Honolulu, Hawaii
                                                     , 1999

                                   RE:  H.B. No. 139
                                        H.D. 1
                                        S.D. 1

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


     Your Committee on Transportation and Intergovernmental
Affairs, to which was referred H.B. No. 139, H.D. 1, entitled: 


begs leave to report as follows:

     The purpose of this measure is to define "local resident" in
the State procurement code.

     Testimony in support of this measure was received from the
Hawaii Building and Construction Trades Council AFL-CIO and
Alaka'i Mechanical Corporation.  The Contractor Association of
Kauai, Building Industry Association of Hawaii, Construction
Industry Legislative Organization, Inc., and General Contractors
Association of Hawaii submitted testimony supporting the intent
of this measure with a suggested amendment.  The Department of
Taxation submitted comments on this measure.

     Your Committee finds that federal law requires that when a
state's unemployment average exceeds the national average, the
appropriate military construction contracting agency must include
a provision in the contract requiring the contractor to employ
"residents" of the State.  A clear and usable definition of a
state resident is needed to assist federal contracting agencies
in fully enforcing the law and to ensure contractors comply with
the law.

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     Your Committee has amended this measure by replacing the
definition of "local resident" with a definition of "state
resident" which incorporates the definitions of "state resident",
"state contractor", and "state subcontractor" as provided in S.B.
No. 1438, S.D. 1, and the language of this measure to further
define a state resident as:

     (1)  An individual who resides in the State at least two
          hundred days of the year and filed a Hawaii resident
          tax return in the taxable year immediately preceding
          the date of the bid for a contract; and

     (2)  A business entity that:

          (A)  Holds a current Hawaii business or contracting

          (B)  Submits a bid for goods, services, or construction
               in the name appearing on the contractor's business
               or contracting license;

          (C)  Has maintained a place of business within the
               State staffed by the bidder or an employee of the
               bidder for a period of six months immediately
               preceding the date of the bid; and

          (D)  Has the required minimum percentage of state
               residents as owners, principals, partners, and
               employees depending on the form of the business

     Hawaii's construction industry represents a sizable
component of Hawaii's economy but has experienced economic
declines in recent years.  The lack of business and employment
opportunities, the high cost of doing business in Hawaii, and
increased competition from foreign companies have contributed to
the declines.  Due to the importance of the construction industry
to Hawaii's economy, every effort must be made to revitalize and
stabilize the industry.

     This measure, H.B. No. 140, and H.B. No. 1593, H.D. 1, are
being passed out of this Committee with Senate drafts that
include various provisions from the following Senate measures:
S.B. No. 1438, S.D. 1, S.B. No. 675, S.D. 1, S.B. No. 976,
S.D. 1, S.B. No. 1556, S.D. 2, and S.B. No. 1439.  These Senate
measures represent a coherent approach to revitalizing Hawaii's
construction industry by ensuring faithful execution of the laws
intended to aid the industry, requiring out-of-state contractors
to abide by Hawaii licensing requirements, encouraging further

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research and promotion of the industry, providing a general
excise tax exemption for state contractors that work on federal
military construction projects, and establishing criteria for the
use of agreements that ensure the efficiency, stability, and
quality of construction projects.

     Your Committee has further amended this measure by including
the provisions from S.B. No. 1556, S.D. 2, that:

     (1)  Exempts from the general excise tax all of the gross
          proceeds arising from federal construction contracts
          and received by state contractors and subcontractors;

     (2)  Clarifies that the definition of contractors includes
          all contractors working in the State directly or
          indirectly for the federal government to the extent
          allowed under federal law.  Therefore, those
          contractors, including out-of-state contractors, are
          subject to the licensing and other provisions of
          chapter 444, Hawaii Revised Statutes;

     In addition, your Committee finds that Hawaii's construction
industry can be further stabilized by allowing state agencies to
use project labor agreements.  Project labor agreements contain,
among other things, guarantees against strikes, lockouts, and
other work disruptions, assurances of conformity to all
applicable laws, regulations, and executive orders, procedures to
resolve labor disputes, and other labor-management matters to
ensure the efficiency, quality, and stability of the project.

     S.B. No. 1439 provides for project labor agreements.
Therefore, your Committee has amended this measure by inserting
provisions from S.B. No. 1439 with amendments which:

     (1)  Authorize the use of project labor agreements for
          federal construction projects that the State is
          authorized to participate in;

     (2)  Establish criteria for project labor agreements;

     (3)  Authorize a procurement officer to require a bidder to
          become a party to a project labor agreement as a
          condition to being awarded the contract; and

     (4)  Require the review of the provisions authorizing the
          use of project labor agreements by June 30, 2005.

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     As affirmed by the record of votes of the members of your
Committee on Transportation and Intergovernmental Affairs that is
attached to this report, your Committee is in accord with the
intent and purpose of H.B. No. 139, H.D. 1, as amended herein,
and recommends that it pass Second Reading in the form attached
hereto as H.B. No. 139, H.D. 1, S.D. 1, and be referred to the
Committee on Ways and Means.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Transportation
                                   and Intergovernmental Affairs,

                                   CAL KAWAMOTO, Chair

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