Public Contracts

Adds provision for contractor penalties to the existing law that
prohibits contractors from withholding more than five per cent of
the subcontractor's contract price.

THE SENATE                              S.B. NO.           
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            

                   A  BILL  FOR  AN  ACT



 1      SECTION 1.  The legislature finds that contractors
 2 performing on government contracts frequently withhold a
 3 retainage sum that exceeds the subcontractor's contract price.
 4 Currently, there are no penalties for a contractor who withholds
 5 a retention amount over five per cent of the subcontractor's
 6 contract price.
 7      The legislature finds that adding a penalties section to the
 8 retainage provision of the procurement code will prevent general
 9 contractors from using funds that legally belong to
10 subcontractors.
11      The purpose of this Act is to add penalties to the existing
12 law to prohibit contractors from withholding more than five per
13 cent of the subcontractor's contract price.
14      SECTION 2.  Section 103-32.1, Hawaii Revised Statutes, is
15 amended to read as follows:
16      "103-32.1  Contract provision for retainage[.];
17 subcontractors; penalties.  (a)  Any public contract may include
18 a provision for the retainage of a portion of the amount due
19 under the contract to the contractor to insure the proper

Page 2                                                     2987
                                     S.B. NO.           

 1 performance of the contract; provided that:
 2      (1)  The sum withheld by the procurement officer from the
 3           contractor shall not exceed five per cent of the total
 4           amount due the contractor and that after fifty per cent
 5           of the contract is completed and progress is
 6           satisfactory, no additional sum shall be withheld;
 7           provided further that if progress is not satisfactory,
 8           the contracting officer may continue to withhold as
 9           retainage, sums not exceeding five per cent of the
10           amount due the contractor; and
11      (2)  The retainage shall not include sums deducted as
12           liquidated damages from moneys due or that may become
13           due the contractor under the contract.
14      (b)  Where a subcontractor has provided evidence to the
15 contractor of a current performance and has either a payment bond
16 for the project acceptable to the contractor executed by a surety
17 company authorized to do business in this State, or a bond
18 acceptable to the contractor, then the retention amount withheld
19 by the contractor from its subcontractor shall be the same
20 percentage of retainage as that on the contractor under
21 subsection (a).  This provision shall also apply to
22 subcontractors who subcontract work to other subcontractors."
23      SECTION 3.  Statutory material to be repealed is bracketed.

Page 3                                                     2987
                                     S.B. NO.           

 1 New statutory material is underscored.
 2      SECTION 4.  This Act shall take effect on July 1, 2000, and
 3 shall apply to all public works contracts entered into after
 4 June 30, 2000.
 6                       INTRODUCED BY:  ___________________________