HOUSE OF REPRESENTATIVES

H.B. NO.

2019

THIRTIETH LEGISLATURE, 2020

 

STATE OF HAWAII

 

 

 

 

 

 

A BILL FOR AN ACT

 

 

RELATING to the PROCUREMENT code.

 

 

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

 


SECTION 1. Section 103D-324, Hawaii Revised Statutes, is amended to read as follows:

"103D-324 Contract performance [and], payment, and post-performance bonds. (a) Unless the policy board determines otherwise by rules, the following bonds or security shall be delivered to the purchasing agency and shall become binding on the parties upon the execution of the contract if the contract [which is] awarded exceeds $25,000 and is for construction, or the purchasing agency secures the approval of the chief procurement officer:

(1) A performance bond in a form prescribed by the rules of the policy board, executed by a surety company authorized to do business in this State or otherwise secured in a manner satisfactory to the purchasing agency, in an amount equal to one hundred per cent of the price specified in the contract;

(2) A payment bond in a form prescribed by the rules of the policy board, executed by a surety company authorized to do business in this State or otherwise secured in a manner satisfactory to the purchasing agency, for the protection of all persons supplying labor and material to the contractor for the performance of the work provided for in the contract. The bond shall be in an amount equal to one hundred per cent of the price specified in the contract; [or] and

(3) A post-performance bond in a form prescribed by the rules of the policy board, executed by a surety company authorized to do business in this State or otherwise secured in a manner satisfactory to the purchasing agency, for the costs to the State of curing construction defects discovered not later than ten years after the completion of the contract; provided that the bond shall not be used to cover the costs of repairs due solely to normal wear and tear. The bond shall be in an amount equal to one hundred per cent of the price specified in the contract, and prior to the completion of the contract, the contractor shall provide proof satisfactory to the purchasing agency that the bond is paid in full for the ten years following the completion of the contract; or

[(3)] (4) A performance [and], payment, and post-performance bond [which] that satisfies all of the requirements of paragraphs (1) [and], (2)[.], and (3).

(b) The policy board may adopt rules that authorize the head of a purchasing agency to reduce the amount of performance and payment bonds.

(c) Nothing in this section shall be construed to limit the authority of the chief procurement officer to require a performance bond or other security in addition to those bonds, or in circumstances other than specified in subsection (a).

(d) Every person who has furnished labor or material to the contractor for the work provided in the contract, in respect of which a payment bond or a performance and payment bond is furnished under this section, and who has not been paid amounts due therefor before the expiration of a period of ninety days after the day on which the last of the labor was done or performed or material was furnished or supplied, for which [such] the a claim is made, may institute an action for the amount, or balance thereof, unpaid at the time of the institution of the action against the contractor and its sureties, on the payment bond or the performance and payment bond, and have their rights and claims adjudicated in the action, and judgment rendered thereon; subject to the State's priority on the bonds. If the full amount of the liability of the sureties on the payment bond is insufficient to pay the full amount of the claims, then, after paying the full amount due the State, the remainder shall be distributed pro rata among the claimants.

As a condition precedent to any such suit, written notice shall be given to contractor and surety, within ninety days from the date on which the person did or performed the last labor or furnished or supplied the last of the material for which claim is made, stating with substantial accuracy the amount claimed and the name of the party to whom the material was furnished or supplied or for whom the labor was done or performed.

The written notice shall be served by registered or certified mailing of the notice, to the contractor and surety, at any place they maintain an office or conduct their business, or in any manner authorized by law to serve summons.

(e) If the State discovers a construction defect not later than ten years after the completion of the contract, the State may institute an action for the costs of curing the construction defect against the contractor and its sureties, on the post-performance bond, and have their rights and claims adjudicated in the action, and judgment rendered thereon.

[(e)] (f) Every suit instituted under subsection (d) shall be brought in the circuit court of the circuit in which the project is located, but no such suit shall be commenced after the expiration of one year after the day on which the last of the labor was performed or material was supplied for the work provided in the contract. The obligee named in the bond need not be joined as a party in any such suit.

The terms "labor" and "material" have the same meanings in this section as the terms are used in section 507-41.

(g) Every suit instituted under subsection (e) shall be brought in the circuit court of the circuit in which the project is located; provided that the suit shall not be commenced after the expiration of ten years after the day on which the last of the labor was performed or material was supplied for the work provided in the contract; provided further that the obligee named in the bond need not be joined as a party in the suit."

SECTION 2. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.

SECTION 3. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 4. This Act shall take effect upon its approval.

 

INTRODUCED BY:

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Report Title:

Procurement Code; Bonds; Prepayment

 

Description:

Requires public contractors to post a post-performance bond to cover the State's costs of curing construction defects discovered within 10 years after the completion of the contract. Requires the contractor to fully pay for the bond prior to the completion of the contract.

 

 

 

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.