STAND. COM. REP. NO. 1078

                                   Honolulu, Hawaii
                                                     , 1999

                                   RE:  H.B. No. 140
                                        S.D. 1




Honorable Norman Mizuguchi
President of the Senate
Twentieth State Legislature
Regular Session of 1999
State of Hawaii

Sir:

     Your Committee on Transportation and Intergovernmental
Affairs, to which was referred H.B. No. 140 entitled: 

     "A BILL FOR AN ACT RELATING TO PUBLIC-PRIVATE INFRASTRUCTURE
     PARTNERSHIPS,"

begs leave to report as follows:

     The purpose of this measure is to provide for the efficient
and expeditious development and construction of public
infrastructure projects by allowing any department of the State
or any county to enter into agreements with private entities to
develop, construct, and maintain public infrastructure systems
and facilities.

     Testimony in support of this measure was received from the
Department of Transportation, Hawaii State Teachers Association,
Jas. W. Glover, Ltd., Building Industry Association, Contractors
Association of Kaua'i, Hawaii Building and Construction Trades
Council AFL-CIO, and Hawaii Operating Engineers Industry
Stabilization Fund.  The Department of Budget and Finance and
Matson Navigation Company submitted testimony in support of the
intent of this measure but expressed concerns that state and
county agencies may be able to enter into agreements without
oversight and prior approval from higher authorities.

     Testimony in opposition to this measure was received from
the Board of Water Supply of the City and County of Honolulu.


 
a                                                     HB140 SD1
 
                                   STAND. COM. REP. NO. 1078
                                   Page 2


     Your Committee finds that allowing the transfer of
infrastructure system and facility improvement projects from
state and local governments to the private sector will aid the
government in delivering government services efficiently and at
lower costs.  Your Committee acknowledged the concerns of the
Department of Budget and Finance and Matson Navigation Company
and has amended this measure by providing that agreements may not
be entered into by a public entity pursuant to this measure
without prior legislative approval.

     Hawaii's construction industry represents a sizable
component of Hawaii's economy but has experienced economic
declines in recent years.  The lack of business and employment
opportunities, the high cost of doing business in Hawaii, and
increased competition from foreign companies have contributed to
the declines.  Due to the importance of the construction industry
to Hawaii's economy, every effort must be made to revitalize and
stabilize the industry.

     This measure and H.B. No. 139, H.D. 1, and 1593, H.D. 1, are
being passed out of this Committee with Senate drafts that
include various provisions from the following Senate measures:
S.B. No. 1438, S.D. 1, S.B. No. 675, S.D. 1, S.B. No. 976,
S.D. 1, S.B. No. 1556, S.D. 2, and S.B. No. 1439.  These Senate
measures represent a coherent approach to revitalizing Hawaii's
construction industry by ensuring faithful execution of the laws
intended to aid the industry, requiring out-of-state contractors
to abide by Hawaii licensing requirements, encouraging further
research and promotion of the industry, providing a general
excise tax exemption for state contractors that work on federal
military construction projects, and establishing criteria for the
use of agreements that ensure the efficiency, stability, and
quality of construction projects.

     It is in the State's best interest to better understand the
economic decline of the construction industry in recent years and
to develop programs and initiatives to revitalize and encourage
the growth of the industry.  Therefore, your Committee has
amended this measure by inserting provisions from S.B. No. 976,
S.D. 1, which establish a construction industry branch under the
research and economic analysis division of the Department of
Business, Economic Development, and Tourism that will work with
private entities to research, analyze, and encourage the growth
and development of Hawaii's construction industry.

     In addition, your Committee finds that Hawaii's construction
industry can be further stabilized by allowing State agencies to
use project labor agreements.  Project labor agreements contain,
among other things, guarantees against strikes, lockouts, and

 
a                                                     HB140 SD1
                                   STAND. COM. REP. NO. 1078
                                   Page 3


other work disruptions, assurances of conformity to all
applicable laws, regulations, and executive orders, procedures to
resolve labor disputes, and other labor-management matters to
ensure the efficiency, quality, and stability of the project.

     S.B. No. 1439 provides for project labor agreements.
Therefore, your Committee has amended this measure by inserting
provisions from S.B. No. 1439, with amendments, as a new part
which:

     (1)  Authorizes the use of project labor agreements for
          federal construction projects that the State is
          authorized to participate in and state public works
          contracts over $10,000,000;

     (2)  Establishes criteria for project labor agreements;

     (3)  Authorizes a procurement officer to require a bidder to
          become a party to a project labor agreement as a
          condition to being awarded the contract; and

     (4)  Requires a review of the provisions authorizing the use
          of project labor agreements by June 30, 2005.

     There are existing laws intended to revitalize Hawaii's
construction industry, however, these laws are not being fully
and faithfully executed.

     Federal law requires the contractor on a military
construction or services project to employ Hawaii residents when
Hawaii's unemployment rate exceeds the national average.
Hawaii's unemployment rate has exceeded the national average
since 1994, but the law has not been strictly enforced supposedly
due to the lack of a definition of "state resident."

     State law provides a bid preference in favor of bidders who
filed state tax returns for two successive years prior to
submitting the bid.  However, your Committee finds that local
bidders are still losing contracts to out-of-state bidders and
that those bidders who are awarded contracts pursuant to the
preference may not be employing state residents.

     S.B. No. 1438, S.D. 1, addressed these concerns.  Therefore,
your Committee has amended this measure by inserting provisions
from S.B. No. 1438, S.D. 1, which:

     (1)  Create definitions for "state contractor", "state
          subcontractor", and "state resident" to provide federal

 
a                                                     HB140 SD1
                                   STAND. COM. REP. NO. 1078
                                   Page 4


          and state contracting officers with clear and absolute
          definitions;

     (2)  Provide that the bid preference shall be given to state
          contractors as defined by this measure, rather than
          bidders who filed state tax returns for two successive
          years prior to submitting the bid;

     (3)  Increase the bid preference in favor of state
          contractors from seven to fifteen percent on state
          public works projects for $30,000,000 or less;

     (4)  Set out the requirements needed to be satisfied by a
          state contractor in order to receive the bid
          preference; and

     (5)  Require a review of the bid preference law by June 30,
          2005.

     As affirmed by the record of votes of the members of your
Committee on Transportation and Intergovernmental Affairs that is
attached to this report, your Committee is in accord with the
intent and purpose of H.B. No. 140, as amended herein, and
recommends that it pass Second Reading in the form attached
hereto as H.B. No. 140, S.D. 1, and be referred to the Committee
on Ways and Means.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Transportation
                                   and Intergovernmental Affairs,



                                   ______________________________
                                   CAL KAWAMOTO, Chair

 
a                                                     HB140 SD1