REPORT TITLE:
Public Contracts


DESCRIPTION:
Establishes percentage rate for retainage and bond requirements
for subcontractors.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        2877
HOUSE OF REPRESENTATIVES                H.B. NO.           H.D. 1        
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            
                                                             
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                   A  BILL  FOR  AN  ACT

RELATING TO PUBLIC CONTRACTS.



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

 1      SECTION 1.  The legislature finds that for construction
 
 2 projects, the state often retains a percentage of the amount paid
 
 3 to prime contractors.  The contractors, in turn, often retain a
 
 4 higher rate from subcontractors to protect themselves, in case
 
 5 the subcontractors fail to complete their work, and from other
 
 6 contingencies.  The higher retention rates imposed upon
 
 7 subcontractors often cause cash flow problems for these
 
 8 companies.
 
 9      The legislature also finds that earlier legislative action
 
10 on the issue resulted in divisive conflict between construction
 
11 industry groups.  To avoid further rancor, representatives from
 
12 various construction industry organizations established an
 
13 informal task force to reconcile differences.  After many months
 
14 of open, sometimes heated debate, the members of the task force
 
15 acquired a new respect for the unique problems facing their
 
16 counterparts and managed to craft a partial solution to the
 
17 thorny problem of retention.  The proposal provides that the
 
18 retention rate imposed upon subcontractors shall be equal to the
 
19 retention rate imposed upon their prime contractor by the State,
 
20 provided the subcontractor possesses a performance and payment
 

 
Page 2                                                     2877
                                     H.B. NO.           H.D. 1        
                                                        
                                                        

 
 1 bond.  This addresses the subcontractors' concern for equal
 
 2 retention rates, and the prime contractors' concern regarding
 
 3 liability for work completion.
 
 4      The purpose of this Act is to require equal retention rates
 
 5 on state projects for subcontractors who possess a valid
 
 6 performance and payment bond or another mutually agreeable form
 
 7 of collateral. 
 
 8      SECTION 2.  Section 103-32.1, Hawaii Revised Statutes, is
 
 9 amended to read as follows:
 
10      "�103-32.1  Contract provision for retainage.  (a)  Any
 
11 public contract may include a provision for the retainage of a
 
12 portion of the amount due under the contract to the contractor to
 
13 insure the proper performance of the contract; provided that:
 
14      (1)  The sum withheld by the procurement officer from the
 
15           contractor shall not exceed five per cent of the total
 
16           amount due the contractor and that after fifty per cent
 
17           of the contract is completed and progress is
 
18           satisfactory, no additional sum shall be withheld;
 
19           provided further that if progress is not satisfactory,
 
20           the contracting officer may continue to withhold as
 
21           retainage, sums not exceeding five per cent of the
 
22           amount due the contractor; and
 

 
 
 
Page 3                                                     2877
                                     H.B. NO.           H.D. 1        
                                                        
                                                        

 
 1      (2)  The retainage shall not include sums deducted as
 
 2           liquidated damages from moneys due or that may become
 
 3           due the contractor under the contract.
 
 4      (b)  Where a subcontractor has provided evidence to the
 
 5 contractor of:
 
 6      (1)  A current performance and payment bond for the project,
 
 7           that is acceptable to the contractor and executed by a
 
 8           surety company authorized to do business in the State;
 
 9           or
 
10      (2)  Any other bond acceptable to the contractor.
 
11 The retention amount withheld by the contractor from its
 
12 subcontractor shall be the same percentage of retainage as that
 
13 on the contractor.  This subsection shall also apply to
 
14 subcontractors who subcontract work to other subcontractors."
 
15      SECTION 3.  New statutory material is underscored.
 
16      SECTION 4.  This Act shall take effect on July 1, 2000.