STAND. COM. REP. NO. 2708

                                   Honolulu, Hawaii
                                                     , 2000

                                   RE:  S.B. No. 2987
                                        S.D. 1




Honorable Norman Mizuguchi
President of the Senate
Twentieth State Legislature
Regular Session of 2000
State of Hawaii

Sir:

     Your Committee on Ways and Means, to which was referred S.B.
No. 2987 entitled: 

     "A BILL FOR AN ACT RELATING TO PUBLIC CONTRACTS,"

begs leave to report as follows:

     The purpose of this bill is to enact penalties to prohibit
contractors from withholding more than five per cent of the
subcontractor's contract price.

     In particular, this bill prohibits general contractors from
withholding from their subcontractors a retention amount greater
than that which is being withheld from the general contractor by
the contracting public agency, provided that the subcontractor
provides evidence of a current performance or is bonded to the
satisfaction of the general contractor.  This bill also applies
to subcontractors who subcontract work to other subcontractors.

     Your Committee finds that contractors performing on
government contracts frequently withhold a retainage sum that
exceeds the subcontractor's contract price.  Currently, there are
no penalties for a contractor who withholds a retention amount
over five per cent of the subcontractor's contract price.  Your
Committee finds that adding a penalty to the retainage provision
will prevent general contractors from using funds that legally
belong to subcontractors, thereby providing for a more equitable

 
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                                   STAND. COM. REP. NO. 2708
                                   Page 2


application of the retainage provisions of the public contracts
law.

     Upon further consideration, your Committee has amended the
new language added to section 103-32.1, Hawaii Revised Statutes,
in section 2 of the bill by restating the first sentence of new
subsection (b) as follows:  "Where a subcontractor has provided
evidence to the contractor of a current performance and has a
payment bond acceptable to the contractor executed by a surety
company authorized to do business in this State, or an
alternative means of security acceptable to the contractor, then
the amount withheld by the contractor from its subcontractor
shall be the same percentage of retainage as that on the
contractor under subsection (a)."

     As affirmed by the record of votes of the members of your
Committee on Ways and Means that is attached to this report, your
Committee is in accord with the intent and purpose of S.B. No.
2987, as amended herein, and recommends that it pass Third
Reading in the form attached hereto as S.B. No. 2987, S.D. 1.

                                 Respectfully submitted on behalf
                                 of the members of the Committee
                                 on Ways and Means,



                                 ________________________________
                                 CAROL FUKUNAGA, Co-Chair



                                 ________________________________
                                 ANDREW LEVIN, Co-Chair

 
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