STAND. COM. REP. NO. 2937

                                   Honolulu, Hawaii
                                                     , 2000

                                   RE:  H.B. No. 2878
                                        H.D. 2
                                        S.D. 1




Honorable Norman Mizuguchi
President of the Senate
Twentieth State Legislature
Regular Session of 2000
State of Hawaii

Sir:

     Your Committee on Government Operations and Housing, to
which was referred H.B. No. 2878, H.D. 2, entitled: 

     "A BILL FOR AN ACT RELATING TO PUBLIC CONTRACTS AND
     PROCUREMENT,"

begs leave to report as follows:

     The purpose of this measure is to ensure prompt payment on
state projects by contractors to subcontractors, by:

     (1)  Specifying that subcontractors provide evidence to
          contractors of a current trust fund contribution bond,
          a performance and payment bond, any other bond or form
          of collateral acceptable to the contractor;

     (2)  Imposing penalties on contractors for failing to
          properly pay amounts owed to subcontractors; and

     (3)  Requiring the Procurement Policy Board to adopt rules
          on prompt payment and retainage.

     Testimony in support of this measure was received from the
Construction Industry Legislative Organization, the Hawaii Surety
Association, the Plumbing and Mechanical Contractors Association
of Hawaii, the General Contractors Association of Hawaii, the
Subcontractors Association of Hawaii, the Building Industry
Association of Hawaii, and the Hawaii Construction Industry

 
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                                   STAND. COM. REP. NO. 2937
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Association.  Comments on this measure were received from the
State Procurement Office.

     Your Committee finds that although prompt payment is an
important issue for subcontractor protection, the interests of
subcontractors would be better served if the contractors are
given additional protection when entering into state contracts.

     Your Committee has amended this measure by deleting its
contents and inserting a new section which amends the Procurement
Code to include the following provisions:

     (1)  Each procurement officer awarding a state procurement
          contract shall sign an affidavit attesting as to
          whether the Department of Budget and Finance has
          approved the expenditure of money for the contract
          prior to issuing the notice to proceed;

     (2)  If the notice to proceed is issued prior to obtaining
          such contract approval, the procuring officer shall be
          subject to the following penalties:

          (A)  $200 on the first offense;

          (B)  $1000 on the second offense; and

          (C)  Termination on the third offense.

     Your Committee finds that reducing any possibility that a
procurement officer will require a contractor to commence work
prior to receiving contract approval outweighs placing the burden
of proof on the contractor with respect to any alleged violations
by procurement officers.

     As affirmed by the record of votes of the members of your
Committee on Government Operations and Housing that is attached
to this report, your Committee is in accord with the intent and
purpose of H.B. No. 2878, H.D. 2, as amended herein, and
recommends that it pass Second Reading in the form attached
hereto as H.B. No. 2878, H.D. 2, S.D. 1, and be referred to the
Committee on Ways and Means.


 
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                                   STAND. COM. REP. NO. 2937
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                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Government
                                   Operations and Housing,



                                   ______________________________
                                   ROD TAM, Chair

 
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