STAND. COM. REP. NO. 2338

                                   Honolulu, Hawaii
                                                     , 2000

                                   RE:  S.B. No. 2988
                                        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 S.B. No. 2988 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 impose penalties against
contractors who improperly withhold payment from their
subcontractors.

     This measure in particular, specifies a penalty of one and
one half per cent per month on outstanding amounts due to the
subcontractor be imposed on the general contractor when the
subcontractor has provided evidence of a trust fund contribution
bond, a surety performance and payment bond, or a bond acceptable
to the contractor.

     Testimony in support of this measure was received from the
Building Industry Association, Associated Builders and
Contractors, Inc., the Sheet Metal Contractors Association, the
Plumbing and Mechanical Contractors Association of Hawaii, the
General Contractors Association of Hawaii, the Subcontractors
Association of Hawaii, and the Construction Industry Legislative
Organization.

     Testimony in opposition to this measure was received from
the Hawaii Electricians Market Enhancement Program Fund.
Recommendations and comments were received from the Department of

 
a                                                     SB2988 SD1
                                   STAND. COM. REP. NO. 2338
                                   Page 2


Accounting and General Services, the State Procurement Office,
and the Hawaii Surety Association.

     Your Committee finds that this measure makes significant
progress toward addressing subcontractors' concerns regarding
prompt payment, and the general contractors' concerns regarding
liability for union trust fund benefits payments.  Your Committee
is supportive of this measure, which is the product of many
months of discussion and negotiation among representatives of the
many construction industry organizations.

     Your Committee has amended this measure to:

     1.   Delete the provisions allowing a subcontractor to
          provide evidence of a current trust fund contribution
          bond or a performance and payment bond for penalties to
          be assessed against a contractor delinquent in payments
          to the subcontractor; and

     2.   Clarify that a subcontractor shall be required to post
          a bond acceptable under prevailing industry practice
          for penalties to be assessed against a delinquent
          contractor.

     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 S.B. No. 2988, as amended herein, and recommends that
it pass Second Reading in the form attached hereto as S.B.
No. 2988, S.D. 1, and be referred to the Committee on Ways and
Means.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Government
                                   Operations and Housing,



                                   ______________________________
                                   ROD TAM, Chair

 
a                                                     SB2988 SD1