Honorable Robert Bunda

President of the Senate

Twenty-First State Legislature

Third Special Session of 2001

State of Hawaii

Sir:

Your Committee on Ways and Means, to which was referred S.B. No. 16 entitled:

begs leave to report as follows:

The purpose of this measure is to temporarily increase the small purchase procurement exception dollar ceiling in order to facilitate quicker administration of public contracts during this time of severe economic crisis.

Your Committee received testimony in support of this measure from the Department of Transportation, the Department of Accounting and General Services, the State Procurement Office, the Board of Land and Natural Resources, the Housing and Community Development Corporation of Hawaii, the Hawaii County Office of Housing and Community Development, the Ironworkers Stabilization Fund, the General Contractors Association of Hawaii, the Subcontractors Association of Hawaii, the Building Industry Association of Hawaii, the Hawaii Building and Construction Trades Council, AFL-CIO, and the Chamber of Commerce of Hawaii.

Your Committee finds that the economy of the State has been devastated by the September 11, 2001, terrorist attacks against the United States. There has been a significant increase in the number of initial filings for unemployment benefits, and a high percentage of the recently furloughed employees were previously employed by the airlines or other businesses within the sluggish tourism industry. Your Committee believes that the State must help these displaced workers find employment in different industries.

Historically, when the tourism industry has faltered in Hawaii, bolstering the construction industry has proven to be the best remedy. An effective way for the State to bolster the construction industry is to fund public construction projects, and to facilitate more rapid implementation of such projects in order to put as many people to work as quickly as possible.

Therefore, your Committee supports the intent of this measure, to temporarily ease the administrative burdens associated with awarding public contracts, especially construction contracts. At the same time, your Committee believes that there must be some accountability for such projects, and supports the requirement that a report be submitted for all such projects with a total value of $100,000 or more.

Your Committee also agrees that state residents should be the primary beneficiaries of any emergency measures enacted during this special session, so that these displaced resident workers can find jobs, support their families, and continue to live as residents of this State. Therefore, your Committee also supports the provisions of this measure that provide a preference for state resident contractors.

However, your Committee believes that the compelling rationale behind the resident preference applies with even greater force with regard to larger public contracts, which can serve as vehicles to employ even greater numbers of state residents. In addition, your Committee finds that there is relatively little competition from out of state contractors for small purchase contracts, and therefore the resident preference is unnecessary for such contracts.

Conversely, there is tremendous competition from mainland contractors for large government contracts, and your Committee finds that it makes sense to provide a state resident preference for all public contracts with a total value of $100,000 or more.

Also, with the extraordinary emergency powers granted to the governor during this special session, including the power to waive certain procurement rules if necessary, your Committee anticipates that several large public construction contracts may be awarded during the economic emergency period. The State has a compelling interest in ensuring that any such contracts awarded during the economic emergency employ as many state residents as possible, particularly if such contracts are awarded outside the open bidding process.

Accordingly, your Committee has amended this measure to apply the state resident preference to every large public construction contract initiated pursuant to the emergency powers granted to the governor during this time of economic crisis. By giving state residents this preference the State can help as many displaced workers as possible find jobs in the construction industry, thus enabling them to continue to support their families and the state economy.

As affirmed by the record of votes of the members of your Committee on Ways and Means that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 16, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 16, S.D. 1, and be placed on the calendar for Third Reading.