REPORT TITLE: 
Peformance Contracts



DESCRIPTION:
Removes policy board's discretion to exempt bond requirement for
contracts exceeding $25,000.  Removes policy board's authority to
adopt rules to reduce amount of bonds.  

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        
THE SENATE                              S.B. NO.           1498
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
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                   A  BILL  FOR  AN  ACT

RELATING TO PERFORMANCE CONTRACTS. 


BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 1      SECTION 1.  Section 103D-324, Hawaii Revised Statutes, is
 
 2 amended to read as follows:
 
 3      "�103D-324  Contract performance and payment bonds.(a)
 
 4 [Unless the policy board determines otherwise by rules, the] The
 
 5 following bonds or security shall be delivered to the purchasing
 
 6 agency and shall become binding on the parties upon the execution
 
 7 of the contract if the contract which is awarded exceeds $25,000
 
 8 and is for construction, or the purchasing agency secures the
 
 9 approval of the chief procurement officer:
 
10      (1)  A performance bond in a form prescribed by the rules of
 
11           the policy board, executed by a surety company
 
12           authorized to do business in this State or otherwise
 
13           secured in a manner satisfactory to the purchasing
 
14           agency, in an amount equal to one hundred per cent of
 
15           the price specified in the contract;
 
16      (2)  A payment bond in a form prescribed by the rules of the
 
17           policy board, executed by a surety company authorized
 
18           to do business in this State or otherwise secured in a
 
19           manner satisfactory to the purchasing agency, for the
 
20           protection of all persons supplying labor and material
 

 
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                                     S.B. NO.           1498
                                                        
                                                        

 
 1           to the contractor for the performance of the work
 
 2           provided for in the contract.  The bond shall be in an 
 
 3           amount equal to one hundred per cent of the price
 
 4           specified in the contract; or
 
 5      (3)  A performance and payment bond which satisfies all of
 
 6           the requirements of paragraphs (1) and (2).
 
 7      [(b)  The policy board may adopt rules that authorize the
 
 8 head of a purchasing agency to reduce the amount of performance
 
 9 and payment bonds.]
 
10      [(c)] (b)  Nothing in this section shall be construed to
 
11 limit the authority of the chief procurement officer to require a
 
12 performance bond or other security in addition to those bonds, or
 
13 in circumstances other than specified in subsection (a).
 
14      [(d)] (c)  Every person who has furnished labor or material
 
15 to the contractor for the work provided in the contract, in
 
16 respect of which a payment bond or a performance and payment bond
 
17 is furnished under this section, and who has not been paid
 
18 amounts due therefor before the expiration of a period of ninety
 
19 days after the day on which the last of the labor was done or
 
20 performed or material was furnished or supplied, for which such a
 
21 claim is made, may institute an action for the amount, or balance
 
22 thereof, unpaid at the time of the institution of the action
 
23 against the contractor and its sureties, on the payment bond or
 

 
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                                     S.B. NO.           1498
                                                        
                                                        

 
 1 the performance and payment bond, and have their rights and
 
 2 claims adjudicated in the action, and judgment rendered thereon;
 
 3 subject to the State's priority on the bonds.  If the full amount
 
 4 of the liability of the sureties on the payment bond is
 
 5 insufficient to pay the full amount of the claims, then, after
 
 6 paying the full amount due the State, the remainder shall be
 
 7 distributed pro rata among the claimants.
 
 8      As a condition precedent to any such suit, written notice
 
 9 shall be given to contractor and surety, within ninety days from
 
10 the date on which the person did or performed the last labor or
 
11 furnished or supplied the last of the material for which claim is
 
12 made, stating with substantial accuracy the amount claimed and
 
13 the name of the party to whom the material was furnished or
 
14 supplied or for whom the labor was done or performed.
 
15      The written notice shall be served by registered or
 
16 certified mailing of the notice, to the contractor and surety, at
 
17 any place they maintain an office or conduct their business, or
 
18 in any manner authorized by law to serve summons.
 
19      [(e)] (d) Every suit instituted under subsection (d) shall
 
20 be brought in the circuit court of the circuit in which the
 
21 project is located, but no such suit shall be commenced after the
 
22 expiration of one year after the day on which the last of the
 
23 labor was performed or material was supplied for the work
 

 
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                                     S.B. NO.           1498
                                                        
                                                        

 
 1 provided in the contract.  The obligee named in the bond need not
 
 2 be joined as a party in any such suit.
 
 3      The terms "labor" and "material" have the same meanings in
 
 4 this section as the terms are used in section 507-41."
 
 5      SECTION 2.  Statutory material to be repealed is bracketed.
 
 6 New statutory material is underscored.  
 
 7      SECTION 3.  This Act shall take effect upon approval.  
 
 8 
 
 9 
 
10                          INTRODUCED BY:  ______________________