STAND. COM. REP. NO.1184

Honolulu, Hawaii

, 2003

RE: H.B. No. 704

H.D. 1

S.D. 1

 

 

Honorable Robert Bunda

President of the Senate

Twenty-Second State Legislature

Regular Session of 2003

State of Hawaii

Sir:

Your Committee on Transportation, Military Affairs, and Government Operations, to which was referred H.B. No. 704, H.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO PROCUREMENT CODE,"

begs leave to report as follows:

The purpose of this measure is to require a pre-job conference prior to work on any public construction project.

Your Committee received testimony in support of the intent of this measure from the Department of Transportation and the Department of Accounting and General Services (DAGS). The Honolulu Department of Design and Construction submitted testimony in opposition to this measure.

Your Committee supports the requirement of a pre-job conference for public construction projects as a means of reducing the amount of confusion over bid requirements, and time-consuming protests.

Your Committee amended this measure by replacing its contents with the contents of Senate Bill No. 1262, S.D. 1, which addressed the following aspects of the procurement code:

PROCUREMENT PREFERENCE FOR CERTAIN ENTITIES

As amended by your Committee, this measure amends section 103D-310, Hawaii Revised Statutes (HRS), based on language previously recommended by DAGS, in order to provide local contractors an equal shot at state contracts. As amended, all offerors on state contracts must demonstrate compliance with all state employment laws, including the general excise tax law, the disability compensation law, the employment security law, the temporary disability insurance law, and the prepaid health care law.

Apparently, in the past, out-of-state contractors were not required by DAGS to demonstrate compliance with these laws, and as a result, their bids were often lower than in-state contractors, who are required to comply with all Hawaii laws. Your Committee is hopeful that this new requirement will enable local contractors to win more contract awards.

Your Committee also included a requirement that the contractor be incorporated or organized under the laws of the State of Hawaii. Your Committee believes that the State has an important interest in ensuring that corporations, partnerships, and sole proprietors working on state projects are organized in the State, so that they can be better monitored, be more accountable, and always have on file a current agent in the State.

STATE PROCUREMENT INSTITUTE

This measure also contains provisions to establish a Hawaii Procurement Institute at the University of Hawaii (UH), in conjunction with the William S. Richardson School of Law, to conduct procurement education, training, and research.

DAGS previously testified that the Institute will work within existing funds at the UH, and will also be supported by contributions from user groups such as contractors. Your Committee generally supports the concept of the Institute, but reserves final judgment until it becomes clear exactly what the Institute's duties will be, and whether it will, in fact, be self sustaining.

PROCUREMENT OF PROFESSIONAL SERVICES

This measure also amends section 103D-304, HRS, relating to procurement of professional services. Specifically, this measure amends the composition of the review committee required under section 103D-304, HRS, and specifies that the review committee members' names shall be public information placed in the contract file.

This measure also amends section 103D-304, HRS, to require that an independent selection committee rank professional service providers according to specified criteria, and that the head of the purchasing agency negotiate with providers according to their ranking. Your Committee agrees that professional services contracts must be awarded based on professional qualifications only.

Your Committee further amended section 103D-304, HRS, to provide that design professional services, such as architect services, shall only be procured under section 103D-304, HRS, or emergency procurement procedures. Your Committee believes that the unique nature of design professional services justifies this amendment.

Your Committee also amended section 103D-304, HRS, further to require an equal distribution of work among providers that have the same qualifications. This amendment will help to ensure that all qualified professional service providers are granted state contracts.

PRE-BID CONFERENCE

This measure also includes a provision requiring a pre-bid conference to be held for every construction or design-build project with an estimated contract value of $100,000 or more.

Your Committee finds that many state projects are held up in order to resolve a protest by one of the unsuccessful offerors. Moreover, the number of protests has increased in recent years, which has stifled the efficiency of the procurement process. Many of these protests are difficult to resolve, because they are based on the uncertainty and ambiguity of bid requirements.

Your Committee believes that requiring a pre-bid conference for every large construction project and design-build project will enable potential bidders to have their questions answered prior to bidding, and will enable protests to be resolved quickly.

REPEAL OF STATE TAXPAYER PREFERENCE

Your Committee also amended this measure to repeal section 103D-1007, HRS, the so-called state taxpayer preference. With the addition of the provisions in this measure to require all offerors to be organized under the laws of Hawaii and to comply with all applicable employment laws, your Committee finds the state taxpayer preference unnecessary.

Moreover, your Committee finds that the state taxpayer preference did not serve its purpose to assist local contractors to win construction project awards. Instead, many mainland contractors were easily able to qualify for the preference. Therefore, your Committee supports the more stringent requirements contained in this measure.

As affirmed by the record of votes of the members of your Committee on Transportation, Military Affairs, and Government Operations that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 704, H.D. 1, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 704, H.D. 1, S.D. 1, and be referred to the Committee on Ways and Means.

Respectfully submitted on behalf of the members of the Committee on Transportation, Military Affairs, and Government Operations,

____________________________

CAL KAWAMOTO, Chair