REPORT TITLE:
PLA; State Resident


DESCRIPTION:
Designates the heads of the county water supply authorities the
chief procurement officers; authorizes the use of project labor
agreements in state public work contracts over $10,000,000;
Establishes criteria for state project labor agreements; Defines
"state contractor," "state subcontractor," and "state resident";
increases the bid preference to state residents.  (SD2)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        1593
HOUSE OF REPRESENTATIVES                H.B. NO.           H.D. 1
TWENTIETH LEGISLATURE, 1999                                S.D. 2
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO THE HAWAII PUBLIC PROCUREMENT CODE.



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

 1                              PART I
 
 2      SECTION 1.  Section 103D-203, Hawaii Revised Statutes, is
 
 3 amended by amending subsections (b) and (c) to read as follows:
 
 4      "(b)  The chief procurement officers for each of the several
 
 5 counties shall be:
 
 6      (1)  The executive branch--the respective finance directors
 
 7           of the several counties[; and], except as provided in
 
 8           paragraphs (3), (4), (5), and (6);
 
 9      (2)  The legislative branch--the respective chairpersons of
 
10           the councils of the several counties;
 
11      (3)  The Kauai department of water--the manager and chief
 
12           engineer or as designated by county charter;
 
13      (4)  The Hawaii department of water supply--the manager or
 
14           as designated by county charter;
 
15      (5)  The Honolulu board of water supply--the manager and
 
16           chief engineer or as designated by county charter; and
 
17      (6)  The Maui department of water supply--the director or as
 
18           designated by county charter;
 
19 provided that the chief procurement officers designated under
 

 
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 1 paragraphs (1) [and (2)] to (6) shall not exercise their powers
 
 2 or duties over contracting in a manner contrary to the respective
 
 3 county's charter, ordinances, or rules adopted in accordance with
 
 4 chapter 91.
 
 5      (c)  For purposes of applying this chapter to the judiciary,
 
 6 houses of the legislature, office of Hawaiian affairs, department
 
 7 of education, University of Hawaii, remaining departments of the
 
 8 executive branch and all governmental bodies administratively
 
 9 attached to them, and the several counties, including their
 
10 respective water supply authorities, unless otherwise expressly
 
11 provided, "State" shall mean "judiciary," "state senate," "state
 
12 house of representatives," "office of Hawaiian affairs,"
 
13 "department of education," "University of Hawaii," "executive
 
14 branch," [and] "county," "department of water," "department of
 
15 water supply," and "board of water supply," respectively."
 
16                              PART II
 
17      SECTION 2.  The purpose of this Part is to establish
 
18 standards and criteria for a project labor agreement that is
 
19 consistent with the United States President's memorandum dated
 
20 June 5, 1997, and to encourage the use of a project labor
 
21 agreement to achieve economy and efficiency in state public works
 
22 projects over $10,000,000 such as the proposed state prison on
 
23 the island of Hawaii or the University of Hawaii-West Oahu
 

 
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 1 Campus.
 
 2      SECTION 3.  Project labor agreement.  (a)  In any state
 
 3 public works project over $10,000,000, any department or agency
 
 4 of the State that is authorized to award a contract, on a
 
 5 project-by-project basis, may use a project labor agreement if
 
 6 the project labor agreement:
 
 7      (1)  Advances the project's procurement interest in cost,
 
 8           efficiency, and quality;
 
 9      (2)  Promotes labor-management stability and compliance with
 
10           legal requirements governing safety and health,
 
11           employment equal opportunity, labor and employment
 
12           standards, and other matters; and
 
13      (3)  Is not precluded from use because of laws applicable to
 
14           the specific construction project.
 
15      (b)  If the department or agency of the State determines
 
16 that the use of a project labor agreement will serve the goals
 
17 set forth in subsection (a), the department or agency of the
 
18 State may require that every contractor or subcontractor on the
 
19 project agree, for that project, to negotiate or become a party
 
20 to a project labor agreement with unions traditionally
 
21 representing employees working in the building and construction
 
22 industry as well as other nonunion contractors, subcontractors,
 
23 and employees, and incorporate the project labor agreement into
 

 
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 1 the requests for proposals, invitations for bid under chapter
 
 2 103D, Hawaii Revised Statutes, and contract documents.
 
 3      (c)  Any project labor agreement reached pursuant to this
 
 4 section shall:
 
 5      (1)  Bind all contractors and subcontractors on the
 
 6           construction project by incorporating the project labor
 
 7           agreement into all relevant requests for proposals,
 
 8           invitations for bids under chapter 103D, Hawaii Revised
 
 9           Statutes, and contract documents;
 
10      (2)  Fully conform to all applicable laws, regulations, and
 
11           executive orders;
 
12      (3)  Allow all contractors and subcontractors wishing to
 
13           compete for contracts and subcontracts on the project
 
14           to do so, without discrimination against contractors,
 
15           subcontractors, or employees based on union or nonunion
 
16           status;
 
17      (4)  Contain guarantees against strikes, lockouts, and
 
18           similar work disruptions;
 
19      (5)  Set forth effective, prompt, and mutually binding
 
20           procedures for resolving labor disputes arising during
 
21           the project; and
 
22      (6)  Provide other mechanisms for labor-management
 
23           cooperation on matters of mutual interest and concern,
 

 
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 1           including productivity, quality of work, safety, and
 
 2           health.
 
 3      (d)  This section does not require a department or agency of
 
 4 the State to use a project labor agreement on any state
 
 5 construction project, nor does it preclude use of a project labor
 
 6 agreement in circumstances not covered in this section.  This
 
 7 section also does not require a contractor to enter into a
 
 8 project labor agreement with any particular labor organization.
 
 9      (e)  The procurement policy board, in consultation with the
 
10 departments that are covered by this section, shall establish
 
11 appropriate written procedures and criteria for the
 
12 determinations set forth in subsection (a) in accordance with
 
13 chapter 91.
 
14      (f)  This section does not create any right or benefit,
 
15 substantive or procedural, enforceable by a non-state party
 
16 against the State, its departments, agencies, or
 
17 instrumentalities, its officers, or employees, or any other
 
18 person.
 
19      SECTION 4.  Chapter 103D, Hawaii Revised Statutes, is
 
20 amended by adding a new section to be appropriately designated
 
21 and to read as follows:
 
22      "103D-     Project labor agreements.  (a)  A procurement
 
23 officer, as a condition of being awarded a contract, may direct
 

 
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 1 that each responsible and responsive bidder negotiate or become a
 
 2 party to a project labor agreement between the bidder and unions
 
 3 traditionally representing employees working in the building and
 
 4 construction industry as well as nonunion contractors,
 
 5 subcontractors, and employees, and shall be bound by the
 
 6 provisions of that agreement in the same manner as the provisions
 
 7 of the contract; provided that:
 
 8      (1)  The responsible and responsive bidder and all
 
 9           subcontractors on the construction project shall be
 
10           signatories to the project labor agreement;
 
11      (2)  Previously negotiated signatories shall be honored; and
 
12      (3)  The project agreement shall include the applicable
 
13           terms of the standard industry-wide collective
 
14           bargaining agreements.
 
15      (b)  This section shall not preclude a bidder from
 
16 submitting a bid if the bidder presents documentation to the
 
17 chief procurement officer that for the duration of the contract
 
18 those employed by the bidder and all subcontractors will abide
 
19 and be bound to the terms of the project labor agreement.
 
20      (c)  An award of a contract shall be made to the lowest
 
21 responsible and responsive bidder who either:
 
22      (1)  Becomes a signatory to the project labor agreement
 
23           pursuant to subsection (a), with the exception of
 

 
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 1           honoring previously negotiated signatories; or
 
 2      (2)  Provides documentation to the chief procurement officer
 
 3           pursuant to subsection (b).
 
 4      (d)  The procurement policy board shall establish rules in
 
 5 accordance with chapter 91 for determining when the chief
 
 6 procurement officer may require the use of a project labor
 
 7 agreement pursuant to this section."
 
 8      SECTION 5.  The department of accounting and general
 
 9 services shall submit a report on the results of the use of
 
10 project labor agreements authorized by this Part to the
 
11 legislature twenty days before the convening of the regular
 
12 session of 2003.
 
13      SECTION 6.  This Part shall apply to project labor
 
14 agreements entered into on or after the effective date of this
 
15 Part.  All project labor agreements entered into before the
 
16 effective date of this Part shall continue to be honored until
 
17 their termination.
 
18                             PART III
 
19      SECTION 7.  Beginning with section 8078 of the United States
 
20 Defense Appropriations Act of 1986, all subsequent Defense
 
21 Appropriations Acts require the contractor on a military
 
22 construction or services project to employ Hawaii residents when
 
23 Hawaii's unemployment rate exceeds the national average.  The
 

 
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 1 unemployment rate in Hawaii has been above the national average
 
 2 since 1994, but the federal law has not been strictly enforced.
 
 3 Many defense construction and service contracts have been awarded
 
 4 to out-of-state contractors that hire individuals that move to
 
 5 Hawaii just to work on these particular federal contracts.  This
 
 6 apparently is within the scope of the law, though clearly not the
 
 7 intent of section 8078.  One reason given for the failure to
 
 8 strictly enforce the requirement to employ Hawaii residents is
 
 9 that the term "state resident" is not defined in section 8078, in
 
10 its related provisions, or in the Federal Acquisition
 
11 Regulations.
 
12      The purpose of this Part is to assure compliance with the
 
13 federal and state laws regarding employment and bid preferences
 
14 for State residents.  This Part establishes a definition of
 
15 "state resident" that will provide a clear, objective, measurable
 
16 standard in the state procurement code that can be easily
 
17 followed, copied, and enforced by federal contracting officers in
 
18 enforcing the preference provisions in federal law.  A clear
 
19 definition of "state resident" in the state procurement code will
 
20 help keep profits and wages from military construction projects
 
21 in the State.
 
22      The further purpose of this Part is to define "state
 
23 contractor" and "state subcontractor" to provide state
 

 
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 1 contracting officers with clear and absolute definitions in order
 
 2 that the contractors who are granted a bid preference are those
 
 3 that have:
 
 4      (1)  Fully availed themselves of the laws of the State; and
 
 5      (2)  Committed themselves to contributing to the economy of
 
 6           the State by establishing and maintaining a business
 
 7           within the State and employing state residents.
 
 8      In addition, this Part increases the bid preference in favor
 
 9 of state contractors from seven to fifteen per cent on state
 
10 public works contracts for $8,000,000 or less, and to require a
 
11 review of the bid preference law by June 30, 2005.
 
12      SECTION 8.  Section 103D-1001, Hawaii Revised Statutes, is
 
13 amended by adding two new definitions to be inserted and to read
 
14 as follows:
 
15      ""State contractor" and "state subcontractor" means a person
 
16 that:
 
17      (1)  Is licensed as a contractor pursuant to chapter 444;
 
18      (2)  Is licensed to conduct business in this State pursuant
 
19           to section 237-9;
 
20      (3)  Submits a bid under the name appearing on the person's
 
21           current contracting or business license;
 
22      (4)  Is a domestic corporation, partnership, or business
 
23           organized or formed under the laws of the State;
 

 
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 1      (5)  Has maintained its principal place of business within
 
 2           the State for at least two-hundred consecutive days
 
 3           prior to the submission of a bid;
 
 4      (6)  Has filed a Hawaii resident income tax and all other
 
 5           applicable tax returns for the preceding tax year and
 
 6           has paid all amounts owing on those tax returns;
 
 7      (7)  Has complied with all applicable Hawaii employment,
 
 8           insurance, and worker's compensation laws;
 
 9      (8)  If an employer with one or more employees, one-hundred
 
10           per cent of its employees are state residents; and
 
11      (9)  If a joint venture, is composed entirely of entities
 
12           that qualify under paragraphs (1) to (8).
 
13      "State resident" means an individual who:
 
14      (1)  Resides in the State at least two hundred days of the
 
15           year; and
 
16      (2)  Has filed a Hawaii resident income tax return in the
 
17           taxable year immediately preceding a bid for a state
 
18           contract by the individual's employer or business that
 
19           is a state contractor and has paid all amounts owing on
 
20           that tax return; provided that an individual who was a
 
21           state resident, left the State to attend school or
 
22           serve in the armed forces of the United States of
 
23           America, and returned to the State to work for a state
 

 
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 1           contractor is a state resident, even though the
 
 2           individual has not yet resided in the State for at
 
 3           least two hundred days or filed a Hawaii resident
 
 4           income tax return or paid all amounts owing on that tax
 
 5           return."
 
 6      SECTION 9.  Section 103D-1007, Hawaii Revised Statutes, is
 
 7 amended to read as follows:
 
 8      "[[]103D-1007[]]  Preference to bidders on state agency
 
 9 contracts.(a)  The requirements in this section are in addition
 
10 to any other applicable requirements provided in this chapter.
 
11      (b)  The preference in this section may not be used in
 
12 combination with any other preference otherwise available to a
 
13 bidder under state or federal law[.] and shall be interpreted to
 
14 enable a state agency to increase the opportunity for more state
 
15 contractors to succeed in their bids for state contracts and to
 
16 more widely distribute state contracts among all state
 
17 contractors that are qualified to bid.
 
18      (c)  In any contract for a public works project[,] for
 
19 $8,000,000 or less, a state agency shall award the contract to a
 
20 bidder who [has filed all state tax returns due to the State and
 
21 paid all amounts owing on such returns for two successive years]
 
22 is a state contractor prior to submitting the bid; provided that
 
23 the amount of that bid is not more than [seven] fifteen per cent
 

 
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 1 higher than the amount bid by any competing contractor who [has
 
 2 not filed or paid all applicable state taxes, and the amount of
 
 3 the bid by the state tax paying bidder is $5,000,000 or less.] is
 
 4 not a state contractor.
 
 5      [(d)  In any contract for a public works project, a state
 
 6 agency shall award the contract to a bidder who has filed all
 
 7 state tax returns due to the State and paid all amounts owing on
 
 8 such returns for four successive years prior to submitting the
 
 9 bid; provided that the amount of that bid is not more than seven
 
10 per cent higher than the amount bid by any competing contractor
 
11 who has not filed or paid all applicable state taxes, and the
 
12 amount of the bid by the state tax paying bidder is more than
 
13 $5,000,000.]
 
14      (d)  A state contractor is qualified for the full preference
 
15 under this section when the state contractor:
 
16      (1)  Submits its bid with an attestation that it will
 
17           perform all of the work required to be performed on the
 
18           contract without any subcontract; or
 
19      (2)  Submits its bid with an attestation that it will
 
20           perform all of the work required to be performed on the
 
21           contract using state subcontractors, and attaches to
 
22           the bid, a list of state subcontractors that the state
 
23           contractor intends to use on the project covered by the
 

 
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 1           bid.
 
 2      (e)  A state contractor is qualified for a portion of the
 
 3 full preference under this section when the state contractor:
 
 4      (1)  Submits its bid with an attestation that it is able to
 
 5           perform some of the work required to be performed using
 
 6           state subcontractors that the state contractor intends
 
 7           to use on the project covered by the bid, together with
 
 8           a list of nonstate subcontractors that it intends to
 
 9           use, the cost of those subcontractors, and a statement
 
10           as to why state subcontractors cannot be used; provided
 
11           that the statement is based on fact and is approved by
 
12           the state agency; or
 
13      (2)  Submits its bid with an attestation that it is unable
 
14           to perform the work required to be performed on the
 
15           contract with state subcontractors, together with a
 
16           list of nonstate subcontractors that the state
 
17           contractor intends to use on the project covered by the
 
18           bid, the total cost of those subcontractors, and a
 
19           statement as to why state subcontractors cannot be
 
20           used; provided that the statement is based on fact and
 
21           is approved by the state agency.
 
22      (f)  The preference to state contractors shall be reduced
 
23 for qualified state contractors under subsection (e)(1) and (2)
 

 
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 1 by a percentage that the cost of the nonstate subcontractor's
 
 2 contract bears to the total amount of the state contractor's bid
 
 3 on the state project covered by the bid.
 
 4      [(e)] (g)  If two or more [contractors who have paid state
 
 5 and county taxes or were required to submit a filing regarding
 
 6 state and county taxes] state contractors are bidding on a public
 
 7 works contract, [and those contractors meet the criteria outlined
 
 8 in subsection (c) or (d),] the state agency shall award the
 
 9 contract to the state contractor among them who has submitted the
 
10 lowest bid.
 
11      [(f)] (h)  If any federal statute or regulation precludes
 
12 the granting of federal assistance or reduces the amount of that
 
13 assistance for a particular public works project because of
 
14 preference awarded by this section, this section shall not apply
 
15 insofar as its application would preclude or reduce federal
 
16 assistance for that work."
 
17      SECTION 10.  No later than twenty days prior to the
 
18 convening of the regular session of the 2001 legislature, the
 
19 comptroller shall submit a report to the legislature evaluating
 
20 the preference structure of 103D-1007, Hawaii Revised Statutes,
 
21 in general by providing data on contracts involving this
 
22 preference.
 
23                              PART IV
 

 
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 1      SECTION 11.  If any provision of this Act, or the
 
 2 application thereof to any person or circumstance is held
 
 3 invalid, the invalidity does not affect other provisions or
 
 4 applications of the Act which can be given effect without the
 
 5 invalid provision or application, and to this end the provisions
 
 6 of this Act are severable.
 
 7      SECTION 12.  This Act does not affect rights and duties that
 
 8 matured, penalties that were incurred, and proceedings that were
 
 9 begun, before its effective date.
 
10      SECTION 13.  Statutory material to be repealed is bracketed.
 
11 New statutory material is underscored.
 
12      SECTION 14.  This Act shall take effect on July 1, 1999;
 
13 provided that Part II and section 9 shall be reviewed by June 30,
 
14 2005.