REPORT TITLE:
PLA; State Resident


DESCRIPTION:
Designates the heads of the county water supply authorities the
chief procurement officers; authorizes the use of project labor
agreements in state public work contracts over $10,000,000;
Establishes criteria for state project labor agreements; Defines
"state contractor," "state subcontractor," and "state resident";
increases the bid preference to state residents.  (SD1)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        1593
HOUSE OF REPRESENTATIVES                H.B. NO.           H.D. 1
TWENTIETH LEGISLATURE, 1999                                S.D. 1
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO THE HAWAII PUBLIC PROCUREMENT CODE.



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

 1                              PART I
 
 2      SECTION 1.  Section 103D-203, Hawaii Revised Statutes, is
 
 3 amended by amending subsections (b) and (c) to read as follows:
 
 4      "(b)  The chief procurement officers for each of the several
 
 5 counties shall be:
 
 6      (1)  The executive branch--the respective finance directors
 
 7           of the several counties[; and], except as provided in
 
 8           paragraphs (3), (4), (5), and (6);
 
 9      (2)  The legislative branch--the respective chairpersons of
 
10           the councils of the several counties;
 
11      (3)  The Kauai department of water--the manager and chief
 
12           engineer or as designated by county charter;
 
13      (4)  The Hawaii department of water supply--the manager or
 
14           as designated by county charter;
 
15      (5)  The Honolulu board of water supply--the manager and
 
16           chief engineer or as designated by county charter; and
 
17      (6)  The Maui department of water supply--the director or as
 
18           designated by county charter;
 
19 provided that the chief procurement officers designated under
 

 
Page 2                                                     1593
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        

 
 1 paragraphs (1) [and (2)] to (6) shall not exercise their powers
 
 2 or duties over contracting in a manner contrary to the respective
 
 3 county's charter, ordinances, or rules adopted in accordance with
 
 4 chapter 91.
 
 5      (c)  For purposes of applying this chapter to the judiciary,
 
 6 houses of the legislature, office of Hawaiian affairs, department
 
 7 of education, University of Hawaii, remaining departments of the
 
 8 executive branch and all governmental bodies administratively
 
 9 attached to them, and the several counties, including their
 
10 respective water supply authorities, unless otherwise expressly
 
11 provided, "State" shall mean "judiciary," "state senate," "state
 
12 house of representatives," "office of Hawaiian affairs,"
 
13 "department of education," "University of Hawaii," "executive
 
14 branch," [and] "county," "department of water," "department of
 
15 water supply," and "board of water supply," respectively."
 
16                              PART II
 
17      SECTION 2.  The purpose of this Part is to establish
 
18 standards and criteria for a project labor agreement that is
 
19 consistent with the United States President's memorandum dated
 
20 June 5, 1997, and to encourage the use of a project labor
 
21 agreement to achieve economy and efficiency in state public works
 
22 projects over $10,000,000 such as the proposed state prison on
 
23 the island of Hawaii or the University of Hawaii-West Oahu
 

 
Page 3                                                     1593
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        

 
 1 Campus.
 
 2      SECTION 3.  Project labor agreement.  (a)  In any state
 
 3 public works project over $10,000,000, any department or agency
 
 4 of the State that is authorized to award a contract, on a
 
 5 project-by-project basis, may use a project labor agreement if
 
 6 the project labor agreement:
 
 7      (1)  Advances the project's procurement interest in cost,
 
 8           efficiency, and quality;
 
 9      (2)  Promotes labor-management stability and compliance with
 
10           legal requirements governing safety and health,
 
11           employment equal opportunity, labor and employment
 
12           standards, and other matters; and
 
13      (3)  Is not precluded from use because of laws applicable to
 
14           the specific construction project.
 
15      (b)  If the department or agency of the State determines
 
16 that the use of a project labor agreement will serve the goals
 
17 set forth in subsection (a), the department or agency of the
 
18 State may require that every contractor or subcontractor on the
 
19 project agree, for that project, to negotiate or become a party
 
20 to a project labor agreement with unions traditionally
 
21 representing employees working in the building and construction
 
22 industry as well as other nonunion contractors, subcontractors,
 
23 and employees, and incorporate the project labor agreement into
 

 
Page 4                                                     1593
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        

 
 1 the requests for proposals, invitations for bid under chapter
 
 2 103D, Hawaii Revised Statutes, and contract documents.
 
 3      (c)  Any project labor agreement reached pursuant to this
 
 4 section shall:
 
 5      (1)  Bind all contractors and subcontractors on the
 
 6           construction project by incorporating the project labor
 
 7           agreement into all relevant requests for proposals,
 
 8           invitations for bids under chapter 103D, Hawaii Revised
 
 9           Statutes, and contract documents;
 
10      (2)  Fully conform to all applicable laws, regulations, and
 
11           executive orders;
 
12      (3)  Allow all contractors and subcontractors wishing to
 
13           compete for contracts and subcontracts on the project
 
14           to do so, without discrimination against contractors,
 
15           subcontractors, or employees based on union or nonunion
 
16           status;
 
17      (4)  Contain guarantees against strikes, lockouts, and
 
18           similar work disruptions;
 
19      (5)  Set forth effective, prompt, and mutually binding
 
20           procedures for resolving labor disputes arising during
 
21           the project; and
 
22      (6)  Provide other mechanisms for labor-management
 
23           cooperation on matters of mutual interest and concern,
 

 
Page 5                                                     1593
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        

 
 1           including productivity, quality of work, safety, and
 
 2           health.
 
 3      (d)  This section does not require a department or agency of
 
 4 the State to use a project labor agreement on any state
 
 5 construction project, nor does it preclude use of a project labor
 
 6 agreement in circumstances not covered in this section.  This
 
 7 section also does not require a contractor to enter into a
 
 8 project labor agreement with any particular labor organization.
 
 9      (e)  The procurement policy board, in consultation with the
 
10 departments that are covered by this section, shall establish
 
11 appropriate written procedures and criteria for the
 
12 determinations set forth in subsection (a) in accordance with
 
13 chapter 91.
 
14      (f)  This section does not create any right or benefit,
 
15 substantive or procedural, enforceable by a non-state party
 
16 against the State, its departments, agencies, or
 
17 instrumentalities, its officers, or employees, or any other
 
18 person.
 
19      SECTION 4.  Chapter 103D, Hawaii Revised Statutes, is
 
20 amended by adding a new section to be appropriately designated
 
21 and to read as follows:
 
22      "103D-     Project labor agreements.  (a)  A procurement
 
23 officer, as a condition of being awarded a contract, may direct
 

 
Page 6                                                     1593
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        

 
 1 that each responsible and responsive bidder negotiate or become a
 
 2 party to a project labor agreement between the bidder and unions
 
 3 traditionally representing employees working in the building and
 
 4 construction industry as well as nonunion contractors,
 
 5 subcontractors, and employees, and shall be bound by the
 
 6 provisions of that agreement in the same manner as the provisions
 
 7 of the contract; provided that:
 
 8      (1)  The responsible and responsive bidder and all
 
 9           subcontractors on the construction project shall be
 
10           signatories to the project labor agreement;
 
11      (2)  Previously negotiated signatories shall be honored; and
 
12      (3)  The project agreement shall include the applicable
 
13           terms of the standard industry-wide collective
 
14           bargaining agreements.
 
15      (b)  This section shall not preclude a bidder from
 
16 submitting a bid if the bidder presents documentation to the
 
17 chief procurement officer that for the duration of the contract
 
18 those employed by the bidder and all subcontractors will abide
 
19 and be bound to the terms of the project labor agreement.
 
20      (c)  An award of a contract shall be made to the lowest
 
21 responsible and responsive bidder who either:
 
22      (1)  Becomes a signatory to the project labor agreement
 
23           pursuant to subsection (a), with the exception of
 

 
Page 7                                                     1593
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        

 
 1           honoring previously negotiated signatories; or
 
 2      (2)  Provides documentation to the chief procurement officer
 
 3           pursuant to subsection (b)."
 
 4      SECTION 5.  The department of accounting and general
 
 5 services shall submit a report on the results of the use of
 
 6 project labor agreements authorized by this Part to the
 
 7 legislature twenty days before the convening of the regular
 
 8 session of 2003.
 
 9      SECTION 6.  This Part shall apply to project labor
 
10 agreements entered into on or after the effective date of this
 
11 Part.  All project labor agreements entered into before the
 
12 effective date of this Part shall continue to be honored until
 
13 their termination.
 
14                             PART III
 
15      SECTION 7.  Beginning with section 8078 of the United States
 
16 Defense Appropriations Act of 1986, all subsequent Defense
 
17 Appropriations Acts require the contractor on a military
 
18 construction or services project to employ Hawaii residents when
 
19 Hawaii's unemployment rate exceeds the national average.  The
 
20 unemployment rate in Hawaii has been above the national average
 
21 since 1994, but the federal law has not been strictly enforced.
 
22 Many defense construction and service contracts have been awarded
 
23 to out-of-state contractors that hire individuals that move to
 

 
Page 8                                                     1593
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        

 
 1 Hawaii just to work on these particular federal contracts.  This
 
 2 apparently is within the scope of the law, though clearly not the
 
 3 intent of section 8078.  One reason given for the failure to
 
 4 strictly enforce the requirement to employ Hawaii residents is
 
 5 that the term "state resident" is not defined in section 8078, in
 
 6 its related provisions, or in the Federal Acquisition
 
 7 Regulations.
 
 8      The purpose of this Part is to amend the preference
 
 9 provision in the state procurement code on state agency
 
10 contracts.  The preference provision amendment establishes a
 
11 definition of "state resident" that will provide a clear,
 
12 objective, measurable standard in the state procurement code that
 
13 can be easily followed, copied, and enforced by federal
 
14 contracting officers in enforcing the preference provisions in
 
15 federal law.  A clear definition of "state resident" in the state
 
16 procurement code will help keep profits and wages from military
 
17 construction projects in the State.
 
18      SECTION 8.  Section 103D-1001, Hawaii Revised Statutes, is
 
19 amended by adding two new definitions to be inserted and to read
 
20 as follows:
 
21      ""State contractor" and "state subcontractor" means a
 
22 contractor who is licensed by the State as a contractor, is doing
 
23 business in the State, and if the contractor is:
 

 
Page 9                                                     1593
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        

 
 1      (1)  An individual, the individual, and at least one-hundred
 
 2           per cent of the individual's employees shall be state
 
 3           residents;
 
 4      (2)  A corporation or limited liability company, not less
 
 5           than eighty-five per cent of the total number of
 
 6           officers, directors, members, and shareholders, and
 
 7           one-hundred per cent of the employees of the
 
 8           corporation or limited liability company shall be state
 
 9           residents;
 
10      (3)  A partnership, including general, limited, and limited
 
11           liability partnerships, not less than eighty-five per
 
12           cent of the total number of general and limited
 
13           partners, and one-hundred per cent of the employees of
 
14           the partnership shall be state residents;
 
15      (4)  A joint venture or other business entity, not less than
 
16           eighty-five per cent of the total number of owners,
 
17           officers, and other individuals with a monetary
 
18           investment in the business entity, and one-hundred per
 
19           cent of the employees of the joint venture or business
 
20           entity shall be state residents; or
 
21      (5)  A combination of the foregoing business entities, not
 
22           less than eighty-five per cent of the total number of
 
23           officers, directors, shareholders, general and limited
 

 
Page 10                                                    1593
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        

 
 1           partners, and members with a monetary investment in the
 
 2           entity, and one-hundred per cent of the employees of
 
 3           the business entity shall be state residents.
 
 4      "State resident" means an individual who:
 
 5      (1)  Resides in the State at least two hundred days of the
 
 6           year; and
 
 7      (2)  Has filed a Hawaii resident income tax return in the
 
 8           taxable year immediately preceding a bid for a state
 
 9           contract by the individual's employer or business that
 
10           is a state contractor; provided that an individual who
 
11           was a state resident, left the State to attend school
 
12           or serve in the armed forces of the United States of
 
13           America, and returned to the State to work for a state
 
14           contractor is a state resident, even though the
 
15           individual has not yet resided in the State for at
 
16           least two hundred days or filed a Hawaii resident
 
17           income tax return."
 
18      SECTION 9.  Section 103D-1007, Hawaii Revised Statutes, is
 
19 amended to read as follows:
 
20      "[[]103D-1007[]]  Preference to bidders on state agency
 
21 contracts.(a)  The requirements in this section are in addition
 
22 to any other applicable requirements provided in this chapter.
 
23      (b)  The preference in this section may not be used in
 

 
Page 11                                                    1593
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        

 
 1 combination with any other preference otherwise available to a
 
 2 bidder under state or federal law.
 
 3      (c)  In any contract for a public works project[,] for
 
 4 $30,000,000 or less, a state agency shall award the contract to a
 
 5 bidder who [has filed all state tax returns due to the State and
 
 6 paid all amounts owing on such returns for two successive years]
 
 7 is a state contractor prior to submitting the bid; provided that
 
 8 the amount of that bid is not more than [seven] fifteen per cent
 
 9 higher than the amount bid by any competing contractor who [has
 
10 not filed or paid all applicable state taxes, and the amount of
 
11 the bid by the state tax paying bidder is $5,000,000 or less.] is
 
12 not a state contractor.
 
13      [(d)  In any contract for a public works project, a state
 
14 agency shall award the contract to a bidder who has filed all
 
15 state tax returns due to the State and paid all amounts owing on
 
16 such returns for four successive years prior to submitting the
 
17 bid; provided that the amount of that bid is not more than seven
 
18 per cent higher than the amount bid by any competing contractor
 
19 who has not filed or paid all applicable state taxes, and the
 
20 amount of the bid by the state tax paying bidder is more than
 
21 $5,000,000.]
 
22      (d)  A state contractor is qualified for the full preference
 
23 under this section when the state contractor:
 

 
Page 12                                                    1593
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        

 
 1      (1)  Submits its bid with an attestation that it will
 
 2           perform all of the work required to be performed on the
 
 3           contract without any subcontract; or
 
 4      (2)  Submits its bid with an attestation that it will
 
 5           perform all of the work required to be performed on the
 
 6           contract using state subcontractors, and attaches to
 
 7           the bid, a list of state subcontractors that the state
 
 8           contractor intends to use on the project covered by the
 
 9           bid.
 
10      (e)  A state contractor is qualified for a portion of the
 
11 full preference under this section when the state contractor:
 
12      (1)  Submits its bid with an attestation that it is able to
 
13           perform some of the work required to be performed using
 
14           state subcontractors that the state contractor intends
 
15           to use on the project covered by the bid, together with
 
16           a list of nonstate subcontractors that it intends to
 
17           use, the cost of those subcontractors, and a statement
 
18           as to why state subcontractors cannot be used; provided
 
19           that the statement is based on fact and is approved by
 
20           the state agency; or
 
21      (2)  Submits its bid with an attestation that it is unable
 
22           to perform the work required to be performed on the
 
23           contract with state subcontractors, together with a
 

 
Page 13                                                    1593
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        

 
 1           list of nonstate subcontractors that the state
 
 2           contractor intends to use on the project covered by the
 
 3           bid, the total cost of those subcontractors, and a
 
 4           statement as to why state subcontractors cannot be
 
 5           used; provided that the statement is based on fact and
 
 6           is approved by the state agency.
 
 7      (f)  The preference to state contractors shall be reduced
 
 8 for qualified state contractors under subsection (e)(1) and (2)
 
 9 by a percentage that the cost of the subcontractor's contract
 
10 bears to the total amount of the state contractor's bid on the
 
11 state project covered by the bid.
 
12      [(e)] (g)  If two or more [contractors who have paid state
 
13 and county taxes or were required to submit a filing regarding
 
14 state and county taxes] state contractors are bidding on a public
 
15 works contract, [and those contractors meet the criteria outlined
 
16 in subsection (c) or (d),] the state agency shall award the
 
17 contract to the state contractor among them who has submitted the
 
18 lowest bid.
 
19      [(f)] (h)  If any federal statute or regulation precludes
 
20 the granting of federal assistance or reduces the amount of that
 
21 assistance for a particular public works project because of
 
22 preference awarded by this section, this section shall not apply
 
23 insofar as its application would preclude or reduce federal
 

 
Page 14                                                    1593
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        

 
 1 assistance for that work."
 
 2      SECTION 10.  No later than twenty days prior to the
 
 3 convening of the regular session of the 2001 legislature, the
 
 4 comptroller shall submit a report to the legislature evaluating
 
 5 the preference structure of 103D-1007, Hawaii Revised Statutes,
 
 6 in general by providing data on contracts involving this
 
 7 preference.
 
 8                              PART IV
 
 9      SECTION 11.  This Act does not affect rights and duties that
 
10 matured, penalties that were incurred, and proceedings that were
 
11 begun, before its effective date.
 
12      SECTION 12.  Statutory material to be repealed is bracketed.
 
13 New statutory material is underscored.
 
14      SECTION 13.  This Act shall take effect on July 1, 1999;
 
15 provided that Part II and section 9 shall be reviewed by June 30,
 
16 2005.