no bona fide disputes[; and] on which the
 
19           procurement agency has withheld payment;
 

 
Page 2                                                     2988
                                     S.B. NO.           
                                                        
                                                        

 
 1      (2)  Upon final payment to the contractor, full payment to
 
 2           the subcontractor, including retainage, shall be made
 
 3           within ten days after receipt of the money; provided
 
 4           that there are no bona fide disputes over the
 
 5           subcontractor's performance under the subcontract[.];
 
 6      (3)  Where a subcontractor has provided:
 
 7           (A)  Evidence to the contractor of a current trust fund
 
 8                contribution bond acceptable to the contractor in
 
 9                an amount not less than the subcontractor's three
 
10                months of trust fund contribution;
 
11           (B)  A performance and payment bond for the project
 
12                executed by a surety company authorized to do
 
13                business in this State; or
 
14           (C)  A bond acceptable to the contractor,
 
15           and the contractor fails to pay in accordance with this
 
16           section, there shall be imposed a penalty of one and
 
17           one half per cent a month on the amounts outstanding
 
18           due to the subcontractor.  The penalty may be withheld
 
19           from any future payments due to the contractor.  Any
 
20           form of collateral acceptable to the contractor may be
 
21           substituted for the trust fund contribution bond; and
 
22      (4)  Where a contractor has violated paragraph (3) three or
 
23           more times within two years of the first violation, the
 

 
Page 3                                                     2988
                                     S.B. NO.           
                                                        
                                                        

 
 1           contractor's name shall be referred to the contractor
 
 2           license board by the procurement agency for action
 
 3           under section 444-14."
 
 4      SECTION 3.  Section 103D-501, Hawaii Revised Statutes, is
 
 5 amended by amending subsection (d) to read as follows:
 
 6      "(d)  The policy board shall adopt rules requiring the
 
 7 inclusion in contracts of clauses providing for appropriate
 
 8 remedies and covering the following subjects:
 
 9      (1)  Liquidated damages as appropriate;
 
10      (2)  Specified excuses for delay or nonperformance;
 
11      (3)  Termination of the contract for default; [and]
 
12      (4)  Termination of the contract in whole or in part for the
 
13           convenience of the governmental body[.]; and
 
14      (5)  Prompt payment and retainage."
 
15      SECTION 4.  Section 103-10.5, Hawaii Revised Statutes, is
 
16 repealed.
 
17      ["[§103-10.5]  Prompt payment.  Any money, other than
 
18 retainage, paid to a contractor shall be dispersed to
 
19 subcontractors within ten days after receipt of the money in
 
20 accordance with the terms of the subcontract, provided that the
 
21 subcontractor has met all the terms and conditions of the
 
22 subcontract and there are no bona fide disputes.  Upon final
 
23 payment to the contractor, full payment to the subcontractor,
 

 
Page 4                                                     2988
                                     S.B. NO.           
                                                        
                                                        

 
 1 including retainage, shall be made within ten days after receipt
 
 2 of the money, provided there are no bona fide disputes over the
 
 3 subcontractor's performance under the subcontract."]
 
 4      SECTION 5.  Statutory material to be repealed is bracketed.
 
 5 New statutory material is underscored.
 
 6      SECTION 6.  This Act shall take effect on July 1, 2000, and
 
 7 shall apply to all public contracts entered into after June 30,
 
 8 2000.
 
 9 
 
10                       INTRODUCED BY:  ___________________________