HDOT WORKING TOWARD RESOLVING CLAIMS OF COMPANIES LEFT UNPAID BY CONTRACTOR

News Release from HDOT, Apr 4, 2017

HONOLULU – The Hawaii Department of Transportation (HDOT) thanks the State Senate Ways and Means Committee for passing HB1022 HD1 SD2 today. This bill appropriates funds for the State to settle claims. One of the claims approved in the bill today will allow HDOT to directly pay subcontractors who supplied labor and materials on the project to construct a Hawaiian Airlines Terminal Maintenance and Cargo Facility at the Honolulu International Airport, but were never paid. The subcontractors who provided the work were supposed to be paid by the general contractor.

By law, HDOT pays the contractor who in turn pays subcontractors for the work performed. HB1022 would allow HDOT to pay $10 million to as many as 47 subcontractors directly. HDOT understands many of the subcontractors are local companies and not being paid what is owed can create hardships and it wants to ensure companies are compensated for the services provided. This measure helps prevent potentially costly litigation for both the State and the subcontractors.

“We want businesses to succeed. With the help of Governor Ige and the Office of the Attorney General, we have been aggressively working to resolve the issues with the project and the subcontractors,” said Ford Fuchigami, Hawaii Department of Transportation Director. “Because the contract was with the general contractor, we had to find another avenue to pay the subcontractors. HB1022 is that venue.”

“Settling these claims now spares all parties years of litigation and lets HDOT use existing project monies to pay subs for the work that was done,” said Doug Chin, Hawaii Attorney General.

The money to be paid to subcontractors will come from the existing project budget, which did not use state taxpayer money. HDOT is self-sustaining and the Airports Division does not receive funding from the State’s General Fund. Instead, the Airports System generates its own revenues and pays for its own expenses from concession and airline revenue. Primary sources of funding includes, landing fees, terminal rentals, parking revenue, and passenger facility charges and concessions.

Project Background:

HDOT contracted with DCK Pacific Construction LLC (DCK), to build the Hawaiian Airlines Terminal Maintenance and Cargo Facility. The project fell behind schedule. HDOT learned subcontractors were not sending employees to the job because DCK was not paying the subcontractors. This violates section 103-10.5, Hawaii Revised Statutes and an identical provision in the general contract. HDOT provided DCK time to remedy the situation. When DCK failed to do so, HDOT terminated the general contractor for cause. The last day of work was Dec. 28, 2015.

HDOT had paid DCK through Sept. 30, 2015. HDOT learned that DCK had kept more than $3 million that should have been paid to suppliers and subcontractors up to that point.

The State is pursuing litigation to the fullest extent possible to recover the funds from DCK, in addition to paying legal fees and expenses associated with the case. HDOT referred the matter to the DCCA Regulated Industries Complaints Office for appropriate action. HDOT is also working with the State Procurement Office on barring DCK from working on future State projects.

For more information regarding HB1022 click here.

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