HOUSE OF REPRESENTATIVES

H.B. NO.

1483

TWENTY-EIGHTH LEGISLATURE, 2015

 

STATE OF HAWAII

 

 

 

 

 

 

A BILL FOR AN ACT

 

 

relating to public-private partnerships.

 

 

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

 


     SECTION 1.  The legislature finds a great opportunity to facilitate a more flexible investment structure for state projects, acknowledges the desire to support innovative private enterprises, and recognizes the opportunity to introduce private sector capital and expertise to address the needs of our State through Public-Private Partnership (P3) programs.

The legislature recognizes the benefits that P3 programs can have, such as an influx of critical capital to fund state projects, flexibility of arrangements to address innovation along with State shortcomings, as well as shifting substantial financial, technical, and operational risks.  The legislature further recognizes the economic opportunities that P3s will bring to businesses in our state, by privatizing employment and investment opportunities while providing a transparent process for greater accountability.

The legislature further finds that there are various forms of P3s throughout our State, and creating a uniform P3 process with oversight into a standardized collaborative process, will leverage efficiencies of process and contribute to accumulated knowledge of how our state best works with P3s.  By establishing a uniform P3 process, Hawaii's public sector will have a better understanding of how to partner with the private sector to develop, construct, and operate necessary state projects to accelerate project completions.

     The purpose of this Act is to:

     (1)  Improve public operational efficiency and environmental performance, promote public safety, attract private investment to the State, and minimize governmental liabilities through a transparent P3 process.

     (2)  Create an accessible alternative method of P3 source selection for procurements authorized under chapters 103, 103D, 107, 107D, 109, or 110, and pursuant to section 103D-102(b)(4)(L). 

     (3)  Establish a State of Hawaii Public-Private Partnership (P3) structure to identify and establish public-private partnerships, approve qualified bidders, review requests for proposals, and provide P3 template contracts, by establishing the following:

(A) A Public-Private Partnership (P3) Committee;

(B)  A Public-Private Partnership (P3) Finance Director within the Department of Budget and Finance; and

(C) A Public-Private Partnership (P3) Procurement Coordinator under the State Procurement Office Administrator.

     SECTION 2.  Chapter 103, Hawaii Revised Statutes, is amended by adding a new part VI, entitled "Public-Private Partnerships," with nine new sections to be appropriately designated and to read as follows:

     "§103-A   Public-Private Partnerships. This Act may be cited as the "Public-Private Partnership (P3) Authority Act” for authorized procurements made pursuant to chapters 103, 103D, 107, 107D, 109, and 110.  Procurements made pursuant to chapter 103D may utilize this part's alternative source selection method of P3 with written determination by the policy board or chief procurement officer pursuant to section 103D-102(b)(4)(L).  

§103-B    Definitions.  The following definitions apply in this part:

“Contract” means any purchase and sale agreement, lease, service agreement, franchise agreement, concession agreement, or other written agreement entered into under chapters 103, 103D, 107, 107D, 109, and 110, with respect to the provision of a public service and any project related thereto.

“Improvement” means any construction, reconstruction, rehabilitation, renovation, installation, improvement, enlargement, or extension of property or improvements to property.

“P3 committee” means the committee established in section 103-C.

     "Public-Private Partnership" means a contract between the State or its political subdivisions and affiliations, and approved private sector entities that involve the State paying, reimbursing, or transferring a public asset to the private sector in return for goods or services over a set time period, providing a specialized source selection process to work with existing procurement laws.

     “Private sector entity” means any corporation, whether for profit or not for profit, limited liability company, partnership, limited liability partnership, sole proprietorship, business trust, joint venture or other entity, but shall not mean the state, a political subdivision of the state, or a public or governmental entity, agency, or instrumentality of the state.

“Project” means real or personal property, or both, and improvements thereto or in support thereof, including undivided and other interests therein, used for or in the provision of a public service.

“Proposer” means a private sector entity, a local or regional public entity or agency, or any group or combination thereof, submitting qualifications or a proposal for a public-private partnership contract.

“Public service” means a service provided for a public purpose of the responsible state agency and identified in an invitation for qualifications or proposals under chapters 103, 103D, 107, 107D, 109, and 110.

“Responsible state agency” means the agency, department, commission, authority, or other instrumentality of the state responsible for the provision of the public service which is or is proposed to be the subject of a contract.

§103-C    P3 Committee. (a) There is established a P3 committee that shall:

(1)  Identify potential public-private partnerships;

(2)  Consider and accept unsolicited proposals;

(3)  Approve a short-list of qualified bidders;

(4)  Approve P3 requests for proposals; and

(5)  Approve template contracts before they are sent to bidders.  The P3 committee shall operate with the assistance of the P3 finance director and the P3 procurement coordinator.

(b) The P3 committee shall be comprised of members appointed, without regard to section 26-34, as follows:

(1)  Two members nominated by the president of the senate;

(2)  Two members nominated by the speaker of the house;

(3)  Two members appointed by the governor;

(4)  Two representatives of each responsible governmental agency involved in the project at issue;

(5)  The comptroller;

(6)  A representative from the department of the attorney general;

(7)  The P3 procurement coordinator, established in section 103-E; and

(8)  The P3 finance director, established in section 103-D; who shall serve as the chair of the P3 committee.

The members appointed under paragraphs (1), (2), and (3) shall not be currently employed by the State or any county. 

(c)  The P3 committee shall be administratively placed in the department of budget and finance.  The P3 Finance director shall initiate the organization of and provide staff support for the P3 committee.

(d)  Non-government employee members of the P3 Committee shall serve without compensation, but shall be reimbursed for necessary expenses incurred during the performance of their duties.  The reimbursements shall be made by the department of budget and finance, who shall submit a request to the legislature for an appropriation equal to the reimbursements made and expected to be made.  The P3 finance director shall submit the requests for inclusion in the legislative budget acts each year.

(e)  The P3 committee shall act only upon a decision of a majority of its members.

§103-D    P3 Finance Director.    (a)  There shall be established within the department of budget and finance, a P3 finance director, as designated by the director of finance.

     (b)  The P3 finance director shall evaluate and direct financing compliance with applicable statutes and regulations.

     (c)  The P3 finance director shall have the authority to charge fees for services it shall render as part of the procedures to establish Partnerships, as approved by the P3 committee established in section 103-B, and to receive money on loan to cover its operating expenses and to accomplish the purposes of chapters 103, 103D, 107, 107D, 109, and 110.

§103-E    P3 Procurement Coordinator   (a)  There shall be established within the state procurement office, a P3 procurement coordinator, as a P3 procurement specialist, as designated by the state procurement office administrator

(b)  The P3 procurement coordinator shall coordinate the procurement logistics to ensure compliance with current laws and regulations governing procurement.

(c)  The P3 coordinator shall have the authority to charge fees for services it shall render as part of the procedures to establish Partnerships, as approved by the P3 committee established in section 103-B, and to receive money on loan to cover its operating expenses and to accomplish the purposes of chapters 103, 103D, 107, 107D, 109, and 110.

§103-F    Coordination. (a) The director of budget and finance, the state procurement administrator, and the authorized representative of a responsible state agency shall coordinate with the P3 finance director and the P3 procurement coordinator to jointly take any action and execute any contract for the provision of a public service in order to more efficiently and effectively provide public services, including by generating additional resources in support of those public services and related projects.

(b)  The P3 finance director and P3 procurement coordinator shall jointly coordinate with the P3 committee, the state procurement administrator, as well as the director of finance, and in consultation with the responsible state agencies, may retain or contract for the services of commercial appraisers, engineers, investment bankers, financial advisers, accounting experts, and other consultants, independent contractors or providers of professional services as are necessary in the judgment of the P3 finance director to carry out the P3 finance director's powers and duties established in section 103-D, including the identification of public services and any related projects to be subject to invitations for qualifications or proposals the procurement code, the development of those invitations and related evaluation criteria, the evaluation of those invitations, and negotiation of any contract under chapters 103, 103D, 107, 107D, 109, and 110.

§103-G    Project Selection. (a) Any proposer or responsible state agency may submit to the P3 committee one or more proposals for partnership projects in connection with any public service.  The P3 committee shall identify potential projects and public services for which a public-private partnership may be appropriate from those received from a proposer, a responsible state agency, or those identified by the P3 committee itself.  The P3 committee shall select such projects based on the partnership’s potential to improve public operational efficiencies, improve environmental performance, promote public safety, attract private investment in the state, and minimize governmental liabilities.

(b)  After the P3 committee identifies a potential partnership for a public project or public service, the P3 finance director shall conduct a public-sector comparative study of the potential partnership.  The P3 committee shall determine the scope of each public comparative study, the scope of which shall depend on the type of proposed partnership and the nature of the public service under consideration for the partnership.  The following issues shall be considered as components of a public sector comparative study:

(1)  The definition of the need served by the proposed partnership;

(2)  The cost required to meet the public need served by the public service under traditional procurements or traditional state agency operations;

(3)  An analysis of alternative methods for providing the public services under consideration, including but not limited to design-build, design-build-finance, design-build-finance-operate-maintain, service contracts, or leases, and how the alternative method(s) would meet the need served by the public service; and,

(4)  An evaluation of the cost-benefit of using an alternative method or public-private partnership to render a public service, which cost-benefit analysis shall include:

(A)  The potential cost of utilizing an alternative method;

(B)  The operational and technological risks involved in utilizing an alternative method;

(C)  A comparative analysis of rendering the public service by allowing the responsible state agency to utilize traditional methods;

(D)  The financial impact the partnership will have on the responsible state agency; and

(E)  The impact a partnership would have on job formation, economic growth, and the community in which the public service is to be rendered.

(c) The P3 committee shall use the results of the public sector comparative study to determine which public services and projects are appropriate for partnership.  The P3 procurement director shall publish on its website the public sector comparative study for each project to provide a public service for which a request for qualifications is initiated.

(d) The P3 coordinator shall publish notice of the intent to enter into a contract for a partnership for public service or related project and shall prepare a request for qualifications for private sector entities interested in serving as proposers for the partnership.  The notice shall notify interested parties of the opportunity to submit their qualifications for consideration and shall be published at least thirty days prior to the deadline for submitting those qualifications. The P3 coordinator also may advertise the information contained in the notice in appropriate trade journals and otherwise notify parties believed to be interested in providing the public service and in any related project.

(e) After inviting qualifications, the P3 committee shall evaluate the qualifications submitted and may hold discussions with proposers to further explore their qualifications. Following this evaluation, the P3 committee may determine a list of qualified proposers based on criteria in the invitation, and invite only those proposers to submit a proposal.

(f)  The P3 coordinator shall prepare a request for proposal and the proposed partnership contract, both of which shall be approved by the P3 committee. After the P3 committee’s approval of the request for proposal and the partnership contract, the project shall be deemed an approved partnership procurement.

(g) Partnership contracts may contain the terms and conditions to effect the purposes of chapters 103, 103D, 107, 107D, 109, and 110, including the duration of the contract, which shall not exceed seventy-five years, rates or fees for the public services to be provided or methods or procedures for the determination of such rates or fees, standards for the public services to be provided, responsibilities and standards for operation and maintenance of any related project, required financial assurances, financial and other data reporting requirements, bases and procedures for termination of the contract and retaking of possession or title to the project, and events of default and remedies upon default, including mandamus, a suit in equity, an action at law, or any combination of those remedial actions.

(h) After proposals are received, using the criteria established in the request for proposal by the P3 committee,

(1)  The P3 finance director shall evaluate the proposals submitted for financial stability; and

(2)  The P3 procurement coordinator shall evaluate the proposals submitted for proposal suitability and compliance; then

(3)  The P3 committee shall select and rank no fewer than three proposers that the P3 committee considers to be the most qualified to enter into the contract, except when the P3 committee determines that fewer than three qualified proposers are available, in which case the P3 committee shall select and rank them.

The P3 committee may hold discussions with proposers to further explore their proposals, the scope and nature of the public service(s) they would provide, and the various technical approaches they may take regarding the public service and any related project.

(i) After the proposers have been ranked by the P3 committee, the director of finance and the authorized representative of the responsible state agency shall negotiate the contract with the proposer ranked most qualified to provide the public service at a compensation determined in writing to be fair and reasonable, and to purchase, lease or otherwise take a legal interest in the project.

(1)  Upon failure to negotiate a contract with the proposer ranked most qualified, the director of finance shall inform the proposer in writing of the termination of negotiations and may enter, with the responsible state agency, into negotiations with the proposer ranked next most qualified. If negotiations again fail, the same procedure may be followed with each next most qualified proposer selected and ranked, in order of ranking, until a contract is negotiated and executed.

(2)  If the director of finance and the authorized representative of the responsible state agency fail to negotiate a contract with any of the ranked proposers, the P3 finance director, in consultation with the responsible state agency, may terminate the process or select and rank additional proposers, based on their qualifications or proposals, and negotiations shall continue with the proposers selected and ranked initially until a contract is negotiated.

(3)  The P3 finance director and the authorized representative of the responsible state agency may jointly reject any and all submissions of qualifications or proposals, and may jointly terminate the procurement process at any point.

(4)  The director of finance and the authorized representative of the responsible state agency shall have the authority to make commercially reasonable changes to the partnership contract approved by the P3 procurement coordinator and the P3 committee.  Any such contract may contain the terms and conditions to effect the purposes of chapters 103, 103D, 107, 107D, 109, and 110.

§103-H    Partnership Contracts.  (a) Partnership contracts shall be signed by both the director of finance and the authorized representative of the responsible state agency to which the public service at issue in the contract relates.

(b) The director of finance is authorized to receive and deposit any money received under the contract.  Any such contract shall be sufficient to effect its purpose notwithstanding any lawful provision to the contrary, including other laws governing the sale, lease or other disposition of property or interests therein, service contracts, or financial transactions by or for the state.

(c) The P3 procurement coordinator, with the assistance of the P3 director of finance, shall provide a report to the speaker of the house and the president of the senate explaining the value of the contract to the state and describing the procurement process by which the contract was reached.

§103-I    Ownership.    (a) The exercise of the powers granted by chapters 103, 103D, 107, 107D, 109, and 110, will be for the benefit of the people of Hawaii and shall be liberally construed to effect the purposes thereof. As the performance of public services will constitute the performance of essential government functions, any project or part thereof owned by the state and used for performing any public service pursuant to a contract entered into under chapters 103, 103D, 107, 107D, 109, and 110, that would be exempt from taxation or assessments in the absence of such contract shall remain exempt from taxation and assessments levied by the state and its subdivisions to the same extent as if not subject to that contract. The gross receipts and income of a successful proposer derived from providing public services contract through a project owned by the state shall be exempt from taxation levied by the state and its political subdivisions.  Any transfer or lease between a proposer and the State, of a project or part thereof, or item included or to be included in the project, shall be exempt from the taxes levied, as available, if the state is retaining ownership of the project or part thereof that is being transferred or leased."

     SECTION 3.  New statutory material is underscored.

     SECTION 4.  In codifying the new sections added by section 2 of this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in designating the new sections in this Act.

     SECTION 5.  There is appropriated out of the general funds of the State of Hawaii the sum of $ ______ or so much thereof as may be necessary for fiscal year 2015-2016 and the same sum or so much thereof as may be necessary for fiscal year 2016-2017 to carry out the purposes of this Act, including the hiring of necessary staff.

The sums appropriated shall be expended jointly by the department of budget and finance and the department of accounting and general services, as necessary to carry out the purpose of this Act.

     SECTION 6.  This Act shall take effect upon its approval; provided that section 5 shall take effect on July 1, 2015.

 

 

INTRODUCED BY:

_____________________________

 

 


 


 

Report Title:

Procurement; Public-Private Partnerships.

 

Description:

Establishes a public-private partnership (P3) approval process for public procurements in chapters 103, 103D, 107, 107D, 109, and 110, Hawaii Revised Statutes.  Creates a P3 committee, establishes a P3 finance director, and a P3 procurement coordinator.  Effective upon approval.

 

 

 

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.