REPORT TITLE:
Procurement Preference


DESCRIPTION:
Provides a 15% preference to state resident bidders on county
agency contracts.  Requires all subcontractors hired by a
contractor to be a state resident subcontractor.  Provides that
if a contractor uses an unqualified nonresident subcontractor,
the contract shall be subject to appropriate remedies.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        
THE SENATE                              S.B. NO.           683
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
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                   A  BILL  FOR  AN  ACT

RELATING TO GOVERNMENT. 


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

 1      SECTION 1.  The legislature finds that the lowest bid is not
 
 2 necessarily the best bid.  Tax dollars are sometimes better spent
 
 3 by offering bid preferences to state residents and companies as
 
 4 the money they receive will be recirculated back into the economy
 
 5 with a multiplier effect.
 
 6      Currently, county public works projects are entered into
 
 7 with the lowest bidder.  Many out-of-state companies who employ
 
 8 only out-of-state workers, and who do not pay state taxes operate
 
 9 more at a lower cost.  However, state tax dollars are shipped
 
10 out-of-state without any benefits to state residents and
 
11 companies.  State tax dollars can more wisely be spent in-state
 
12 by offering a bid preference to state companies.
 
13      The purpose of this Act is to promote economic development
 
14 and create more jobs for state residents and companies, by
 
15 increasing the preference for state contractors and
 
16 subcontractors on county public works projects.
 
17      SECTION 2.  Section 103D-1007, Hawaii Revised Statutes, is
 
18 amended to read as follows:
 
19      "[[]§103D-1007[]]  Preference to bidders on [state] county
 
20 agency contracts.(a)  The requirements in this section are in
 

 
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 1 addition to any other applicable requirements provided in this
 
 2 chapter.
 
 3      (b)  The preference in this section may not be used in
 
 4 combination with any other preference otherwise available to a
 
 5 bidder under state or federal law.
 
 6      (c)  In any contract for a public works project, a [state]
 
 7 county agency shall award the contract to a bidder who [has filed
 
 8 all state tax returns due to the State and paid all amounts owing
 
 9 on such returns for two successive years] is a state contractor
 
10 prior to submitting the bid; provided that the amount of that bid
 
11 is not more than [seven] fifteen per cent higher than the amount
 
12 bid by any competing contractor who [has not filed or paid all
 
13 applicable state taxes, and the amount of the bid by the state
 
14 tax paying bidder is $5,000,000 or less.] is not a state
 
15 contractor.
 
16      [(d)  In any contract for a public works project, a state
 
17 agency shall award the contract to a bidder who has filed all
 
18 state tax returns due to the State and paid all amounts owing on
 
19 such returns for four successive years prior to submitting the
 
20 bid; provided that the amount of that bid is not more than seven
 
21 per cent higher than the amount bid by any competing contractor
 
22 who has not filed or paid all applicable state taxes, and the
 
23 amount of the bid by the state tax paying bidder is more than
 
24 $5,000,000.]
 

 
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 1      (d)  In order to qualify for a county contract for a public
 
 2 works project using a preference under this section, a contractor
 
 3 shall agree to hire subcontractors who qualify as a state
 
 4 subcontractor.  Each subcontractor shall provide to the
 
 5 contractor written verification of eligibility as a state
 
 6 subcontractor.  Each contractor shall provide to a county written
 
 7 verification of the contractor's own eligibility as a state
 
 8 contractor and that of the contractor's subcontractors.
 
 9      (e)  If the contractor uses a subcontractor who is not a
 
10 state subcontractor, the contractor shall be subject to section
 
11 103D-707; provided that a contractor shall not be subject to
 
12 section 103D-707 and shall still be entitled to the preference if
 
13 the contractor fully exhausts all eligible, technically qualified
 
14 state subcontractors before hiring a subcontractor who is not a
 
15 state subcontractor.  If the subcontractor is not a state
 
16 subcontractor, then the contractor may substitute another state
 
17 subcontractor without obtaining a release from the disqualified
 
18 subcontractor and the disqualified subcontractor shall not have a
 
19 cause of action due to the substitution.
 
20      (f)  If a contractor:
 
21      (1)  Obtains a county contract using a preference under this
 
22           section;
 
23      (2)  Cannot hire a technically qualified state
 
24           subcontractor; and
 

 
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 1      (3)  Hires an out-of-state subcontractor;
 
 2 the fifteen per cent bid preference under subsection (c) shall be
 
 3 reduced by a percentage that the out-of-state subcontractor's
 
 4 contract amount bears to the total amount of the contractor's
 
 5 county contract.
 
 6      [(e)] (g)  If two or more [contractors who have paid state
 
 7 and county taxes or were required to submit a filing regarding
 
 8 state and county taxes] state contractors as defined in
 
 9 subsection (h) are bidding on a public works contract, [and those
 
10 contractors meet the criteria outlined in subsection (c) or (d),]
 
11 the [state] county agency shall award the contract to the state
 
12 contractor among them who has submitted the lowest bid.
 
13      (h)  As used in this section:
 
14      "Hawaii state resident" means a person who has resided in
 
15 the State for more than two hundred days and must have paid the
 
16 immediately previous year's state resident income tax in Hawaii.
 
17      "State contractor" or "state subcontractor" means an entity
 
18 whose stockholders, owners, managers, and employees are composed
 
19 of one hundred per cent Hawaii state residents.
 
20      [(f)] (i)  If any federal statute or regulation precludes
 
21 the granting of federal assistance or reduces the amount of that
 
22 assistance for a particular public works project because of
 
23 preference awarded by this section, this section shall not apply
 

 
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 1 insofar as its application would preclude or reduce federal
 
 2 assistance for that work." 
 
 3      SECTION 3.  No later than twenty days prior to the convening
 
 4 of the regular session of the 2001 legislature, each county shall
 
 5 submit a report to the legislature evaluating the preference
 
 6 structure of 103D-1007, Hawaii Revised Statutes, in general by
 
 7 providing data on contracts involving this preference.
 
 8      SECTION 4.  This Act does not affect rights and duties that
 
 9 matured, penalties that were incurred, and proceedings that were
 
10 begun, before its effective date.
 
11      SECTION 5.  Statutory material to be repealed is bracketed.
 
12 New statutory material is underscored.
 
13      SECTION 6.  This Act shall take effect upon its approval;
 
14 provided that section 2 shall be reviewed by June 30, 2005.
 
15                           INTRODUCED BY:  _______________________