REPORT TITLE:
Procurement


DESCRIPTION:
Defines "state resident", "state contractor", and "state
subcontractor" for purposes of the state contractor preference
for state contracts; increases state contractor preference to 15%
within the state procurement code. (SD1)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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THE SENATE                              S.B. NO.           S.D. 1
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO GOVERNMENT PROCUREMENT.



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

 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 amend the preference provision
 
18 in the state procurement code on state agency contracts.  The
 
19 preference provision amendment establishes a definition of "state
 

 
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 1 resident" that will provide a clear, objective, measurable
 
 2 standard in the state procurement code that can be easily
 
 3 followed, copied, and enforced by federal contracting officers in
 
 4 enforcing the preference provisions in federal law.  A clear
 
 5 definition of "state resident" in the state procurement code will
 
 6 help keep profits and wages from military construction projects
 
 7 in the State.
 
 8      SECTION 2.  Section 103D-1001, Hawaii Revised Statutes, is
 
 9 amended by adding two new definitions to be inserted and to read
 
10 as follows:
 
11      ""State contractor" and "state subcontractor" means a
 
12 contractor who is licensed by the State as a contractor, is doing
 
13 business in the State, and if the contractor is:
 
14      (1)  An individual, the individual, and at least one-hundred
 
15           per cent of the individual's employees shall be state
 
16           residents;
 
17      (2)  A corporation or limited liability company, not less
 
18           than eighty-five per cent of the total number of
 
19           officers, directors, members, and shareholders, and
 
20           one-hundred per cent of the employees of the
 
21           corporation or limited liability company shall be state
 
22           residents;
 
23      (3)  A partnership or limited partnership, not less than
 

 
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 1           eighty-five per cent of the total number of general and
 
 2           limited partners, and one-hundred per cent of the
 
 3           employees of the partnership shall be state residents;
 
 4      (4)  A joint venture or other business entity, not less than
 
 5           eighty-five per cent of the total number of owners,
 
 6           officers, and other individuals with a monetary
 
 7           investment in the business entity, and one-hundred per
 
 8           cent of the employees of the joint venture or business
 
 9           entity shall be state residents; or
 
10      (5)  A combination of the foregoing business entities, not
 
11           less than eighty-five per cent of the total number of
 
12           officers, directors, shareholders, general and limited
 
13           partners, and members with a monetary investment in the
 
14           entity, and one-hundred per cent of the employees of
 
15           the business entity shall be state residents.
 
16      "State resident" means an individual who:
 
17      (1)  Resides in the State at least two hundred days of the
 
18           year; and
 
19      (2)  Has filed a Hawaii resident income tax return in the
 
20           taxable year immediately preceding a bid for a state
 
21           contract by the individual's employer or business that
 
22           is a state contractor; provided that an individual who
 
23           was a state resident, left the State to attend school
 

 
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 1           or serve in the armed forces of the United States of
 
 2           America, and returned to the State to work for a state
 
 3           contractor is a state resident, even though the
 
 4           individual has not yet resided in the State for at
 
 5           least two hundred days or filed a Hawaii resident
 
 6           income tax return."
 
 7      SECTION 3.  Section 103D-1007, Hawaii Revised Statutes, is
 
 8 amended to read as follows:
 
 9      "[[]103D-1007[]]  Preference to bidders on state agency
 
10 contracts.(a)  The requirements in this section are in addition
 
11 to any other applicable requirements provided in this chapter.
 
12      (b)  The preference in this section may not be used in
 
13 combination with any other preference otherwise available to a
 
14 bidder under state or federal law.
 
15      (c)  In any contract for a public works project, a state
 
16 agency shall award the contract to a bidder who [has filed all
 
17 state tax returns due to the State and paid all amounts owing on
 
18 such returns for two successive years] is a state contractor
 
19 prior to submitting the bid; provided that the amount of that bid
 
20 is not more than [seven] fifteen per cent higher than the amount
 
21 bid by any competing contractor who [has not filed or paid all
 
22 applicable state taxes, and the amount of the bid by the state
 
23 tax paying bidder is $5,000,000 or less.] is not a state
 

 
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 1 contractor.
 
 2      [(d)  In any contract for a public works project, a state
 
 3 agency shall award the contract to a bidder who has filed all
 
 4 state tax returns due to the State and paid all amounts owing on
 
 5 such returns for four successive years prior to submitting the
 
 6 bid; provided that the amount of that bid is not more than seven
 
 7 per cent higher than the amount bid by any competing contractor
 
 8 who has not filed or paid all applicable state taxes, and the
 
 9 amount of the bid by the state tax paying bidder is more than
 
10 $5,000,000.]
 
11      (d)  A state contractor is qualified for the full preference
 
12 under this section when the state contractor:
 
13      (1)  Submits its bid with an attestation that it will
 
14           perform all of the work required to be performed on the
 
15           contract without any subcontract; or
 
16      (2)  Submits its bid with an attestation that it will
 
17           perform all of the work required to be performed on the
 
18           contract using state subcontractors, and attaches to
 
19           the bid, a list of state subcontractors that the state
 
20           contractor intends to use on the project covered by the
 
21           bid.
 
22      (e)  A state contractor is qualified for a portion of the
 
23 full preference under this section when the state contractor:
 

 
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 1      (1)  Submits its bid with an attestation that it is able to
 
 2           perform some of the work required to be performed using
 
 3           state subcontractors that the state contractor intends
 
 4           to use on the project covered by the bid, together with
 
 5           a list of nonstate subcontractors that it intends to
 
 6           use, the cost of those subcontractors, and a statement
 
 7           as to why state subcontractors cannot be used; provided
 
 8           that the statement is based on fact and is approved by
 
 9           the state agency; or
 
10      (2)  Submits its bid with an attestation that it is unable
 
11           to perform the work required to be performed on the
 
12           contract with state subcontractors, together with a
 
13           list of nonstate subcontractors that the state
 
14           contractor intends to use on the project covered by the
 
15           bid, the total cost of those subcontractors, and a
 
16           statement as to why state subcontractors cannot be
 
17           used; provided that the statement is based on fact and
 
18           is approved by the state agency.
 
19      (f)  The preference to state contractors shall be reduced
 
20 for qualified state contractors under subsection (e)(1) and (2)
 
21 by a percentage that the cost of the subcontractor's contract
 
22 bears to the total amount of the state contractor's bid on the
 
23 state project covered by the bid.
 

 
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 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 are bidding on a public
 
 4 works contract, [and those contractors meet the criteria outlined
 
 5 in subsection (c) or (d),] the state agency shall award the
 
 6 contract to the state contractor among them who has submitted the
 
 7 lowest bid.
 
 8      [(f)] (h)  If any federal statute or regulation precludes
 
 9 the granting of federal assistance or reduces the amount of that
 
10 assistance for a particular public works project because of
 
11 preference awarded by this section, this section shall not apply
 
12 insofar as its application would preclude or reduce federal
 
13 assistance for that work."
 
14      SECTION 4.  No later than twenty days prior to the convening
 
15 of the regular session of the 2001 legislature, the comptroller
 
16 shall submit a report to the legislature evaluating the
 
17 preference structure of 103D-1007, Hawaii Revised Statutes, in
 
18 general by providing data on contracts involving this preference.
 
19      SECTION 5.  This Act does not affect rights and duties that
 
20 matured, penalties that were incurred, and proceedings that were
 
21 begun, before its effective date.
 
22      SECTION 6.  Statutory material to be repealed is bracketed.
 
23 New statutory material is underscored.
 

 
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 1      SECTION 7.  This Act shall take effect upon its approval;
 
 2 provided that section 3 shall be reviewed by June 30, 2005.