Defines "state resident" within the procurement code as one who
has resided in the State for 200 days of the year and filed a
Hawaii resident income tax return.

THE SENATE                              S.B. NO.           1438
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            

                   A  BILL  FOR  AN  ACT



 1      SECTION 1.  Beginning with section 8078 of the United States
 2 Defense Appropriations Act of 1986, all subsequent Defense
 3 Appropriations Acts require the contractor on a military
 4 construction or services project to employ Hawaii residents when
 5 Hawaii's unemployment rate exceeds the national average.  The
 6 unemployment rate in Hawaii has been above the national average
 7 since 1994, but the federal law has not been strictly enforced.
 8 Many defense construction and service contracts have been awarded
 9 to out-of-state contractors that hire individuals that move to
10 Hawaii just to work on these particular federal contracts.  This
11 apparently is within the scope of the law, though clearly not the
12 intent of section 8078.  One reason given for the failure to
13 strictly enforce the requirement to employ Hawaii residents is
14 that the term "state resident" is not defined in section 8078, in
15 its related provisions, or in the Federal Acquisition
16 Regulations.
17      The purpose of this Act is to establish a definition of
18 "state resident" in the state procurement code that will provide
19 a clear, objective, measurable standard that can be easily

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                                     S.B. NO.           1438

 1 followed, copied, and enforced by federal contracting officers in
 2 determining eligibility for preferences under the Federal
 3 Acquisition Regulations.  The definition of "state resident" will
 4 help keep profits and wages from military construction projects
 5 in the State.
 6      SECTION 2.  Section 103D-1001, Hawaii Revised Statutes, is
 7 amended by adding a new definition of "state resident" to read as
 8 follows:
 9      ""State resident" means a person who:
10      (1)  Resides in the State at least two hundred days of the
11           year; and
12      (2)  Has filed a Hawaii resident income tax return in the
13           last previous taxable year."
14      SECTION 3.  Section 103D-1007, Hawaii Revised Statutes, is
15 amended to read as follows:
16      "[[]103D-1007[]]  Preference to bidders on state agency
17 contracts.(a)  The requirements in this section are in addition
18 to any other applicable requirements provided in this chapter.
19      (b)  The preference in this section may not be used in
20 combination with any other preference otherwise available to a
21 bidder under state or federal law.
22      (c)  In any contract for a public works project, a state
23 agency shall award the contract to a bidder who [has filed all

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                                     S.B. NO.           1438

 1 state tax returns due to the State and paid all amounts owing on
 2 such returns for two successive years] is a state contractor
 3 prior to submitting the bid; provided that the amount of that bid
 4 is not more than [seven] fifteen per cent higher than the amount
 5 bid by any competing contractor who [has not filed or paid all
 6 applicable state taxes, and the amount of the bid by the state
 7 tax paying bidder is $5,000,000 or less.] is not a state
 8 contractor.
 9      [(d)  In any contract for a public works project, a state
10 agency shall award the contract to a bidder who has filed all
11 state tax returns due to the State and paid all amounts owing on
12 such returns for four successive years prior to submitting the
13 bid; provided that the amount of that bid is not more than seven
14 per cent higher than the amount bid by any competing contractor
15 who has not filed or paid all applicable state taxes, and the
16 amount of the bid by the state tax paying bidder is more than
17 $5,000,000.]
18      (d)  In order to qualify for a state contract for a public
19 works project using a preference under this section, a contractor
20 shall agree to hire subcontractors who qualify as a state
21 subcontractor.  Each subcontractor shall provide to the
22 contractor written verification of eligibility as a state
23 subcontractor.  Each contractor shall provide to the State

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                                     S.B. NO.           1438

 1 written verification of the contractor's own eligibility as a
 2 state contractor and that of the contractor's subcontractors.
 3      (e)  If the contractor uses a subcontractor who is not a
 4 state subcontractor, the contractor shall be subject to section
 5 103D-707; provided that a contractor shall not be subject to
 6 section 103D-707 and shall still be entitled to the preference if
 7 the contractor fully exhausts all eligible, technically qualified
 8 state subcontractors before hiring a subcontractor who is not a
 9 state subcontractor.  If the subcontractor is not a state
10 subcontractor, then the contractor may substitute another state
11 subcontractor without obtaining a release from the disqualified
12 subcontractor and the disqualified subcontractor shall not have a
13 cause of action due to the substitution.
14      (f)  If a contractor:
15      (1)  Obtains a state contract using a preference under this
16           section;
17      (2)  Cannot hire a technically qualified state
18           subcontractor; and
19      (3)  Hires an out-of-state subcontractor;
20 the fifteen per cent bid preference under subsection (c) shall be
21 reduced by a percentage that the out-of-state subcontractor's
22 contract amount bears to the total amount of the contractor's
23 state contract.

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                                     S.B. NO.           1438

 1      [(e)] (g)  If two or more [contractors who have paid state
 2 and county taxes or were required to submit a filing regarding
 3 state and county taxes] state contractors as defined in
 4 subsection (h) are bidding on a public works contract, [and those
 5 contractors meet the criteria outlined in subsection (c) or (d),]
 6 the state agency shall award the contract to the state contractor
 7 among them who has submitted the lowest bid.
 8      (h)  As used in this section:
 9      "Hawaii state resident" means a person who has resided in
10 the State for more than two hundred days and must have paid the
11 immediately previous year's state resident income tax in Hawaii.
12      "State contractor" or "state subcontractor" means an entity
13 whose stockholders, owners, managers, and employees are composed
14 of one hundred per cent Hawaii state residents.
15      [(f)] (i)  If any federal statute or regulation precludes
16 the granting of federal assistance or reduces the amount of that
17 assistance for a particular public works project because of
18 preference awarded by this section, this section shall not apply
19 insofar as its application would preclude or reduce federal
20 assistance for that work."
21      SECTION 4.  No later than twenty days prior to the convening
22 of the regular session of the 2001 legislature, the comptroller
23 shall submit a report to the legislature evaluating the

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                                     S.B. NO.           1438

 1 preference structure of 103D-1007, Hawaii Revised Statutes, in
 2 general by providing data on contracts involving this preference.
 3      SECTION 5.  This Act does not affect rights and duties that
 4 matured, penalties that were incurred, and proceedings that were
 5 begun, before its effective date.
 6      SECTION 6.  Statutory material to be repealed is bracketed.
 7 New statutory material is underscored.
 8      SECTION 7.  This Act shall take effect upon its approval;
 9 provided that section 3 shall be reviewed by June 30, 2005.
11                              INTRODUCED BY:______________________