RELATING TO GOVERNMENT CONTRACTING.

SB3114

THE SENATE

S.B. NO.

3114

THIRTY-THIRD LEGISLATURE, 2026

STATE OF HAWAII

A BILL FOR AN ACT

RELATING TO GOVERNMENT CONTRACTING.

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

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SECTION 1.
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Governmental
contracting agencies must adhere to established rules and requirements, known
as procurement standards, when acquiring goods, services, or works, ensuring
fairness, transparency, and value for money in their purchasing processes.
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These standards may extend beyond basic price
and quality considerations to include social and economic criteria, such as
mandatory minimum wages for workers involved in the contract and proof of valid
contractor licensure to ensure compliance with labor laws and professional
competence.
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Procurement standards must
be balanced to allow for efficient and timely project completion, while also
ensuring accountability and fair competition.

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Current procurement standards are placing
significant administrative burdens on governmental contracting agencies,
causing delays for smaller, routine construction and repair jobs.
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By raising the threshold for exemptions to
these procurement standards, governmental contracting agencies can more quickly
address critical construction issues.
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A
higher threshold allows governmental contracting agencies to have greater
autonomy and flexibility, ensuring that funding is spent more effectively on
tangible improvements.

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For example, a simple plumbing or
electrical repair can quickly exceed the current threshold, which leads to
slower project completion.
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By increasing
the cap, governmental contracting agency administrators would be allowed to
swiftly hire contractors for smaller-scale projects.
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This change would not only save valuable time
and resources but also allow governmental contracting agencies such as the
department of education to address maintenance issues more promptly, creating
safer and more functional learning environments for its students and staff.

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In section 104-2, Hawaii Revised Statutes,
the $2,000 public work contract exemption for governmental contracting agencies
has not been raised since July 1, 2002, via Act 215, Session Laws of Hawaii
2002.
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In section 444-2, Hawaii Revised
Statutes, the exemption threshold for construction projects involving $1,500 or
less in labor and materials should be raised for governmental contracting
agency projects to align with section 104-2, Hawaii Revised Statutes, as labor
and materials are often the largest cost for small construction projects.
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Based upon the department of business, economic
development, and tourism's Honolulu Construction Cost Index, raising the $2,000
exemption threshold set in 2002 in section 104-2, Hawaii Revised Statutes, to
$5,000 would be in line with inflation.
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Governmental contracting agencies are governed by both sections 104-2
and 444-2 and would therefore require both sections to be increased to
establish a new procurement standard for small construction projects.

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SECTION 2.
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Section 104-2, Hawaii Revised Statutes, is amended by amending
subsection (a) to read as follows:

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"(a)
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This chapter shall apply to every contract in excess of [
$2,000
]
$5,000

for construction of a public work project to which a governmental contracting
agency is a party; provided that this chapter shall not apply to experimental
and demonstration housing developed pursuant to section 46-15 or housing
developed pursuant to chapter 201H if the cost of the project is less than
$500,000 and the eligible bidder or eligible developer is a private nonprofit
corporation.

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For the purposes of this subsection:

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"Contract" includes but is not
limited to any agreement, purchase order, or voucher in excess of [
$2,000
]

$5,000
for construction of a public work project.

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"Governmental contracting agency"
includes:

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(1)
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Any
person or entity that causes either directly or indirectly the building or
development of a public work; and

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(2)
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Any
public-private partnership.

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"Party" includes eligible bidders
for and eligible developers of any public work and any housing under chapter
201H; provided that this subsection shall not apply to any housing developed
under section 46-15 or chapter 201H if the entire cost of the project is less
than $500,000 and the eligible bidder or eligible developer is a private
nonprofit corporation."

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SECTION 3.
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Section 444-2, Hawaii Revised Statutes, is amended to read as follows:

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"
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444-2
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Exemptions.
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This chapter shall not apply to:

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(1)
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Officers
and employees of the United States, the State, or any county while in the
performance of their governmental duties;

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(2)
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Any
person acting as a receiver, trustee in bankruptcy, personal representative, or
any other person acting under any order or authorization of any court;

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(3)
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A
person who sells or installs any finished products, materials, or articles of
merchandise that are not actually fabricated into and do not become a permanent
fixed part of the structure, or to the construction, alteration, improvement,
or repair of personal property;

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(4)
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Any
project or operation for which the aggregate contract price for labor and
materials is not more than $1,500.
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This
exemption shall not apply in any case where a building permit is required
regardless of the aggregate contract price, nor where the undertaking is only a
part of a larger or major project or operation, whether undertaken by the same
or a different contractor or in which a division of the project or operation is
made in contracts of amounts not more than $1,500 for the purpose of evading
this chapter or otherwise;

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(5)
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A
registered architect or professional engineer acting solely in the person's
professional capacity;

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(6)
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Any
person who engages in the activities regulated in this chapter as an employee
with wages as the person's sole compensation;

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(7)
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Owner-builders
exempted under section 444-2.5;

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(8)
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Any
joint venture if all members thereof hold licenses issued under this chapter;

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(9)
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Any
project or operation where it is determined by the board that less than ten
persons are qualified to perform the work in question and that the work does
not pose a potential danger to public health, safety, and welfare; [
or
]

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(10)
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Any
public works project that requires additional qualifications beyond those
established by the licensing law and which is deemed necessary and in the
public interest by the contracting agency[
.
]
; or

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(11)
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Any
project or operation for the construction or repair of a public work, as
defined in chapter 104, to which a governmental contracting agency is a party,
in which the aggregate contract price for labor and materials is not more than
$5,000.
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This exemption shall not apply
in any case where a building permit is required regardless of the aggregate
contract price, nor where the undertaking is only a part of a larger or major
project or operation, whether undertaken by the same or a different contractor
or in which a division of the project or operation is made in contracts of
amounts not more than $5,000 for the purpose of evading this chapter or
otherwise.
"

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SECTION 4.
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Statutory material to be repealed is bracketed and stricken.
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New statutory material is underscored.

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SECTION 5.
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This Act shall take effect upon its approval.

INTRODUCED BY:

_____________________________

BY REQUEST

Report Title:

Governmental Contracting Agencies; Procurement Standards;
Prevailing Wages; Contractors Licensing Exemption

Description:

Raises the ceiling for the prevailing wages exemption on
public works construction projects from $2,000 to $5,000 for governmental
contracting agencies.
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Creates exemption
to contractors licensing laws for public works construction projects valued up
to $5,000 for governmental contracting agencies.

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