SB3114

SECTION 1. 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. 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. Procurement standards must be balanced to allow for efficient and timely project completion, while also ensuring accountability and fair competition.

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

For example, a simple plumbing or electrical repair can quickly exceed the current threshold, which leads to slower project completion. By increasing the cap, governmental contracting agency administrators would be allowed to swiftly hire contractors for smaller-scale projects. 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.

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. 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. 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. 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.

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

"(a) 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.

For the purposes of this subsection:

"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.

"Governmental contracting agency" includes:

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

(2) Any public-private partnership.

"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."

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

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

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

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

(3) 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;

(4) Any project or operation for which the aggregate contract price for labor and materials is not more than $1,500. 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;

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

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

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

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

(9) 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]

(10) 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

(11) 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. 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."

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

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

INTRODUCED BY:

_____________________________

BY REQUEST

THE SENATE	S.B. NO.	3114
THIRTY-THIRD LEGISLATURE, 2026
STATE OF HAWAII