REPORT TITLE:
Public Contracts


DESCRIPTION:
Prohibits contractors on a public contract who do not pay a
subcontractor within 5 days of job completion from bidding on
future public contracts for five years and fines $1,000.
Prohibits contractors and subcontractors for a public contract
from retaining more than 5% of a subcontractors contract price. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        
THE SENATE                              S.B. NO.           879
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 legislature further finds that there is currently a five
 
 9 per cent cap on how much retainage may be withheld from
 
10 contractors on a public contract.  No such cap exists for
 
11 subcontracts.  The legislature finds that contractors and
 
12 subcontractors should be treated equally because discrimination
 
13 does not promote business in Hawaii.
 
14      The purpose of this Act is to add penalties to the existing
 
15 law that requires contractors to pay subcontractors on a timely
 
16 basis.  Additionally, this Act places a maximum allowable
 
17 retainage amount witheld by contractors on subcontracts.   
 
18      SECTION 2.  Section 103-10.5, Hawaii Revised Statutes, is
 
19 amended to read as follows:
 

 
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                                     S.B. NO.           879
                                                        
                                                        

 
 1      "[[]§103-10.5[]]  Prompt payment.  (a)  Any money, other
 
 2 than retainage, paid to a contractor shall be dispersed to
 
 3 subcontractors within [ten] five days after receipt of the money
 
 4 in accordance with the terms of the subcontract[,]; provided that
 
 5 the subcontractor has met all the terms and conditions of the
 
 6 subcontract and there are no bona fide disputes.  Upon final
 
 7 payment to the contractor, full payment to the subcontractor,
 
 8 including retainage, shall be made within [ten] five days after
 
 9 receipt of the money[,]; provided there are no bona fide disputes
 
10 over the subcontractor's performance under the subcontract,
 
11 pursuant to rules adopted by the comptroller.
 
12      (b)  Failure of a contractor to pay a subcontractor in
 
13 accordance with this section shall render the contractor
 
14 ineligible to bid on future public contracts for five years and
 
15 subject to a $1,000 fine; provided that a contractor that fails
 
16 to pay a subcontractor in accordance with this section may be
 
17 permitted to submit bids on public contracts by submitting and
 
18 complying with a subcontractor payment plan to be approved by the
 
19 comptroller prior to submitting a bid.  The comptroller shall
 
20 adopt rules pursuant to chapter 91 that may be necessary to
 
21 implement this section."
 
22      SECTION 3.  Section 103-32.1, Hawaii Revised Statutes, is
 
23 amended to read as follows:
 

 
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                                     S.B. NO.           879
                                                        
                                                        

 
 1      "§103-32.1  Contract provision for retainage.  (a)  Any
 
 2 public contract issued under this chapter may include a provision
 
 3 for the retainage of a portion of the amount due under the
 
 4 contract to the contractor to insure the proper performance of
 
 5 the contract; provided that the sum withheld by the contracting
 
 6 officer from the contractor shall not exceed five per cent of the
 
 7 total amount due the contractor [and that after fifty per cent of
 
 8 the contract is completed and progress is satisfactory, no
 
 9 additional sum shall be withheld; provided further that if
 
10 progress is not satisfactory, the contracting officer may
 
11 continue to withhold as retainage, sums not exceeding five per
 
12 cent of the amount due the contractor].
 
13      (b)  The retention amount withheld by a contractor from its
 
14 subcontractor shall not exceed five per cent of the
 
15 subcontractor's contract price.  The maximum five per cent
 
16 retention amount shall also apply to subcontractors who
 
17 subcontract work to other subcontractors.
 
18      (c)  The failure of a contractor to comply with this section
 
19 shall render the contractor ineligible to bid on future public
 
20 contracts for five years and subject to a $1,000 fine.  The
 
21 comptroller shall adopt rules pursuant to chapter 91 as may be
 
22 necessary to implement this section."
 
23      SECTION 4.  Statutory material to be repealed is bracketed.
 

 
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                                     S.B. NO.           879
                                                        
                                                        

 
 1 New statutory material is underscored.
 
 2      SECTION 5.  This Act shall take effect upon its approval.
 
 3 
 
 4                           INTRODUCED BY:  _______________________