Report Title:

Preference for State Residents

 

Description:

Defines "state resident", "state contractor", and "state subcontractor"; restores bid preference for state contractors and subcontractors to seven per cent. (SB749 HD2)

 

THE SENATE

S.B. NO.

749

TWENTY-FIRST LEGISLATURE, 2001

S.D. 2

STATE OF HAWAII

H.D. 2


 

A BILL FOR AN ACT

 

relating to the hawaii public procurement code.

 

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

SECTION 1. Beginning with section 8078 of the United States Defense Appropriations Act of 1986, all subsequent Defense Appropriations Acts require the contractor on a military construction or services project to employ Hawaii residents when Hawaii's unemployment rate exceeds the national average. The unemployment rate in Hawaii has been above the national average since 1994, but the federal law has not been strictly enforced. Many defense construction and service contracts have been awarded to out-of-state contractors that hire individuals who move to Hawaii just to work on these particular federal contracts. Apparently this is within the scope of the law, though clearly not the intent of section 8078. One reason given for the failure to strictly enforce the requirement to employ Hawaii residents is that the term "state resident" is not defined in section 8078, its related provisions, or the Federal Acquisition Regulations.

The purpose of this Act is to assure compliance with federal and state laws regarding employment and bid preferences for state residents. This Act establishes a definition of "state resident" that will provide a clear, objective, measurable standard in the state procurement code that can be easily followed, copied, and enforced by federal contracting officers in enforcing the preference provisions in federal law. A clear definition of "state resident" in the state procurement code will help keep profits and wages from military construction projects in the State.

Further, this Act defines "state contractor" and "state subcontractor" to provide state contracting officers with clear and absolute definitions in order that the contractors who are granted a bid preference are those who have:

(1) Fully availed themselves of the laws of the State; and

(2) Committed themselves to contributing to the economy of the State by establishing and maintaining a business within the State and employing state residents.

In addition, this Act increases the bid preference in favor of state contractors on state public works contracts for $10,000,000 or less, and requires a review of the bid preference law by June 30, 2006.

SECTION 2. Section 103D-1001, Hawaii Revised Statutes, is amended by adding two new definitions to be appropriately inserted and to read as follows:

""State contractor" and "state subcontractor" means a person who submits an affidavit under penalty of perjury to the head of the purchasing agency attesting that the person:

(1) Is licensed as a contractor pursuant to chapter 444;

(2) Is licensed to conduct business in this State pursuant to section 237-9;

(3) Submits a bid under the name appearing on the person's current contracting or business license;

(4) Is a domestic corporation, partnership, or business organized or formed under the laws of the State;

(5) Has maintained its principal place of business within the State for at least two hundred consecutive days prior to the submission of a bid;

(6) Has filed a Hawaii resident income tax and all other applicable tax returns for the preceding tax year and has paid all amounts owing on those tax returns;

(7) Has complied with all applicable Hawaii employment, insurance, and worker's compensation laws;

(8) If an employer with one or more employees, eighty-five per cent of its employees are state residents; and

(9) If a joint venture, is composed entirely of entities that qualify under paragraphs (1) to (8) and eighty-five per cent of all the employees of the joint venture are state residents.

"State resident" means an individual who submits an affidavit under penalty of perjury to the head of the purchasing agency attesting that the person:

(1) Resides in the State at least two hundred days of the year; and

(2) Has filed a Hawaii resident income tax return in the taxable year immediately preceding a bid for a state contract by the individual's employer or business that is a state contractor and has paid all amounts owing on that tax return; provided that an individual who was a state resident, left the State to attend school or serve in the armed forces of the United States, and returned to the State to work for a state contractor is a state resident, even though the individual has not yet resided in the State for at least two hundred days or filed a Hawaii resident income tax return or paid all amounts owing on that tax return."

SECTION 3. Section 103D-1007, Hawaii Revised Statutes, is amended to read as follows:

"§103D-1007 Preference to bidders on state agency contracts. (a) The requirements in this section are in addition to any other applicable requirements provided in this chapter.

(b) The preference in this section may not be used in combination with any other preference otherwise available to a bidder under state or federal law[.] and shall be interpreted to enable a state agency to increase the opportunity for more state contractors to succeed in their bids for state contracts and to more widely distribute state contracts among all state contractors that are qualified to bid.

(c) In any section 103D-302 or 103D-303 contract for a public works project[,] for $10,000,000 or less, a state agency shall award the contract to an offeror who [has filed all state tax returns due to the State and paid all amounts owing on such returns for two successive years] is a state contractor prior to submitting the offer; provided that the amount of that offer is not more than seven per cent higher than the amount offered by any competing contractor who [has not filed or paid all applicable state taxes, and the amount of the offer by the state tax paying offeror is $5,000,000 or less.] is not a state contractor.

[(d) In any section 103D-302 or 103D-303 contract for a public works project, a state agency shall award the contract to an offeror who has filed all state tax returns due to the State and paid all amounts owing on such returns for four successive years prior to submitting the offer; provided that the amount of that offer is not more than seven per cent higher than the amount offered by any competing contractor who has not filed or paid all applicable state taxes, and the amount of the offer by the state tax paying offeror is more than $5,000,000.]

(d) A state contractor is qualified for the full preference under this section when the state contractor:

(1) Submits an offer with an attestation that the state contractor will perform all of the work required to be performed on the contract without any subcontract; or

(2) Submits an offer with an attestation that the state contractor will perform all of the work required to be performed on the contract using state subcontractors, and attaches to the offer a list of state subcontractors that the state contractor intends to use on the project covered by the offer.

(e) If two or more [contractors who have paid state and county taxes or were required to submit a filing regarding state and county taxes] state contractors are bidding on a public works contract, [and those contractors meet the criteria outlined in subsection (c) or (d),] the state agency shall award the contract to the state contractor among them who has submitted the lowest bid.

(f) Any contractor not complying with this section shall not bid on any state public contract for a period of five years from the date of the contractor's last noncompliant act or omission.

[(f)] (g) If any federal statute or regulation precludes the granting of federal assistance or reduces the amount of that assistance for a particular public works project because of preference awarded by this section, this section shall not apply insofar as its application would preclude or reduce federal assistance for that work."

SECTION 4. No later than twenty days prior to the convening of the regular session of the 2007, the comptroller shall submit a report to the legislature evaluating the preference structure of section 103D-1007, Hawaii Revised Statutes, by providing data on contracts involving this preference.

SECTION 5. If any provision of this Act, or the application thereof to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications of the Act which can be given effect without the invalid provision or application, and to this end the provisions of this Act are severable.

SECTION 6. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun, before its effective date.

SECTION 7. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 8. This Act shall take effect on July 1, 2100; provided that section 3 shall be reviewed by June 30, 2006.