Legislative Priorities: 2023 Session
FINAL SESSION HIGHLIGHTS - MAY 2023
The 2023 Legislative Session adjourned on May 4, 2023. The 2023 Legislative Session began with the Legislature and Governor focusing on affordable housing, homelessness, cost of living, climate change, and ethics reform. There were 3,132 total measures introduced with 274 measures passing.
APPROACH
Because of the large amount of freshman legislators this year, the Legislative Committee proactively sought to educate and inform the newly elected officials by holding a presentation on the construction industry after opening day at the State Capitol. However, our approach quickly shifted to defending the industry after the GCA Legislative Committee reviewed all measures introduced and identified numerous measures that would negatively impact the industry. While these measures were well-intentioned, the Legislative Committee focused its attention on raising awareness of the negative impacts these measures would have on the industry if passed. Measures that failed that would have imposed additional burden on the industry include:
This years stats include:
- HB 714 HD1 SD1 / SB 824 SD2 HD1, which increases cement costs and the overall cost of living, particularly on the neighbor islands by requiring that the securing of mooring lines from vessels requiring tug assistance to commercial docks, wharves, piers, quays, and landings be performed by a stevedoring company;
- HB 536, which amends the competitive sealed bidding process for construction projects to require joint contractors and subcontractors to submit their bids to a bid depository established under DCCA. Authorizes joint contractors and subcontractors to submit different bids to different general contractors bidding on the project. Requires all bids submitted by joint contractors and subcontractors to be held in the bid depository and withheld from the general contractors until twenty-four hours before the closing of the invitation for bids. Requires general contractors to use only the bids timely submitted by joint contractors and subcontractors to the bid depository in their construction bid and imposes fines for violations;
- HB 958 / SB 431: Requires recycling of construction and demolition materials and use of recycled materials to factor into priority offeror selections for competitive procurements of construction or demolition services by the State or any county. Requires the State Building Codes to incorporate the International Green Construction Code and set specified targets for the recycling, reuse, donation, and resale of nonhazardous construction waste.
- HB 113 / SB 232, which duplicates the past performance database being developed by the State Procurement Office by requiring procurement officers, when assessing an offeror's responsibility, to require the offeror to submit answers to questions contained in a standard questionnaire; and
HB 1406 HD1 SD1, which requires that asphalt removed from roads and driveways be recycled and requires the Department of Transportation to adopt rules regarding best practices for paving projects, asphalt processing, and asphalt disposal. The measure also mandates that the Department of Health designate asphalt storage sites or develop a centralized asphalt state processing and storage facility.
In addition to defending the industry, the Committee also chose to introduce two measures to amend the Procurement Code by:
- Allowing bidders to clarify or correct immaterial or technical information required as part of a bid submission for up to twenty-four hours after the bid submission deadline (HB 542 HD2); and
- Requiring cash or protest bonds to be returned to the initiating parties, minus administrative costs, except in cases where the appeal was frivolous or made in bad faith (HB 1164, SB 1135 HD2).
It was our hope that these measures would reduce the amount of subcontractor list protests and increase government ethics. Unfortunately, these measures failed to gain legislative approval.
NEW LEGISLATION
One of the major accomplishments of this Session was the confirmation of Rick Heltzel (Healy Tibbitts Builders, Inc.) and Lance Inouye (Ralph S. Inouye Co. Ltd.) to the Procurement Policy Board. Thank you to all of our GCA members who submitted testimony supporting their appointments!
The five-member Procurement Policy Board (PPB) adopts, amends, or repeals, administrative rules to carry out and effectuate the purpose and provisions of Chapter 103D, Hawaii Revised Statutes (HRS).
The following measures passed the Legislature and significantly impact the industry. These measures now head to the Governor for his approval:
SB 435 SD1 HD2 CD1: Orders the person or firm found to be in violation of the state law governing wages and hours of employees on public works to be jointly and severally liable for the penalty, with the penalty increasing for repeat violations.
How this impacts you: Currently, a firm is suspended for three years if it receives three violations of Hawaii’s Wages and Hours of Employees on Public Works Law within five years. This measure will also suspend the principal RME to eliminate the circumvention of the law by entities that transfer key personnel to a separate company and continue business under a new name to avoid the suspension from work provision of Chapter 104.
SB 415 SD2 HD2: Makes general contractors entering into or under contracts in the State for work on buildings, structures, or other private construction works liable for debt incurred by subcontractors for wages due to claimants, including interest owed, for performance of labor in the contract between the general contractor and owner.
How this impacts you: General Contractors can already be held liable for the debt incurred by subcontractors for wages due to claimants through the mechanics lien process. However, this measure now allows a joint labor-management cooperation committee established pursuant to section 175a of the federal Labor Management Cooperation Act of 1978 (29 U.S.C. 175a) to bring an action in any court of competent jurisdiction against a general contractor or subcontractor at any tier for unpaid wages owed to a claimant by the general contractor or subcontractor for the performance of private construction work not subject to chapter 104.
SB 1437 SD1 HD2 CD1: Authorizes certain pass-through entities to elect to pay Hawaii income tax at the entity level.
How this impacts you: This bill seeks to allow pass-through entities: S corporations, partnerships, and limited liability companies (LLC) to elect to have their state tax liability be paid at entity level versus as individuals. Many small businesses in Hawai’i are organized as an LLC, as they typically receive a higher deduction on their taxes. The proposed bill would allow pass-through entities to deduct the entirety of their state tax liability from their federal taxes. For many years, individuals and businesses were allowed to deduct the entirety of their state income taxes from their federal tax liability. The Tax Cut and Jobs Act (2017) capped the amount of state taxes that could be deducted at $10,000 and significantly impacts individual owners of pass-through entities. Note: this cap does not apply to taxes paid by C corporations. However, in 2020 the IRS announced that this $10,000 tax deduction cap would not apply if the state income tax was imposed directly on the entity rather than the individual. Since then, 28 states have enacted these types of pass-through entity tax elections to the benefit of many small businesses.
SCR 91 SD1 HD1: Requests that the Governor convene a task force to examine and make recommendations on the existing procedures for the adoption of the State Building Code.
How this impacts you: This resolution would convene a task force to analyze the current building code process. Streamlining this often cumbersome process would help the building industry more efficiently and consistently build housing. Currently, the building code goes through numerous changes regularly, causing confusion, delays, and constant added cost. The current State Building Code Council does not take into consideration the cost implications of adopting new codes. Nationally, many of the new codes have mandates built-in that manufacturers and special interest groups have embedded into new code revisions. Certain mandates are not intended to protect the public health or safety, and ultimately increase the cost of construction. GCA is looking forward to participating in a true task force that will fully examine the building code adoption process and its effect on construction in Hawaii.
For the full list of measures that the Legislative Committee tracked and the final status of those measures, please click here.
MID-SESSION HIGHLIGHTS - MARCH 2023
This mid-session report identifies key measures affecting the construction industry during the first half of the legislative session. There are 949 measures still alive at the midpoint of this year’s legislative session out of the 3,132 measures introduced. The GCA’s Legislative Committee determined our advocacy position for each measure identified below. Please note that this list is not exhaustive of every measure affecting the industry and that the substance of each measure may evolve as the session progresses.
OPENING 2023
The 2023 Legislative Session opened on January 18 with the Legislature and Governor focusing on affordable housing, homelessness, cost of living, climate change, and ethics reform. There were 3,132 total measures introduced this year. The GCA Legislative Committee met on Friday, January 20th, to review those measures that affect the industry. The Committee focused on opposing efforts attempting to raise the cost of construction, supporting/opposing various procurement code amendments, and supporting state construction initiatives. Please find a list of those measures here.
The Legislative Committee identified several measures that will have a significant impact on the industry. These measures include:
- HB 113 / SB 232: Requires procurement officers, when assessing an offeror's responsibility, to require the offeror to submit answers to questions contained in a standard questionnaire. Establishes certain questions that must be included in the questionnaire. Requires offerors to submit the questionnaire on an annual basis to be prequalified as responsible for projects by the procurement office. Provides that the information furnished in response to the questionnaire shall be available for public inspection and duplication.
- HB 168 / SB 435: Imposes penalties, including suspension, on the person and the firm upon a finding of violations of state law governing wages and hours of employees on public works projects.
- HB 536: Amends the competitive sealed bidding process for construction projects to require joint contractors and subcontractors to submit their bids to a bid depository established under DCCA. Authorizes joint contractors and subcontractors to submit different bids to different general contractors bidding on the project. Requires all bids submitted by joint contractors and subcontractors to be held in the bid depository and withheld from the general contractors until twenty-four hours before the closing of the invitation for bids. Requires general contractors to use only the bids timely submitted by joint contractors and subcontractors to the bid depository in their construction bid and imposes fines for violations. Requires DCCA to adopt rules specifying how the bid depository shall operate.
- HB 958 / SB 431: Requires recycling of construction and demolition materials and use of recycled materials to factor into priority offeror selections for competitive procurements of construction or demolition services by the State or any county. Requires the State Building Codes to incorporate the International Green Construction Code and set specified targets for the recycling, reuse, donation, and resale of nonhazardous construction waste.
The Committee also chose to introduce two measures to amend the Procurement Code by:
- Allowing bidders to clarify or correct immaterial or technical information required as part of a bid submission for up to twenty-four hours after the bid submission deadline (HB 542); and
- Requiring cash or protest bonds to be returned to the initiating parties, minus administrative costs, except in cases where the appeal was frivolous or made in bad faith (HB 1164, SB 1135).
It is our hope that these measures will reduce the amount of subcontractor list protests and increase government ethics.
The Legislative Committee will continue to meet around the various legislative deadlines to review and comment on the measures moving throughout the Legislature.
Interested in finding out more about the GCA Legislative Committee: click here.
GCA Members, interested in joining? Contact Gladys at info@gcahawaii.org.