REPORT TITLE:
Procurement


DESCRIPTION:
Imposes penalties on contractors for failing to properly pay
amounts owed to subcontractors.  (SD1)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        2988
THE SENATE                              S.B. NO.           S.D. 1
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            
                                                             
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                   A  BILL  FOR  AN  ACT

RELATING TO PUBLIC CONTRACTS AND PROCUREMENT. 


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

 1      SECTION 1.  The weakness of the State's economy emphasizes
 
 2 the need for subcontractors to pay their employees in a timely
 
 3 manner.  This need is circumvented by contractors who improperly
 
 4 withhold payment from their subcontractors.
 
 5      The purpose of this Act is to impose penalties against
 
 6 contractors who improperly withhold payment from their
 
 7 subcontractors.
 
 8      SECTION 2.  Section 103D-501, Hawaii Revised Statutes, is
 
 9 amended by amending subsection (c) to read as follows:
 
10      "(c)  The policy board shall adopt rules requiring the
 
11 inclusion in contracts of clauses providing for prompt payment by
 
12 contractors to subcontractors.  The rules shall provide that:
 
13      (1)  Any money, other than retainage, paid to a contractor
 
14           shall be dispersed to subcontractors within ten days
 
15           after receipt of the money in accordance with the terms
 
16           of the subcontract; provided that the subcontractor has
 
17           met all the terms and conditions of the subcontract and
 
18           there are no bona fide disputes[; and] on which the
 
19           procurement agency has withheld payment;
 

 
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 1      (2)  Upon final payment to the contractor, full payment to
 
 2           the subcontractor, including retainage, shall be made
 
 3           within ten days after receipt of the money; provided
 
 4           that there are no bona fide disputes over the
 
 5           subcontractor's performance under the subcontract[.];
 
 6      (3)  Where a subcontractor has provided a bond acceptable as
 
 7           prevailing industry practice to the contractor, and the
 
 8           contractor fails to pay in accordance with this
 
 9           section, there shall be imposed a penalty of one and
 
10           one half per cent a month on the amounts outstanding
 
11           due to the subcontractor.  The penalty may be withheld
 
12           from any future payments due to the contractor.  Any
 
13           form of collateral acceptable to the contractor may be
 
14           substituted for the trust fund contribution bond; and
 
15      (4)  Where a contractor has violated paragraph (3) three or
 
16           more times within two years of the first violation, the
 
17           contractor's name shall be referred to the contractor
 
18           license board by the procurement agency for action
 
19           under section 444-14."
 
20      SECTION 3.  Section 103D-501, Hawaii Revised Statutes, is
 
21 amended by amending subsection (d) to read as follows:
 
22      "(d)  The policy board shall adopt rules requiring the
 
23 inclusion in contracts of clauses providing for appropriate
 
24 remedies and covering the following subjects:
 

 
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 1      (1)  Liquidated damages as appropriate;
 
 2      (2)  Specified excuses for delay or nonperformance;
 
 3      (3)  Termination of the contract for default; [and]
 
 4      (4)  Termination of the contract in whole or in part for the
 
 5           convenience of the governmental body[.]; and
 
 6      (5)  Prompt payment and retainage."
 
 7      SECTION 4.  Section 103-10.5, Hawaii Revised Statutes, is
 
 8 repealed.
 
 9      ["[103-10.5]  Prompt payment.  Any money, other than
 
10 retainage, paid to a contractor shall be dispersed to
 
11 subcontractors within ten days after receipt of the money in
 
12 accordance with the terms of the subcontract, provided that the
 
13 subcontractor has met all the terms and conditions of the
 
14 subcontract and there are no bona fide disputes.  Upon final
 
15 payment to the contractor, full payment to the subcontractor,
 
16 including retainage, shall be made within ten days after receipt
 
17 of the money, provided there are no bona fide disputes over the
 
18 subcontractor's performance under the subcontract."]
 
19      SECTION 5.  Statutory material to be repealed is bracketed.
 
20 New statutory material is underscored.
 
21      SECTION 6.  This Act shall take effect on July 1, 2000, and
 
22 shall apply to all public contracts entered into after June 30,
 
23 2000.