GOVERNOR LINGLE VETOES QUOTA BILL THAT WOULD DISCOURAGE JOB CREATION AND INCREASE COSTS OF PUBLIC WORKS PROJECTS

HONOLULU – Governor Linda Lingle today vetoed a bill that would have mandated the makeup of the workforce on state and county public construction works projects.  The bill, SB2840 SD2 HD1, would impose an ambiguous quota system that would impair contractors’ flexibility to maintain a workforce that is responsive to the specific changing needs of a project.  This bill would further stretch the limited resources and staffing of state and county agencies that award the contracts by adding the burden of having to monitor and enforce the quota requirements, as well as verify the residency status of each contractor's employees.

While the bill has been touted as a job creation measure, the end result would likely discourage job creation by increasing project costs to taxpayers, as well as increasing the likelihood of project delays due to additional grounds for protests by contractors who are not selected. 

“I support the creation of local jobs for local residents,” Governor Linda Lingle said in message to legislators detailing her objections to the bill and her reasons for vetoing it.  “However, this measure does not create jobs because it does not incentivize any new economic activity.”

Numerous contractors and construction industry representatives oppose this measure, including the General Contractors Association, which represents 570 general contractors, subcontractors and construction-related firms.  Others opposing the bill include the Hawai‘i Developers Council, Building Industry Association, Associated Builders and Contractors – Hawai‘i Chapter, Project Plus and Royal Contracting Co.

“I am persuaded by the objections of these organizations and contracting companies because they are the job creators,” Governor Lingle explained.

The bill would require contractors awarded public construction contracts to employ a workforce consisting of at least 80 percent Hawai‘i residents.  In addition to ensuring their own workforce meets the mandated quota, contractors would need to monitor the workforce composition of any subcontractors they hire at $50,000 or more.  Contractors who do not meet the requirements would be subject to sanctions, including temporary suspension of the contract, payment withholdings, disqualification from the project, recovery of contract payments and disbarment or suspension. 

However, the compliance requirements under this bill are ill-defined, ambiguous and complex for both contractors as well as state and county agencies that must monitor and enforce compliance. 

The bill is vague on whether the 80 percent requirement must be maintained every day the project is underway or over the duration of the contract.  In addition, the language does not specify if the 80 percent quota applies only to jobsite staff or all contractor staff, including administrative and managerial personnel. 

Based on the criteria of the bill, contractors would be responsible for verifying the residency status of a potential worker, which in some cases would require determining the worker’s intent to establish residency in Hawai‘i. 

The 80 percent residency requirement would impose on contractors the difficult task of ascertaining prior to the start of a contract the total number of workers and the total number of hours required for a particular project, and then identifying the workers to meet the requirement.  The quota would impair contractors’ ability to add workers that are needed throughout the course of the project and would require the constant juggling of workers – adding and deleting individuals – to avoid violating the 80 percent requirement.

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LINK: Gov Lingle’s statement of objections on SB2840