Honolulu, Hawaii
                                                     , 1999

                                   RE:  H.B. No. 1338
                                        H.D. 1

Honorable Norman Mizuguchi
President of the Senate
Twentieth State Legislature
Regular Session of 1999
State of Hawaii


     Your Committee on Government Operations and Housing, to
which was referred H.B. No. 1338, H.D. 1, entitled: 


begs leave to report as follows:

     The purpose of this measure is to prohibit any retainage
withheld by a contractor or subcontractor from its subcontractor
that exceeds five percent of the subcontractor's contract price.

     Prior to the hearing, your Committee circulated a proposed
Senate draft.  Testimony was received on this proposed H.B. 1338,
H.D. 1, S.D. 1.

     The proposed H.B. 1338, H.D. 1, S.D. 1, added to the measure
as received, language which formally authorizes the chief
procurement officer to enter into project labor agreements.

     Testimony in support of the proposed Senate draft was
received from the Plumbers and Fitters Local 675 United
Association, Hawaii State Teachers Association, Plumbing and
Mechanical Contractors Association of Hawaii, Subcontractors
Association of Hawaii, JR Electric, Tile, Marble and Terrazzo
Contractors Association of Hawaii, R.W. Almonte Enterprises,
Inc., Zack's Flooring, Alii Flooring, Inc., B&J Insulation Co.,
Inc., Bay Harbor Company, Kauai Floors, Inc., Audissey,
Structural Pest Control, Inc., Bug Man Termite & Pest Control
Inc., Skylights of Hawaii, Dorvin D. Leis Co., Inc., Aluminum

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Shake Roofing, Inc., T. Taketa Sheet Metal, Inc., Son-Light
Electric, Inc., and International Brotherhood of Electrical
Workers, Local Union 1186.  Testimony with amendments was
received from the Senator from the 19th District and Kanoelehua
Industrial Area Association, Inc.

     Testimony in opposition to the proposed Senate draft was
received from Jas. W. Glover, Ltd., CC Engineering &
Construction, Inc., Associated Builders and Contractors, Inc.
(ABC), Construction Industry Legislative Organization, Inc.
(CILO),  Building Industry Association of Hawaii, T. Iida
Contracting, Ltd., Armstrong Builders, Ltd., Thurston Pacific,
Inc., Willocks Construction Corporation, Allied Builders System,
Reef Development of Hawaii, Inc., Fletcher Pacific, Universal
Construction, Inc., Kaikor Construction Associates, Inc., Jayar
Construction, Inc., Graham Builders, Inc., Hawaiian Dredging
Construction Company, BKA Builders Inc., Hallmark Construction
Corporation, QMC Corp., Teval Corp., Walter Y. Arakaki General
Contractor, Inc., Robert M. Kaya Builders, Inc., and Henry's
Equipment.  Comments were received from the Steel Fabricators and
Erectors of Hawaii.

     Your Committee finds that currently, general contractors
require subcontractors to sign contracts with a 5%-10% retention
clause.  Yet, the state and county agencies by statute are
allowed to withhold only two and one-half percent retainage from
the general contractor.

     Your Committee finds that this disparity in retainage
between the agencies, the general contractors, and the
subcontractors has created a great financial burden on the
subcontractors.  This measure will provide for a uniform
retainage procedure for all parties, from the agencies to the
general contractors.  

     Your Committee finds that the issue of project labor
agreements is adequately addressed in H.B. No. 1593, H.D. 1,
S.D. 1, therefore, this measure is being passed unamended,
without the provisions relating to project labor agreements that
were included in the proposed Senate draft.

     As affirmed by the record of votes of the members of your
Committee on Government Operations and Housing that is attached
to this report, your Committee is in accord with the intent and
purpose of H.B. No. 1338, H.D. 1, and recommends that it pass
Second Reading, and be placed on the calendar for Third Reading.

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                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Government
                                   Operations and Housing,

                                   ROD TAM, Chair

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