HB1325

SECTION 1. Section 103D-324, Hawaii Revised Statutes, is amended to read as follows:

"§103D-324 Contract performance [~~and~~], payment bonds[.], and insurance. (a) Unless the policy board determines otherwise by rules, the following bonds [or], security, and proof of insurance shall be delivered to the purchasing agency and shall become binding on the parties upon the execution of the contract if the contract [~~which is~~] awarded exceeds $25,000 and is for construction, or the purchasing agency secures the approval of the chief procurement officer:

(1) A [~~performance~~]:

(A) Performance bond in a form prescribed by the rules of the policy board, executed by a surety company authorized to do business in this State or otherwise secured in a manner satisfactory to the purchasing agency, in an amount equal to one hundred per cent of the price specified in the contract;

[~~(2)~~ ~~A payment~~]

(B) Payment bond in a form prescribed by the rules of the policy board, executed by a surety company authorized to do business in this State or otherwise secured in a manner satisfactory to the purchasing agency, for the protection of all persons supplying labor and material to the contractor for the performance of the work provided for in the contract. The bond shall be in an amount equal to one hundred per cent of the price specified in the contract; or

[~~(3)~~ ~~A performance~~]

(C) Performance and payment bond [~~which~~] that satisfies all of the requirements of [~~paragraphs (1)~~] subparagraphs (A) and [~~(2).~~] (B); and

(2) Proof of insurance that meets the requirements of the policy board, through a company authorized to do business in this State, for at least half of the project's construction costs to the State, to provide funds for curing construction defects discovered not later than five years after the completion of the contract; provided that insurance shall not be required to cover the costs of repairs due solely to normal wear and tear.

(b) The policy board may adopt rules that authorize the head of a purchasing agency to reduce the amount of performance and payment bonds[.] and insurance required by subsection (a).

(c) Nothing in this section shall be construed to limit the authority of the chief procurement officer to require a performance bond or other security in addition to those bonds, or additional insurance, or in circumstances other than specified in subsection (a).

(d) Every person who has furnished labor or material to the contractor for the work provided in the contract, in respect of which a payment bond or a performance and payment bond is furnished under this section, and who has not been paid amounts due therefor before the expiration of a period of ninety days after the day on which the last of the labor was done or performed or material was furnished or supplied, for which [~~such a~~] the claim is made, may institute an action for the amount, or balance thereof, unpaid at the time of the institution of the action against the contractor and its sureties, on the payment bond or the performance and payment bond, and have their rights and claims adjudicated in the action, and judgment rendered thereon; subject to the State's priority on the bonds. If the full amount of the liability of the sureties on the payment bond is insufficient to pay the full amount of the claims, then, after paying the full amount due the State, the remainder shall be distributed pro rata among the claimants.

As a condition precedent to any such suit, written notice shall be given to contractor and surety, within ninety days from the date on which the person did or performed the last labor or furnished or supplied the last of the material for which claim is made, stating with substantial accuracy the amount claimed and the name of the party to whom the material was furnished or supplied or for whom the labor was done or performed.

The written notice shall be served by registered or certified mailing of the notice, to the contractor and surety, at any place they maintain an office or conduct their business, or in any manner authorized by law to serve summons.

(e) If the State discovers a construction defect not later than five years after the completion of the contract, the State may institute an action against the contractor for the costs of curing the construction defect, have its rights and claims adjudicated in the action, and have judgment rendered thereon.

[~~(e)~~] (f) Every suit instituted under subsection (d) shall be brought in the circuit court of the circuit in which the project is located, but no such suit shall be commenced after the expiration of one year after the day on which the last of the labor was performed or material was supplied for the work provided in the contract. The obligee named in the bond need not be joined as a party in any such suit.

(g) Every suit instituted under subsection (e) shall be brought in the circuit court of the circuit in which the project is located; provided that the suit shall not be commenced after the expiration of five years after the day on which the last of the labor was performed or material was supplied for the work provided in the contract.

(h) The terms "labor" and "material" have the same meanings in this section as the terms are used in section 507‑41."

SECTION 2. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.

SECTION 3. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 4. This Act shall take effect upon its approval.

INTRODUCED BY:	_____________________________

HOUSE OF REPRESENTATIVES	H.B. NO.	1325
THIRTY-FIRST LEGISLATURE, 2021
STATE OF HAWAII