STAND. COM. REP. NO. 1765

Honolulu, Hawaii

RE:    S.C.R. No. 68

       S.D. 1

Honorable Colleen Hanabusa

President of the Senate

Twenty-Fourth State Legislature

Regular Session of 2007

State of Hawaii

Madam:

     Your Committees on Commerce, Consumer Protection, and Affordable Housing and Judiciary and Labor, to which was referred S.C.R. No. 68 entitled:

"SENATE CONCURRENT RESOLUTION REQUESTING A STUDY ON PUBLIC CONTRACTS,"

beg leave to report as follows:

     The purpose of this measure is to request the Attorney General and the Insurance Commissioner to conduct a study on whether state and county government contracts are being awarded to out-of-state contractors in greater number than to in-state contractors, and whether a major reason for this is the higher workers' compensation premiums paid by in-state contractors.

     Your Committees received testimony in support of this measure from the Subcontractors Association of Hawaii and the International Union of Painters and Allied Trades.  Testimony in opposition to this measure was submitted by the Department of Accounting and General Services.  Comments were submitted by the Department of the Attorney General and the Department of Commerce and Consumer Affairs.

     Your Committees find that a recent national study ranked Hawaii third in the nation in workers' compensation premiums and a recent survey conducted noted that seventy-three per cent of local business responded that their number one issue was the soaring costs of workers' compensation.

     Your Committees further find that as a general matter, the bidding process under the public procurement code is open to all contractors, regardless of whether they are in-state or out-of-state.  Concern has been raised as to whether out-of-state contractors are being awarded contracts based upon their ability to offer lower bids than in-state contractors because in-state contractors must factor the high cost of workers' compensation premiums in the State into their bids.

     Your Committees note that there may be other factors, in addition to the high cost of workers' compensation premiums, that may contribute to the negative impact on in-state contractors in bidding for public contracts.

     Therefore, your Committees have amended this measure by:

     (1)  Replacing the Insurance Commissioner with the Department of Accounting and General Services as one of the parties requested to conduct the study;

     (2)  Expanding the scope of the study to include an examination on whether, in addition to workers' compensation premiums, prepaid healthcare coverage plans, Hawaii general excise tax requirements, unemployment insurance premiums, and any other relevant factors negatively impact the competitiveness of in-state contractors in comparison with out-of-state contractors; and

     (3)  Making technical, nonsubstantive changes for the purposes of clarity and style.

     As affirmed by the records of votes of the members of your Committees on Commerce, Consumer Protection, and Affordable Housing and Judiciary and Labor that are attached to this report, your Committees concur with the intent and purpose of S.C.R. No. 68, as amended herein, and recommend its adoption in the form attached hereto as S.C.R. No. 68, S.D. 1.

Respectfully submitted on behalf of the members of the Committees on Commerce, Consumer Protection, and Affordable Housing and Judiciary and Labor,

____________________________ CLAYTON HEE, Chair

____________________________ BRIAN T. TANIGUCHI, Chair