Honolulu, Hawaii
                                                     , 1999

                                   RE:  S.B. No. 1005
                                        S.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 S.B. No. 1005 entitled: 


begs leave to report as follows:

     The purpose of this measure is to require contractors on a
public contract to pay a contractor within three working days of
receiving payment and provides a penalty for violation of this
     Testimony in favor was received from Action Fire Sprinkler
Corp., Certified SheetMetal, Inc., Commercial Electric, Inc.,
Continental Mechanical of the Pacific, Dorvin D. Leis Co., Inc.,
HSI Mechanical, Pacific Fire Protection, Inc., Painting and
Decorating Contractors Association of Hawaii, Plumbing &
Mechanical Contractors Association of Hawaii.  Testimony in favor
of the intent was received from the Department of Accounting and
General Services and Jas. W. Glover, Ltd.  Testimony in support
with amendments was received from the Subcontractors Association
of Hawaii and Associated Builders and Contractors, Inc.
Testimony opposed to this measure was received from Contractors
Association of Kaua'i and General Contractors Association of
Hawaii.  Oral testimony was presented by the Ironworkers
Stabilization Fund and the Building Association of Hawaii.

     Your Committee finds that currently, section 103-10.5,
Hawaii Revised Statutes (HRS), requires contractors working on a
public contract to pay their subcontractors within ten days after

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receipt of any moneys for the contract.  However, section 103-
10.5, HRS does not have any penalty provisions for violating this

     Your Committee finds that prompt payment to contractors and
subcontractors performing on a government contract stimulates
economic growth and provides economic stability for

     Your Committee has amended this measure to provide for a
graduated penalty scale for violations under this measure,
including:  $5,000 fine for the first offense, $10,000 fine for
the second offense, and $25,000 fine and three year prohibition
on bidding for public contracts.  Additionally, your Committee
deleted the three-day time frame for contractors to pay
subcontractors once payment is received by the contractor and
retained the current ten-day time frame.

     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 S.B. No. 1005, as amended herein, and recommends that
it pass Second Reading in the form attached hereto as S.B.
No. 1005, S.D. 1, and be referred to the Committee on Ways and

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

                                   ROD TAM, Chair

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