STAND. COM. REP. NO. 2411

Honolulu, Hawaii

RE: S.B. No. 2600

S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Twenty-Ninth State Legislature

Regular Session of 2018

State of Hawaii

Sir:

Your Committee on Government Operations, to which was referred S.B. No. 2600 entitled:

"A BILL FOR AN ACT RELATING TO PROCUREMENT,"

begs leave to report as follows:

The purpose and intent of this measure is to:

(1) Require the listing of all joint contractors and subcontractors for construction contracts subject to the procurement code where the total estimated contract value is $5,000,000 or higher; and

(2) Require the listing of joint contractors and subcontractors in the trades of electrical, plumbing, asbestos, elevators, or boilermaker for construction contracts subject to the procurement code where the total estimated contract value is less than $5,000,000.

Your Committee received testimony in support of this measure from the Department of Budget and Fiscal Services of the City and County of Honolulu; General Contractors Association of Hawaii; Ralph S. Inouye Co, Ltd.; S & M Sakamoto, Inc.; Alan Shintani, Inc.; Healy Tibbitts Builders, Inc.; Nordic PCL Construction, Inc.; Lindemann Construction Inc.; Hawaiian Dredging Construction Company, Inc.; Isemoto Contracting Co., Ltd.; LYZ, Inc.; Building Industry Association of Hawaii; and one individual. Your Committee received testimony in opposition to this measure from the Plumbing and Mechanical Contractors Association of Hawaii, Ironworkers Stabilization Fund, Electrical Contractor's Association of Hawai‘i, and Subcontractors Association of Hawaii. Your Committee received comments on this measure from the State Procurement Office.

Your Committee finds that requiring the listing of joint contractors and subcontractors for all public works construction projects may result in unnecessary bid protests, award delays, and increased project costs paid by taxpayer dollars. Such circumstances often lead to inefficiencies in completing public work projects. Your Committee finds that this has been an ongoing problem that requires action. Therefore, your Committee supports placing limits on the public works construction bids that require joint contractor and subcontractor listings. However, your Committee understands the many concerns raised by those in the construction industry during testimony about the viability and effectiveness of the proposals. Accordingly, your Committee finds that conducting a pilot program through the University of Hawaii is an effective method of testing the workability of the measure's proposals.

Your Committee has amended this measure by:

(1) Applying the subcontractor listing requirements to a two-year pilot program to be conducted by the University of Hawaii, rather than mandating subcontractor listing requirements for all public works contracts at this time;

(2) Changing the $5,000,000 threshold to $3,000,000;

(3) Requiring the University of Hawaii to report to the Legislature on the effectiveness of the pilot program prior to the Regular Session of 2020; and

(4) Making technical, nonsubstantive amendments for the purposes of clarity and consistency.

As affirmed by the record of votes of the members of your Committee on Government Operations that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 2600, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 2600, S.D. 1, and be referred to your Committee on Ways and Means.

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

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DONNA MERCADO KIM, Chair